Mondaq_Share.jpg

Headline: Navigating The Metaverse: Where Content Continues To Be King – Copyright

What is the Metaverse?

You may have seen videos of virtual avatars experiencing a
concert, attending a festival or experiencing a famous real-life
landmark in a digitally created space or overheard people looking
to purchase NFTs that can be used in this virtual space. While the
‘metaverse’ may have permeated dinner table conversations
across the globe, there is still a long way to go when it comes to
the people’s understanding of the metaverse and all its
applications.

So, let’s break it down.

The metaverse is a simulated 3D digital environment or a virtual
shared space, that mimics the real world by using augmented
reality, virtual reality, blockchain and concepts from social
media, offering users an immersive virtual experience to interact,
collaborate, communicate, and transact with each other. Different
technology companies have contemplated different kinds of
metaverses. For example, Facebook (now called Meta) is developing
an AR / VR based ecosystem allowing users to interact in different
environments within the metaverse. Under the service ‘Horizon
Venues’, Meta allows users to create digital avatars, wear VR
headsets and attend live concerts, sports events etc. Other players
such as The Sandbox and Epic Games (Fortnite) are developing a more
gamified experience for users, where users will be able to buy and
sell (virtual) land, create assets, host, and attend events and
conduct transactions.

Given that metaverse is ultimately a virtual projection of real
things, every service or experience offered in the metaverse in
effect relies on the underlying digital content – whether in
the form of images, sounds, videos, characters, visual effects,
text, software, design, or a combination of all; the regulatory
landscape governing digital content and intellectual property is
the primary legal regime for the governance and growth of
metaverse.

However, there continue to be rising concerns on the
effectiveness of our existing legal regime that struggles to cope
with the once-unthinkable use and dependence on technology for
consumption of content and user interaction.

What are the key challenges as well as opportunities the lie
ahead for the metaverse? Let us discuss.

Ownership of IP vis a vis the Platform

The ownership of intellectual property developed in the
metaverse is one of the key issues to be addressed, given that
every aspect of metaverse – including the platform, the
underlying software, technology, the so-called ‘real estate in
metaverse’, content, images, music, design, brands,
audio-visuals – are all different types of intellectual
property. It is therefore likely that the traditional principles
and categories of intellectual property may need to be broadened
and reshaped to reflect the unique requirements of the digital only
environment. Another aspect to consider is the territorial scope
relevant for the legal protection of a copyright or other
intellectual property, in an entirely virtual context and absence
of jurisdictional boundaries. The challenge perhaps will be to
identify the location of use of intellectual property and the
applicable jurisdictional legal regime.

Under Indian copyright law, the author or creator of any
intellectual property is regarded as the owner, unless
contractually agreed otherwise. However, when intellectual property
or content is created in the metaverse using underlying
technological tools or Artificial Intelligence (AI) offered by the
metaverse platform – there is a possibility that the host platform
could claim ownership in the works. Thus, the ownership of works or
assets created on a metaverse platform will eventually be
determined by the terms of use of such platform. A possible
solution to this could be creation of a separate category of rights
for AI generated inventions. Interestingly, acknowledging the
increased use, relevance, and benefits of AI, the Parliamentary
Standing Committee of India, recently in its review of intellectual
property laws regime in India, recommended creation of a separate
category of rights for AI and AI related inventions for protection
of such rights.1

On the other hand, content creators could benefit from the fact
that a virtual only environment may make it easier for users to
differentiate between content that is freely available to public
from that which belongs exclusively to an author, performer, or
copyright owner. Today, internet users are often under the
ill-impression that digital formats of content (books, songs,
movies) are free to access simply because they are available on the
internet. One may expect that the illegality of piracy will be more
evident in a virtual environment, with better traceability and
advanced technological controls being implemented to identify IP
rights violations.

Relevance of content acquisition contracts

Under the Indian copyright law, exploitation rights cannot be
assigned for modes and mediums not existing at the time of
assignment. Therefore, use and monetisation of content acquired
prior to contemplation of metaverse could be open to challenge by
authors and original rights owners. Even if a contract contemplates
transfer of rights for use in future technologies or mediums,
authors and original rights owners could claim that they are not
fairly compensated given ‘metaverse’ as a means of
monetisation was not contemplated at the time monetary value to the
assignment/transfer of rights was determined. Therefore, each
contract for acquisition of any content will need to be
re-evaluated to see if it contemplates the rights necessary for
exploitation of content over metaverse or the potential risk of
challenge by the original owner to acquirer’s exploitation of
rights previously acquired.

Going forward, content licenses and assignments will need to be
carefully drafted and negotiated in so far as they relate to
exploitation of content on the metaverse or any new technology. For
assignees or licensees, it will be important to ensure that
contracts expressly grant rights for exploitation of content over
metaverse and its future variants in the widest manner possible.
While the metaverse is ultimately intended to be a decentralised
interoperable ecosystem, in reality metaverse platforms are likely
going to be filled with ‘walled gardens’ controlled by
individual entities / brands / sub-ecosystems. Accordingly, for
licensees and assignees that intend to exploit content in the
metaverse, it is crucial that acquisition agreements do not include
any restriction or limitation on use of content in a specific
ecosystem within the metaverse.

From content owners’ perspective, there is merit in clearly
identifying the rights being granted and the modes and mediums of
exploitation. Where possible, specific commercial terms should be
attributed to various metaverse use-cases. To the extent parties
cannot specifically contemplate use-cases, there should be
flexibility to revisit the contract and determine commercial
consideration as and when any new use-cases arise.

Music Licensing in the Metaverse

Music will likely be a key driver of the metaverse, with the
growth of virtual concerts, virtual worlds, and the integration of
music with games / brands / environments in the metaverse.

Similar to contracts relating to content acquisition, music
licensing arrangements will also be heavily negotiated on aspects
relating to manner and scope of use, modes and medium of
exploitation, use of music across different environments in a
metaverse.

In addition to this, metaverse creates a unique situation for
the purpose of music licensing. Until now, the music industry
bifurcated licenses in clearly defined categories such as public
performance, streaming, downloading, physical reproduction and
synchronisation. Given the varied use cases in the metaverse,
licenses may not fall under the existing categories. For instance,
a virtual concert in the metaverse could be construed as a hybrid
of both, public performance and streaming. Similarly, almost the
entire usage of music in the metaverse will be synchronised to
audio-visuals or digital imagery, and as such could be construed to
fall under a synchronisation license. There will also be other
use-cases for music in the metaverse, such as instant artist
collaborations on remix’s and cover versions, creative
collaborations with fans, monetisation via NFTs, etc.

As various kinds of metaverse develop, the potential for
monetisation of music will also grow exponentially. The music
industry will have to devise new and hybrid forms of licenses to
cater to needs of platforms and users on metaverse.

Smart Contracts and the Metaverse

With the metaverse being majorly on digital assets and services
such as NFTs, avatars, virtual gaming, virtual concerts, virtual
real-estate, etc., use of smart contracts is likely to increase
given the efficiency, expediency and convenience offered by such
contracts as opposed to execution of physical contracts.

Smart contracts are digital contracts that are stored on a
blockchain, which are automatically executed between parties when
specific terms and conditions are met. Smart contracts are stored
on a distributed ledger of a blockchain, adding more security to
contractual arrangements, and restrictions on unauthorised access
to the contract. Enforcement of smart contracts is also easier
since performance of contingent obligations become effective if the
relevant party completes performance of pre-requisite actions,
clearly documented and recorded. However, smart contracts fall
short in case of agreements which have subjective terms that
require human intervention / interpretation. For e.g., determining
the quality of specific services being provided, or covenants which
are qualified by ‘reasonable efforts’ or ‘best
endeavour’ of the performing party.

The initial use of smart contracts is likely to be for
standardised agreements in the metaverse, however agreements that
are more bespoke in nature are likely to be executed through
traditional means, at least until development technology to remove
human intervention in entirety.

Personality Rights and Privacy Rights

Personality rights protect the unauthorised usage of a celebrity
or individual’s name, likeness, voice, nickname / voice
imitation or a look-alike, or personal attributes. Personality
rights become more significant in the metaverse, given the
different ways in which an “avatar” may be used in a
digital ecosystem. Exploitation of personality rights through the
metaverse will be a major revenue stream for celebrities and public
personalities in future with new possibilities of endorsements,
interviews, promotions, and performances in close settings as well
as one-on-one interaction with followers.

Celebrities will have to be cautious regarding the rights they
grant to platforms and ensure that these are specific in nature and
override the generic terms of use imposed by platforms, which may
permit a wide use of personal attributes for promotional
purposes.

For other individual users as well, the question of use of their
digital avatars by third parties is a critical one. While data
protection laws protect personal information, whether an avatar
would fall within its scope is undecided. Privacy laws will have to
swiftly redesigned in the context of changing technology to balance
individual’s privacy with permitted commercial use.

Content Regulation and User Behaviour

Metaverse platforms are intended to operate as intermediaries
providing users and businesses virtual space and opportunity to
interact and transact. As such, these platforms should be able to
claim safe harbour from liability arising from actions of users,
subject to the platforms being in compliance with requirements
under the information technology regime.

A key aspect of the compliance requirements for intermediaries
is to takedown content which is unlawful under applicable law, or
which is in violation of the conditions set out in the Information
Technology (Intermediaries Guidelines and Digital Media Ethics
Code) Rules, 2021 (“IT Rules”). However, takedowns in the
metaverse may not always be practical, particularly in relation to
live interaction of virtual avatars. Other issues around user
behaviour will also have to be addressed, for instance the
possibility of assault or harassment in the virtual environment,
safety of minors, possibility of identity theft, fraud etc. As
such, a mere import of the current regime relating to digital media
may not suffice for regulating metaverse and laws will have to
evolve to ensure creation of a safe environment for users. In order
to claim safe harbour from liability for acts of users, the
platforms will likely be required to implement active measures,
such as content monitoring and safety tools for users. While this
may create burden of compliance for the platforms, it will
eventually be an essential driver growth by making individuals feel
safe in a virtual reality.

To the extent a platform makes available any content or feature
itself, the platform will have primary liability. However, some
platforms have proposed shared governance with users, where users
will have voting rights in matters of governance based on the
assets or currency the relevant user possesses or has earned. If
this is implemented, it will be interesting to see if entities
operating the platforms claim safe harbour on the grounds that the
platform itself is governed entirely by users.

The Way Forward

Undoubtedly, the metaverse is set to change the manner in which
content is consumed and interactions between users take place
virtually. While platforms and their use cases continue to be
developed, it is evident that the current regulatory framework may
not be sufficient to effectively regulate the metaverse.

Eventually, if the metaverse truly becomes the universe for
people to interact and access content; unauthorised use of
intellectual property, data, and information, will create new
challenges for rights holders. Further, if the end purpose of
metaverse is to increase interaction or enhance the experience of
content consumption in a digital only world, the accessibility of
each metaverse will also need to be augmented.

Technology by definition develops rapidly, and therefore legal
landscape is likely to continue being a step behind and reactive to
new developments. Eventually, technology companies may have to
consider agreeing to common standards for metaverse not only to aid
interoperability, but to also ensure safety and protection of
content, technology, information, and privacy of users, to
ultimately foster the growth of this medium.

Footnote

1. https://rajyasabha.nic.in/rsnew/Committee_site/Committee_File/ReportFile/13/141/161_2021_7_15.pdf

The content of this document do not necessarily reflect the
views/position of Khaitan & Co but remain solely those of the
author(s). For any further queries or follow up please contact
Khaitan & Co at legalalerts@khaitanco.com