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The Metaverse ‑ a frank discussion

What is the Metaverse? Is the Metaverse here, or is it being created? Do we have one Metaverse or multiple Metaverses? So many questions arise when one is asked to define the term Metaverse. Not everyone embraces this term either since, Roblox, Epic, Genies use the term Metaverse, whilst others call it Live Maps, Mirrorworld, Omniverse, or Spatial Internet.

The advances in technology are inexorable and they are shaping our lives. With the Fourth Industrial Revolution now upon us, we are living in a new digital world that according to Thomas Friedman has; (a) integrated circuits on microchips, (b) memory units to store information, (c) networks that help to enhance communication, (d) software applications that provide a direct link to consumers’ needs, and (e) sensor capacity that allows artificial intelligence to analyse most things which were previously only accessible to the human mind. This revolution is the result of ‘technological convergence’ which can be described as the concept of merging, blending, integrating, and transforming independent and previously unrelated technologies such as the Internet of Things (IoT), Big Data, Robotics, Artificial Intelligence (AI), Blockchain and Virtual Reality (VR). Joined together, completely new technology is created, integrating the physical, digital and virtual worlds.

The Metaverse to a certain extent is the culmination of technological convergence. The phrase “Metaverse” was initially coined in a 1992 Science Fiction novel by Neal Stephenson called Snow Crash. “Metaverse” is a combination of the prefix “meta,” which means beyond, and “universe”. So, the Metaverse is a world beyond the real world or universe. In the Metaverse, virtual property, avatars, and services can be tokenised, purchased, and sold. This is most often done using tokens cryptocurrencies and NFT. This purports to be an online dimension where through convergence we have the fusion of virtual assets, virtual financial assets, NFT, DEFI, digital ledger technology, and smart contracts.

Through the said convergence the Metaverse is touted to have the potential to become a universal digital communication platform, replacing the current technology stack of the world wide web operating on top of the Internet. For this to materialise however participants within the Metaverse will need to be able to supply goods and services in exchange for value recognised by other users and thus establish a feasible economy within the Metaverse. This economy will prosper and will be underpinned by seamless interoperability and connectivity between different platforms and different users on these platforms in a ubiquitous manner.

Aside from this potential and the novelty, the fusion of the digital and physical worlds aside from augmenting the notion of value, will also undoubtedly bring about new risks, forcing us to redefine and change many of our laws and policies to mitigate such risks and foster the safe functioning of the new digital economy. Let’s make things clear right at the inception, the Metaverse, although not defined is already subject to relevant legislative frameworks, such as the privacy and data protection framework, consumer law, competition,  information society, and other legislation applicable to the internet including criminal and civil law.

This notwithstanding, given the revolutionary nature of the Metaverse, we anticipate that is likely to give rise to a range of complex legal and regulatory issues. We consider some of the key ones below. As time goes by, naturally enough, new ones will emerge. Truth be told on the 15th of February 2022 even the European Commission was asked to commission a study on the same lines.

Participation in the Metaverse will involve the collection of unprecedented amounts and types of personal data. To enable interoperability, data collected by one entity in the Metaverse may have to flow seamlessly between different operators and even platforms. As interoperability improves and the consumers are allowed to move digital assets and avatars between platforms and across the Metaverse, software developers and brands will need to establish bilateral or multilateral data sharing agreements to improve the seamlessness of the consumer experience. 

Virtual reality headsets and glasses will likely be commonplace in the Metaverse. Such devices have the capacity to process a wide range of sensitive data about the users interfacing within the Metaverse. Laws like the General Data Protection Regulation will be put to the test, particularly on what will constitute personal data, what constitutes consent, who is the controller, and how can data be shared within the Metaverse. How will data protection by design be implemented in the Metaverse or the right of erasure? Will data generated by headsets or devices be deemed to be machine‑readable data under the up‑and‑coming Data Act and thus exempt from sui generis database rights?

In the past weeks, we have also witnessed important cases involving NFTs & the Metaverse. Two of these in particular, (Nike vs StockX  & Hermès vs Rothschild) are already highlighting important factors to consider for people venturing into this space. IPR is of paramount importance and aside from copyright protection, one should also consider carefully trademark protection in the Metaverse with respective registration for both the physical as well as virtual versions of the goods.

Another thorny issue (also applicable sometimes to software) is co-ownership. What happens if a virtual good is the result of collaboration? Who owns and who controls the rights? Principles of joint authorship and co-ownership are already extremely complicated in the software realm, and their application will become more complex in the Metaverse.

The e-commerce aspects of the Metaverse would be subject to laws that regulate e-commerce in Europe, like EU Regulation on Platform to Business as well as the up-and-coming Digital Services Act and Digital Markets Act, and the Data Act.

Similarly, if AI is meant to be used in the Metaverse one will also need to follow the developments of the proposed AI regulation. In the same vein we would also advise monitoring closely any applicable laws on the Internet of Things (presently the recent amendments to the Radio Equipment Directive) as well as cybersecurity developments in the field (particularly through the schemes which will be launched pursuant to the Cybersecurity Act).

The Metaverse and all its encompassing value are underpinned by digitalisation, software (code) which includes smart contracts as well as more automation either via the same smart contracts or technologies like AI. In our view merely focusing on cybersecurity might not be enough for this innovative realm and the risks involved. The potential risks here can be substantial and may affect the users and adopters in the Metaverse where software might also have bugs that would result in loss or theft of digital assets/artifacts, access rights, digital identities, personal data, trust in the Metaverse. To this end, more focus on technology assurance and verification would be needed to make the Metaverse as safe and productive as possible.

As the Metaverse pans out and more interactions materialise we can expect to deal with novel legal concepts, like what we experienced with the inception of the internet and lately crypto. The Metaverse has the potential to have different layers of business, interactions, and values and thus fuel its own economic model. To this end will we have more Defi (decentralised finance) dependent models, in the Metaverse? How will jurisdiction be established if there is an international dispute, how will crimes be investigated, detected, and prosecuted, and by which jurisdictions? How will judicial or administrative asset recovery or forfeiture happen? Regrettably, no one has a crystal ball, and we are just scraping the surface here, but we need to embrace this Metaverse phenomenon with an open mind, ready to learn as we go along and ultimately building on the experiences and legal structures we have at hand.

Dr Ian Gauci is the Managing Partner of GTG Advocates and Afilexion Alliance. He advises multiple government bodies and is one of the local key figures on technology law matters. He is also an international speaker, lecturer, and author.

Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.