Protecting intellectual property in Metaverse

L Badri Narayanan |Hemant Krishna | Updated on: May 12, 2022
Metaverse is based on a vision of a decentralised internet with a preference for distributed consensus mechanisms

Metaverse is based on a vision of a decentralised internet with a preference for distributed consensus mechanisms | Photo Credit: Dado Ruvic

Though Metaverse has thrown up opportunities for artists and brands, many legal issues need to be sorted out

The Metaverse, as is currently understood, refers loosely to virtual spaces that may or may not mimic real-life environments, and are characterised by interactive possibilities of social media and online gaming and are powered by the technologies of blockchain, cryptocurrency, augmented reality and virtual reality.

The Metaverse promises a not-so-distant future in which people can wear their virtual reality (VR) headsets, glasses and wrist bands and socialise, work collaboratively, adopt avatars, play games, walk through virtual parks and jungles, meet at virtual coffee shops, hold meetings in virtual boardrooms, dance at virtual nightclubs, and attend concerts with friends virtually among other things.

The very concept of the Metaverse throws up a variety of questions on the interplay between existing legal frameworks and issues of ownership, transfer of value, protection of rights and infringement on the Metaverse. Of these, intellectual property issues are particularly relevant since the Metaverse encapsulates a range of technologies, literary and artistic works, designs, logos, symbols and imagery, most of which have historically been protected under intellectual property law regimes.

In the US, well-known brands such as McDonalds, Nike, Walmart, Crocs, and Skechers, as well as unknown and independent applicants have been making a beeline to register trademarks for their Metaverse offerings. Some of these brands have also been exploring the use of NFTs or non-fungible tokens to assert their intellectual property rights.

Cases galore

The recent lawsuit involving filmmaker Quentin Tarantino’s proposed public auction of a NFT of the screenplay of Pulp Fiction, which was challenged by Miramax on grounds of infringement of trademark and copyright, laid bare the problem of applying traditional intellectual property laws to new technologies.

One question that frequently comes up in discussions of the Metaverse is around who owns the right to create and commercially exploit virtual digital assets. There is growing consensus among intellectual property lawyers across the globe that, in the absence of contractual mechanisms to convey copyright, a mere purchase of an NFT does not entitle a buyer to copyright. But is copyright over an artwork a pre-requisite for a party to issue a NFT over such artwork?

This question has come up before the Southern District Court of New York recently. The administrators of the estate of the Indian artist, MF Husain, challenged the right of TamarindArt LLC, the buyer of Husain’s painting called ‘Lightning’, to proceed with a project involving the sale of NFTs based on the artwork.

TamarindArt holds exclusive, worldwide, royalty-free licence to reproduce the artwork in any format including digital formats but the estate administrators issued a cease-and-desist notice to TamarindArt arguing that the latter was not the ‘copyright owner’ and had no right to reproduce the artwork, distribute copies, create derivative works based on it or display it publicly.

Even as courts grapple with questions of how archaic intellectual property laws can be applied to protect intangible property on the Metaverse, there is no dearth of players in the market innovating at the edges of this fast-evolving paradigm.

In late 2019, Nike obtained a patent called ‘Cryptokicks’, which consists of a blockchain mechanism through which digital assets such as NFTs can be linked to specific physical products such as sneakers. Effectively, when one buys a pair of physical sneakers, they will also get a cryptographic token representing the ownership of the physical pair of sneakers and such tokens can be stored in a cryptocurrency wallet and transferred to other parties. But can a cryptographic token be used to prove ownership in a court of law?

While the Metaverse is opening new and exciting avenues for artists, creators, brands and consumers of new technology, the problem of how to protect intangible property on the Metaverse continues to loom large. The key to solving this problem lies in recognising that while existing frameworks to protect intellectual property rely heavily on centralised authority involving regulators and courts, the Metaverse is based on a vision of a decentralised internet with a preference for distributed consensus mechanisms.

Narayanan is Executive Partner, and Krishna is Partner, Lakshmikumaran & Sridharan Attorneys

Published on May 12, 2022
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