Brands need an IP audit before engaging in the metaverse

Out-Law Analysis | 09 May 2022 | 3:54 pm | 5 min. read

Businesses risk being left behind if they do not embrace the metaverse, but they should first commission a full audit of their intellectual property (IP) to understand what rights they can enforce and where any gaps are.

With several companies battling to define, develop and operate the metaverse – a concept that promises to draw aspects of the physical and digital worlds together to augment reality – brands need to think ahead to how they might operate effectively in this new environment.

What does this mean for intellectual property rights?

The metaverse can deliver interactive and immersive experiences to users and it will change how people socialise, shop and work. It will complement an already booming gaming market globally and further allow brands to reach huge audiences with minimal environmental impact.

This seismic change will generate new creative works to be protected and create a new environment in which to enforce IP rights.

Patents

When creating innovative technologies, businesses should consider whether to seek patent protection. Patents can protect software provided this is novel and it solves a technical problem.

The challenge for businesses is that many courts have been quick to invalidate software patents, holding the software as an implementation of an abstract idea, and incapable of patent protection.

Policing patent infringement in the metaverse also has practical difficulties. Unlike other IP rights, software patents work behind the scenes. Establishing infringement hinges upon a source code comparison, likely requiring legal proceedings to be lodged to obtain disclosure and facilitate expert review. This is expensive and time consuming and runs the risk of the infringer rewriting the source code to avoid liability.

Trade secrets

In light of the challenges regarding registration and enforcement of software patents, businesses may be better leveraging their trade secrets to protect their metaverse technology.

Trade secrets protect confidential information which is commercially valuable, gives the owner a competitive advantage and is treated as a secret. Trade secrets can last indefinitely if kept out of the public domain. However, the speed with which technology changes raises the question of how long trade secrets in this context will remain relevant.

The success of the metaverse hinges upon its understanding of both the physical world – a place, shop or product – and its user – their location, habits and interests. The metaverse can apply real world features to a virtual environment, for example allowing you to visit digital versions of real-life destinations. Data will play a signifcant part in this. Additionally AR/VR technology will generate data of unparalleled granularity, not just measuring where you click but how you move. This data provides access to the user’s subconscious and has been labelled “gold to a data capitalist”. Though trade secret protection is relatively narrow, if the requirements are met, trade secrets may assist in protecting this data.

Copyright

In the UK, copyright is an unregistered right protecting literary, dramatic, musical and artistic works which are original, are fixed in some way and qualify for protection. As a consequence of being unregistered, copyright is a flexible right but it also means that it can be practically difficult to enforce.

Whilst copyright is an unregistered right in the UK, in relevant jurisdictions like the US brand owners may wish to ensure relevant copyright is registered in metaverse assets and software.

If a business finds its copyright material is being used in the metaverse without consent it should notify the platform immediately and should utilise any takedown procedures available. However, depending upon the location of a host server, takedown procedures and website blocking procedures may vary according to local laws.

When assessing copyright infringement, a court will determine whether a substantial part of a copyright work has been copied. It remains to be seen how the courts will interpret substantiality in the metaverse. It is also uncertain how courts will interpret the ‘fair dealing’ defences to copyright infringement in a metaverse context.

On a more fundamental level, the availability of copyright protection is dependent upon whether a work is made by a qualifying person or whether it is published in a qualifying country. This begs the question as to how the courts will interpret the validity of copyright works beyond the universe which, by definition, has no boundaries.

Trade marks

Registered trade marks provide the owner with the exclusive right to prevent others from using the mark for the goods and services covered by the registration. They are valuable assets of a business, can last indefinitely and avoid the need for trade mark owners to prove the elements of a passing off action.

A number of brands are filing trade mark registrations to ready themselves for launch in the metaverse. For example, McDonald’s has filed trade marks for virtual restaurants offering home delivery and Walmart applied for trade marks for financial services “for use by members on an online community via a global computer network”. 

In the absence of a body of decisions, it is difficult to know the value of metaverse registrations and it is unclear how valuable existing marks covering digital goods and services will be in protecting brands in the metaverse. However, it is fair to assume that expanding registered trade mark protection to cover digital assets will prove beneficial for enforcement.

To protect your brand, it is advisable to implement a trade mark monitoring and watch service so that problematic third party applications are identified swiftly. When using a registered trade mark in the metaverse it is advisable to mark this as such and swift action should be taken to prevent dilution of a brand.

Design rights

Registered design rights are not limited to particular classes of goods and services. This flexibility is likely to be useful in the metaverse. For example, where a brand has a design registration for a popular handbag, if this is adopted by a digital avatar, then the registration could be enforced against a copycat digital embodiment.

The UK Intellectual Property Office (UKIPO) is in the process of considering how the UK design rights framework might be amended to future-proof it against new and emerging technologies. In January 2022 it canvassed views on the use of designs in a digital environment, “including avatar content in online gaming”, looking to ensure a balance between human created and computer generated designs. Whilst the consultation does not make reference to the metaverse specifically, clearly improved protection for digital assets such as avatars would impact upon the availability of design rights to better protect brands in the metaverse.

Licensing and advertising

Where licensing IP rights, businesses should review any existing licences to assess whether these cover the use of that IP in the metaverse. Caution should also be taken as to whether any first rights of refusal are offered which may result in infringement if IP rights are offered to a third party. Any future licences should be carefully crafted to deal with the metaverse and any use in digital assets such as NFTs.

The metaverse is likely to be a strong marketing tool, but so far the UK’s advertising watchdog, the Advertising Standards Authority (ASA), has yet to issue guidance to help businesses engaging with the metaverse comply with advertising rules. As brands look to promote themselves in the metaverse they will need to navigate the advertising codes and ASA rulings.

Actions for businesses

The metaverse provides brands with exciting opportunities to reimagine their businesses. With those opportunities come new threats and issues to be determined, including whether the metaverse will be considered a territory or a medium: we might see a separate intellectual property office, governing law and judicial system for the metaverse one day.

However, before engaging with the metaverse, businesses should undertake a full audit of their registered and unregistered IP rights to understand what rights they can enforce in the metaverse and where there are any gaps in their protection.

Businesses that ignore new technologies risk being left behind. Conversely, embracing the metaverse will enable businesses to engage consumers in ways previously unimagined and monitor more effectively for third party risk. However, presence alone is not enough and brands will need to actively implement a digital brand strategy to monitor and detect infringements of their IP rights and take appropriate enforcement action in the metaverse. 

This is an abridged version of an article previously published by ILO.