IP in crisis – the Metaverse and digital tokens

Barely a day goes past without ever more extravagant claims being made for technologies such as artificial intelligence, Web 3.0, and the Metaverse – or the Multiverse, if you prefer: virtual worlds surrounding the physical one in an endless foam of vendor bubbles.

Yet aside from the hype, one thing is clear: these technologies present serious, perhaps existential challenges to our current conceptions of intellectual property, copyright, licensing, and assets. These are no minor fears, given the number of industries, careers, and income streams that rest on the pillar of “I made this/own this, so pay me”.

Trillion-dollar corporations – US tech platforms with such gravitational pull they are fast becoming black holes of socioeconomic power – want us to forget about such trifling concerns, and just hand over our cash to them. But what does the legal profession think? 

 Why do these technologies pose a challenge to current models of IP ownership? Might they even enhance them? This first of three linked reports will focus on the Metaverse and the digital or crypto assets that people use in virtual realms, with the following two in the series looking at AI. 

Dr Andres Guadamuz is a Reader in Intellectual Property Law at the University of Sussex and Editor in Chief at the Journal of World Intellectual Property, and he was speaking at a Westminster Legal Policy Forum this week. He’s also a former gamer, and uses recent cinema visions of that world as jumping-off points for explaining the issues. He says: 

How we think about the intellectual property in these spaces is going to depend very much on the type of Metaverse we get. There is the [movie and book] ‘Ready Player One’ Metaverse. In that movie, there is only one Metaverse, one company that controls the entire space, which is almost a nightmare for regulators: one company wins the Metaverse war. 

Then there is the ‘Ralph Breaks the Internet’ Metaverse, different platforms co-existing and connected to one another through common protocols. So, people can jump from one game [or realm] to another. You could probably use your same account and it will be persistent across all these spaces. 

And then we have what I call the ‘Multiverse of Madness’. But that is what we have now. Lots of metaverses. 

All of this is a serious problem when thinking about intellectual property in these spaces, because there is not a lot of ownership. Obviously, there is intellectual property, but it's generally mediated by contract. And this has been the case since the 1990s. We have platforms and we have end-user licence agreement agreements. 

I always say ‘If it's not your server, it’s not your property’. Because it can be taken away from you with a flip of a switch. So, whenever we're thinking about intellectual property, it's better to think about decentralized services.

Of late, recent discussions of ‘the Metaverse’ have been an embarrassment for the company formerly known as Facebook. So convinced was Mark Zuckerberg that the future looked like an immersive 90s video game that he bought Oculus, alongside WhatsApp and Instagram, and ploughed billions of dollars into making it a (virtual) reality. 

The bet was bold enough to rebadge the company. But from 2023’s generative AI and Web 3.0 perspectives, it looks questionable at best. Are Facebook’s boomer and Gen-X users really going to wear headsets to battle the relentless hordes of low-grade advertisers and ‘Suggested Content’ that have seized control of the Facebook platform? (Anyone would think Meta was desperate for cash!)

But concerns over intellectual property rights are valid as the Web morphs into different shapes, like a T1000 that just wants to be your friend. In Guadamuz’ view, there are three distinct models of intellectual assets in our digital spaces. And increasingly, this is where tokenization will come into play. 

First, there is the private, closed model in which everything is owned by the platform that runs the service, and (as we have seen) is mediated by end-user licence agreements. 

This may explain Facebook’s/Meta’s early foray into digital currency with Libra/Diem: tokens for three billion people to spend on the giant advertising boot that stamps on their faces whenever they log on to see friends’ holiday snaps.

Guadamuz says:

[In these cases] there is an interface with IP, but for now that belongs to the platform owner, so we may have to think about digital assets as mere entries in a licence agreement.

At present, this remains by far the most common licensing agreement in virtual worlds. So, in these cases, all digital assets – even ones you create on those platforms – belong to the provider. He continues:

Second is the open model, which is something that was present in [early virtual realm] Second Life from the outset: if you created a character, land, or things, you owned those things, even though it was not your server. You got the intellectual property and the rights over it, and this was written into the constitution of the platform, in the end-user licence agreement.

This remains an attractive, utopian, but rare idea. The problem is resources, says Guadamuz: who owns and maintains the servers, and who pays for the space? 

He adds:

Then we have the third property option, which is Web 3.0. So, really, Web 1.0 was the early internet, the read-only internet. And Web 2.0 is the read-and-write internet, the user-generated content. 

With Web 3.0, the idea is that we are going to be mediating our property, our ownership of assets, through tokenisation, such as non-fungible tokens (NFTs). But you are going to be able to have ownership of those things, and you can move them from one world to another.

In theory, at least. But as we explored in our previous Metaverse reports on banking and healthcare, the concept of being able to move seamlessly from one virtual realm (as opposed to Web 3.0 network run on a blockchain) to another is complex and fraught with security, privacy, identity, and authentication challenges. 

What if people don’t want to be personally identified in that realm? Not for criminal purposes (though that may be a factor), but because they simply want to play, experiment, or escape from the real world? However, game developers are highly sceptical of the Web 3.0 model, he adds.

New world, meet old world 

Viewed in this light, Meta’s strategy – and the current Metaverse concept itself – looks increasingly like Web 1.0: proprietary, old fashioned, a corny land grab. And the company’s early Metaverse designs reinforce the impression that the 1990s live on in Zuckerberg’s head. Indeed, it’s almost a Victorian concept: a giant corporation with beanies in place of stovepipe hats, owning its dutiful citizens and tossing out tokens for them to spend in the company store. 

How quaint! But it didn’t work, and the platform increasingly seems broken and full of advertising noise. Meanwhile, the current rash of consumer AIs could – arguably – be seen as Big Tech’s hedge against the Web 3.0 model of peer-to-peer networks, transferrable IP, and digital asset ownership – on blockchains and other systems.

An AI with a 1930s voice comes over the public klaxon:

Citizens! Why own things? Let us own them for you instead! Stop making things yourself: it’s boring and you have no time or money! So, let us scrape every piece of data online – including yours – and sell derivative content back to you for a few dollars a month (ramping up in future: conditions may apply)! Fire all your creatives! You hate them anyway! They even hate themselves! Now shut up and press the button, noble Imagineer and Prompt Engineer! (Distant sniggering and giggling.) Have a nice day!

But I digress. 

According to Guadamuz, the Web 3.0 model is increasingly supported by case law and legal precedent – unlike the out-of-control world of generative AI.

He says:

First, digital assets are now recognized as assets. [In the UK] there is a proposal by the Law Commission: a new property law and model for digital assets. That is, English law is going to have one more category [digital assets]. That is the proposal.

A recent Bitcoin theft lawsuit, AA vs Persons Unknown (2019), established that crypto assets are property, and can therefore be pursued in court. Osbourne vs Persons Unknown & Anor (2022) established that NFTs are also property. Meanwhile, D’Aloia vs Persons Unknown and Others (2022), not only established that digital assets are property, but also used an NFT to send the injunction notification. Who knew that courts had a sense of humour?

Meanwhile, Yuga Labs, creator of the epochal Bored Apes Yacht Club (BAYC) NFT craze, sued conceptual artist Ryder Ripps for cloning its entire collection and selling them. Not for copyright theft, however, but for a litany of other complaints: false designation of origin, false advertising, cybersquatting, unfair competition, unjust enrichment, conversion, tortious interference, and trademark infringement. 

How very ‘old world’! ‘Meet the new boss, same as the old boss’, apparently. Ripps countered that his work was freedom of speech and a protest against what he claimed was, in his view, BAYC’s dog-whistle racist imagery. 

Another interesting case remains ongoing, explained Guadamuz. Intellectual property rights organization VEGAP vs Mango, in Barcelona, involves the fashion brand producing NFTs of the work of four Catalan artists and displaying them in [virtual centre for digital assets] Decentraland. VEGAP sued to have the NFTs taken down from that metaverse, and they are now held in custody in the court’s secure digital wallet.

The fashion world seems particularly prone to these challenges, given the billions of dollars that can be associated with brands and exclusive products. The recent case of Hermès vs Mason Rothschild concerned the artist’s MetaBirkin project, which was an NFT collection of Hermès’ iconic Jane Birkin handbags. Again, the lawsuit concerned trademark infringement, rather than copyright. 

Hermès won the case and was awarded $133,000: just enough to buy one of its rarer bags.

My take

While it is tempting to view these issues as a clash of the utopian world of free, borderless data movement and sharing, and a Victorian world of proprietors and ownership, it is remarkable how swiftly the new guard behaves like the old guard. 

Increasingly, it is really a clash of giant US corporations against the individuals it claims to help. The irony is that the corporations represent the new world, while the rest of us are trying to hang onto what little we have left. Can we do it in Web 3.0? Perhaps. But until then, multinationals are waving generative AI toys at us, so we give up on the very notion of making things ourselves. More on that next time!