Hunton Retail Law Resource

The metaverse is a new way to engage with computers through artificial intelligence (AI), widespread connectivity, augmented reality (AR) and virtual reality (VR). Instead of interacting with a two-dimensional application or website via screen and keyboard, the metaverse adds a figurative “third dimension” for users to explore in an intuitive, realistic manner. The metaverse is also an opportunity for a new digital economy. Users can buy and sell goods, services, and property, and even attend events virtually. Like the Internet before it, the metaverse is expected to lay a foundation for the creation of business, art, and technology.

This all raises questions about protection of rights associated with property, including intellectual property (IP) and—particularly for retailers—IP rights concerning the provision of goods and services in a “virtual” world.

Copyright Considerations

US copyright protection covers “original works of authorship fixed in any tangible medium of expression.” Software, pictorial and graphical works, certain text, and sound recordings used within the metaverse are copyrightable.

Unsurprisingly, licensing and policing copyright infringement on the new and different metaverse platform will present new and different logistical and technical problems. For example, it took years to implement a takedown framework for copyright owners to request removal of unlicensed copyrighted music and videos from Internet websites. We expect similar issues in the metaverse. Another licensing consideration is territoriality. The metaverse has potential to transition from platform to platform without readily identifiable boundaries. Copyright licensing agreements will have to adapt, and may recognize platform-by-platform boundaries, sub-platforms, or other territorial divisions.

Fees for the use of copyrighted works are commonly calculated, e.g., per subscriber or per view. Licensors and licensees are likely to encounter difficulties in tracking usage (and thus calculating fees) in the metaverse and must find a method for tracking across platforms, where each may allow the user to engage with or view the work in a different manner. Further, users may use different devices to interact with the metaverse, and platforms may provide different ways for a copyrighted work to be used, further complicating tracking. These concerns apply to any form of media, including advertisements, not only copyrighted music or videos.

Trademark Considerations

Trademark law protects against unauthorized third-party use of a mark in a manner that would cause a reasonable consumer to believe the mark’s owner i) is the source of the goods or services or ii) endorsed or sponsored such goods or services; it also protects against use that may dilute the mark.

One challenge for trademark owners in the metaverse is the definition of “confusion” could be blurred, since the metaverse blurs the barriers between virtual spaces. Similar to copyright, there is also likely to be a territoriality problem and defining boundaries around use of marks may become more difficult.

Some legal precedents relating to video games, showing that game manufacturers receive substantial protection under the First Amendment, might provide guidance.

For example, in E.S.S. Entertainment 2000 v. Rock Star Videos, 547 F.3d 1095 (9th Cir. 2008), the Ninth Circuit ruled that a video game depiction of a strip club’s logo and exterior design did not infringe the club owner’s trademark and trade dress rights. The court held the video game was artistic impression protected by the First Amendment and it was unlikely that consumers would be confused into believing that the strip club produced the game.

In AM General v. Activision Blizzard, No. 17-cv-8644 (S.D.N.Y. 2020), a truck manufacturer sued a software company, alleging trademark infringement for including a branded truck in a video game. The court again found artistic relevance and use protected by the First Amendment, stating that featuring real military operations vehicles evokes a sense of realism and lifelikeness in video games.

It is unclear how these precedents may be applied to the metaverse, though. Artistic relevance may make sense in the video game context, but would that still apply in the blended world of the metaverse? And the metaverse itself is intended to evoke a sense of realism and lifelikeness, so would the realistic depiction of a trademark in the metaverse be a shield against trademark infringement?

Retailers seeking to protect and promote their brands in the metaverse should consider subscribing to a trademark watch service to monitor relevant markets and platforms for possible infringing activity. A more proactive measure would be to establish a presence in the metaverse to interactively monitor its brand and potentially head off infringing activity.

Patent Considerations

While patent issues for retailers in the metaverse are difficult to predict, a focus on AR/VR technology is a certainty. Current AR/VR devices are impressive, but improvements are needed for the metaverse to blend virtual reality with the real world seamlessly. In particular, devices must be less clunky and more powerful. AR/VR technology relies on display screens positioned close to the eyes of the user, where we easily perceive display shortcomings, such as pixel gaps. As the metaverse drives demand for high density displays, including microLEDs and nanoLEDs, we expect an increase in patent activity for this technology and other display technology, e.g., quantum dot color conversion, combiner optics, and new glass configurations, as well as native eye movement recording software and applications.

Implementation of the metaverse will also require improvements in camera and materials technologies. Camera size reduction, to comfortably fit one or more cameras within a headset, and development of time of flight cameras for hand tracking, would advance metaverse applications. Development of microfluidics for tactile-sensing technologies, such as gloves and bodysuits, for an immersive metaverse experience, is also expected.

Metaverse IP Takeaways for Retailers

The metaverse provides opportunities for branding across a wide audience. As it merges the virtual world and the real world, the metaverse will raise many new IP issues. Retailers should assess their approach to IP, including copyrights, trademarks, and patents, and continue to monitor the metaverse for new opportunities to use, expand, and enforce their IP, as well as for risks to their brand.