In October 2021, it was announced that Facebook would formally change its name to Meta as part of an ambitious new initiative called the “metaverse”—a convergence of physical, augmented, and virtual reality in a shared online space. Shortly after this announcement, we wrote a blog post, A Brief Overview of the Metaverse and the Legal Challenges It Will Present. Since then, metaverse trends have experienced phenomenal growth, with the emergence of new immersive virtual reality and collaborative spaces for human interactions, transactions, and data exchanges on decentralized networks.
Non-Fungible Tokens
One of the key areas of growth is the monetization of virtual experiences. For example, more platforms are allowing players and users to buy and sell digital assets in the form of non-fungible tokens (NFTs), which are unique blockchain-based digital assets that are associated with images, artwork, videos, games, or other creative content.
In the Morgan Lewis publication NFTs: What’s in Store for 2022? our colleagues note:
From a legal perspective, the NFT world is a licensing world. While gaining access to NFT technology is relatively easy, given the various third-party service providers available, the ability to source and sell content legally is a complicated matter. Turning something into an NFT and commercializing it is not an intuitive legal process. For example, content used to create NFTs is often covered by copyrights or is subject to agreements that could have very well been drafted prior to the NFT age. It would be wise for a buyer/collector to have a legal review of previous agreements to determine whether the various parties have the rights to sell or buy a particular style of NFT. Otherwise, one may end up paying their profits out of pocket to various rightsholders.
Decentralized Worlds
Another key area of growth is decentralized virtual worlds, such as Decentraland, which are built using blockchain technology. Both centralized and decentralized worlds offer a social environment where people can interact virtually.
In a centralized world such as Roblox, a single company has the ultimate say on what goods are sold in the virtual world, how people experience it, and what the rules of interaction are. Personal interactions are similar in decentralized worlds, but transactions are based on each world’s cryptocurrency, and items or land are traded as NFTs. In Decentraland, for example, users may buy virtual plots of land in the platform based on NFTs via cryptocurrency.
Because NFTs may be able to move across platforms, one of the benefits of decentralized worlds will be the movement of NFT assets from one world to another. Interoperability will ultimately be a key component of the metaverse, and decentralized platforms may be the way to address this issue.
Brand Enforcement
One issue that will come to the forefront with the growth of the metaverse will be brand enforcement. It would be wise for brand owners to be proactive with their brand enforcement in order to mitigate any harm to their brand. There should be a plan in place for addressing infringement. Brand owners should monitor online networks for infringement or hire service providers that can engage in such monitoring and offer enforcement strategies.
As the metaverse grows, so will the legal issues affecting it. We will continue to keep you posted on those issues.
Earlier this month, Morgan Lewis partners Jason Gettleman and Dion Bregman gave a presentation on the metaverse as part of the Morgan Lewis Technology Marathon. Watch the presentation, view the slides, or read key takeaways >>