Even though it feels like we have been hearing about the metaverse for a while now, the truth is this concept is still at its inception. It turns out that building a digital universe takes time, even when billions on top of billions are thrown at it. And since it’s still in its early days, it is only natural that law and order in the metaverse is one giant grey area.
In the first iteration of the internet, users were solely consumers, so regulations were the least complicated. Web 2.0 emphasized user-generated content and created a participatory culture that raised new regulatory challenges which are governed by the current internet laws.
The next iteration of the internet focuses on completely new concepts such as decentralization, blockchain technologies, and token-based economics, so there is definitely a lot to work on.
Are There Any Metaverse Law Right Now?
Since the metaverse is an unprecedented concept, its creators accepted the regulations from Web 2.0 as the foundation of metaverse regulation. Some of the laws that worked in the past can very well work in the future, as for everything else, now is the time for precedents.
Intellectual Property Laws
The metaverse allows and encourages the creation of content in virtual spaces, and as a consequence, metaverse legal issues associated with intellectual properties are bound to arise. Intellectual property laws protect the ideas of inventors, developers, and authors from all areas of work, and this includes content created on the internet. The goal of IP law is to prevent third parties from wrongly profiting from someone else’s creation.
As of right now, three sections of IP law act as the main guidelines for enforcing IP laws in the metaverse:
Downloadable virtual items are regulated with trademark class 9.
Retail stores and services holding virtual products are regulated with trademark class 35.
Online entertainment services are regulated with trademark class 41.
Earlier this year, the French luxury design house Hermès sued NFT creator Mason Rothschild for an alleged trademark infringement on one of their bags. The case is still open, and its conclusion will surely play a major role in setting the stage for future metaverse law.
Copyright Laws
Copyright law is a form of intellectual property law with high importance in the metaverse. Creating replicas of real-world objects in the metaverse without permission is a copyright infringement, though, the question is, isn’t everything in the metaverse replica of real life?
This is another legal area where looking for real-world precedents to establish laws in the metaverse would be a good idea. A popular copyright case from just a few years ago disputed the copyrightable nature of a chair.
Now surely, there is no special permission required for the creation and selling of chairs as there is no single person that has a patent on it. However, the chair in question, called the TRIPP TRAPP chain, was very distinctive and possessed authentic characteristics, making it unique. So the copyright allegation was not built on the chair itself but rather on its unique practical function.
Similarly, metaverse law allows the replication of practical goods, for example, clothing, tools, weapons, and even houses. Virtual real estate is booming, and people spend thousands of dollars on virtual assets. The copyright law protects both real-world buildings and the metaverse users’ creations from being replicated in the metaverse. This doesn’t just apply to virtual houses but to avatars, NFTs, and all kinds of metaverse art.
Contract Laws
Contracts in the metaverse are very straightforward and regulated, just like in real life. When two parties agree on the terms of a contract, they are both obligated to respect them. If one of them fails to comply, the other has the right to sue for breach of contract.
However, the one major difference is that the metaverse is a virtual platform on which the goods sold are non-tangible. As a result, the contract laws of the metaverse will generally take the form of license agreements rather than purchase and sale agreements, which are two completely different types of contracts.
When a creation is sold, unless it is otherwise specified in the contract, the creator loses all authority over its work. On the other hand, when someone gets a license to use a product, the former owner can still restrict how his work can be used.
Tort Laws
Clearly defined torts or civil wrongs are critical for maintaining law and order in the metaverse. The current statute forbids harmful activities and protects metaverse users from property and personal damages, including physical assault and suffering emotional stress.
If one metaverse user injures another metaverse user within the metaverse, the latter has the right to sue the former and ask for financial compensation. If the accused party is found guilty, they may be forced by law to pay for damages, injuries, medical expenses, etc.
While the statute is great, the problem arises in the question of jurisdiction in the metaverse. Let’s say that a Korean pop star hosts a metaverse concert from her home on a server in Germany, and during the event, an incident occurs between two users from Brazil and India. Which country’s courts will take this case?
Such incidents are complicated to resolve in the real world as well, but at least there are cross-border litigation laws that regulate them. When we add the layer of the virtual nature of the metaverse and the fact that the metaverse and law enforcement within it are on entirely different levels across different countries, things get impossibly complicated.
As of right now, there are no clear indications as to how such cases will be treated, though, in the future, a set of universal tort laws will probably be defined and enforced equally all over the world.
Defamation Laws
Under the current metaverse law enforcement, defamation acts such as false accusations, slander, or stating otherwise untrue damaging comments are illegal. This also applies to user-generated content that is damaging to another brand’s reputation. For such actions, the accused can find themselves in front of real-world courts and held liable for breaking defamation laws, just like in real life.
NFT Laws
NFTs, because of their non-tangible nature, are a complicated area in metaverse law, and not many real-world precedents can be applied to them. Since they are made of data, which is immaterial, the concept of exclusive ownership can’t be applied to NFTs.
Even though NFTs are sold and not licensed, their copyright doesn’t automatically transfer from the creator to the person who bought them. The laws of the metaverse allow NFT creators to keep the copyright of their sold creations, create other similar NFTs, and sell them, as well. In some cases, NFT creators can even make secondary profits when an NFT they already sold, gets re-sold again.
Of course, in accordance with the law of contracts in the metaverse, the creator and the buyer may arrange for the copyright of the NFT to be sold as well, or the creator can sell the copyright to a third party. In summary, in the current state of affairs, there are plenty of laws protecting NFT creators, while the buyers have only a few weak rights and have to rely on contract law.
As for the metaverse law of taxation, NFTs are subjects of the traditional financial regulations of the real world. As a matter of fact, all digital goods, such as cryptocurrencies, stablecoins, and NFTs, are regulated by commodities, banking, and securities laws. As a result, all profits made by selling virtual goods in the metaverse are taxable.
The Bottom Line
As it turns out, the metaverse isn’t the lawless wild west you might have imagined. Of course, there are still large hurdles, particularly regarding jurisdiction in the metaverse, that require a lot of work, but there is a solid base to build upon.
Not too long ago, the INTERPOL launched its first global police of the metaverse. This is a big step toward reaching international cooperation in creating unified laws for the metaverse and enforcing them equally everywhere in the world.
