Many unforeseen issues that entail comprehensive changes to global law will emerge as the Metaverse unfolds further, with Intellectual Property Law in India front and centre

Metaverse, the idea of a 3D universe where digital avatars of users can walk around and have an immersive experience of interaction using new-age augmented and virtual realities, is almost a reality now. It is projected to become a more than USD1 trillion industry. Even day-to-day activities such as shopping, working, going to school and interacting with friends will be greatly impacted by the metaverse.

Metaverse opens quagmire of Indian IP issues Manisha Singh
Manisha Singh
Founder Partner
LexOrbis in New Delhi
Tel: + 91 11 23716565
Email: manisha@lexorbis.com

The ability to transcend one’s physical self through an avatar in the metaverse may obviate the need for travel and, to a great extent, replace the requirement of one’s physical presence for many interactions. It will pave the way for newer economies of gigantic scale and proportions.

This, coupled with artificial intelligence (AI), machine learning and blockchain technology, would also require appropriate changes to legal and regulatory frameworks. As business, art and culture, and various other economic activities fuse with the metaverse, the laws to govern them will need to be first set and then implemented. This process is likely to involve many obstacles.

IP protection in the metaverse may also present itself with new challenges that have not been foreseen. The advent of a new breed of brands requiring adequate classification and protection – including non-conventional trademarks such as sound, 3D, smell, motion and tactile marks – may shape the branding space.

In India, for a mark to fulfil basic criteria for the status of a “trademark”, it must be distinctive and capable of being represented graphically. Thus, the law may have to evolve to cover protection of tactile and smell marks that do not have any direct mechanism of being represented graphically.

Although it may seem a bit futuristic, smell and tactile marks may soon be a reality through new-age technologies such as suits with sensors and smell cartridges, like the gadgets and gizmos used to enhance experiences in the metaverse.

Metaverse opens quagmire of Indian IP issues Dheeraj Kapoor
Dheeraj Kapoor
Managing Associate
LexOrbis in New Delhi
Tel: + 91 11 23716565
Email: dheeraj@lexorbis.com

As there is a Vienna codification to classify logos and marks, classification systems for non-conventional marks would also be required. The Nice classification, an international categorisation with 34 classes of goods and 11 classes of services, may need to expand to accommodate a wide range of virtual goods and services.

Even before the lawmakers introduce changes to the law and the Nice classification, businesses may assume an additional burden and prefer filing additional applications to register their brands for virtual goods. Technically speaking, there seems to be no real need for a clothing company that possesses a registration for its brand for apparel in class 25 to seek additional registration for downloadable virtual goods in class 9. This is because India provides a regime of cross-class protection where goods are deemed similar, and consumer confusion could be the likely consequence.

However, for simplifying the process of enforcement, brands may choose to go down the path of filing additional applications. It means the years to come may see a large rise in filings in the country.

IP licensing will also be a challenging task because there are millions of ways a digital asset can be used in the metaverse. The scope of the licence would need to be very well defined to retain enough control on the usage of the asset.

For instance, in India, brands tend to be highly conscious of their reputational health and avoid association with anything that may bring disrepute. A pet clothing brand would not like its clothes to be shown in a virtual event that encourages insensitive human behaviour towards animals. But would it be feasible to check all unacceptable usage in a virtual world of myriad possibilities?

Metaverse opens quagmire of Indian IP issues Simrat Kaur
Simrat Kaur
Associate Partner
LexOrbis in New Delhi
Tel: + 91 11 23716565
Email: simrat@lexorbis.com

Non-fungible tokens (NFTs) that provide irrefutable proof of authenticity could help. Linking digital assets to NFTs and providing robust smart contracts covering all terms governing their usage may assist brand owners in keeping a check and avoiding brand dilution.

People dealing in digital assets in the metaverse would also need to understand that they cannot deal with them in absolutes. Owning a tokenised digital asset does not mean owning the underlying IP itself.

If one buys an NFT for an image, one should know that one owns a particular digital copy of the image and not the copyright. Even if there is IP transfer, it is the smart contract governing the rights that have been transferred, because copyright is a bundle of rights that can be separately transferred or licensed.

Certain other eventualities that can be foreseen are trademark infringement and passing-off through the sale of digital goods like NFTs. Such issues, although not unique to the metaverse, are likely to be heavily litigated in the near future, owing to the lack of legal guidance about this new medium of human interaction.

Disputes have already been occurring. Very recently, the popular French brand Hermès acted against digital artist Mason Rothschild alleging that his MetaBirkins NFTs, which are virtual recreations of the Hermès bags, amount to trademark infringement. Birkin is a famous handbag brand. According to Hermès, the word “meta” being a generic term used for the virtual world does not serve to distinguish the infringing mark from Birkin, hence the addition of the prefix meta is inconsequential.

This is one of the first examples of a brand seeking to protect its trademark in the metaverse. It throws light on the issue of enforcement of trademarks in the virtual world, where digital products bearing trademarks are tied to digital tokens hosted on blockchain and then traded as NFTs.

If such trademark usage leads to consumer confusion as to the source, and is hence infringing, an injunction could be sought. Assuming the NFTs are removed from the NFT platforms to comply with the injunction order, they would not lose their existence because the blockchain is immutable in nature. Therefore, for the purpose of IP enforcement, seeking “NFT burn” (destruction) may be warranted to rule out further transferance.

The fair-use defences available to alleged infringers within the metaverse also need to be looked into to create a better regulated balance. Mostly, the laws of trademark infringement, passing-off and fair use appear to be in place. However their interpretation may require some tweaking, or explanations would need to be added for them to encompass a gamut of activities.

Another interesting consideration would be the ability of a mark to acquire distinctiveness and become protectable. It will be interesting to see whether a mark used only in the metaverse can acquire distinctiveness and be protected in the virtual and real worlds.

As far as cinema is concerned, India has produced iconic movies and fictional characters. As the metaverse takes off, artists and film producers will see new opportunities to reap profits off the popularity of their old classics. Consequently, contract disputes around old artist or celebrity agreements may crop up.

The Quentin Tarantino-Miramax dispute is a hot example in this area. After the director announced NFT versions of the handwritten scripts of his classic movie, Pulp Fiction, Miramax moved a lawsuit against him alleging breach of contract and infringement of its IP in the script. Tarantino’s lawyers built a defence saying the governing contract expressly reserves his rights to screenplay publication. The critical question is: Does the right to screenplay publication cover the minting of NFTs? Given the lack of any precedent, artists may attempt to benefit from the grey area in law and mint NFTs for popular scripts and characters.

In public performance events, social distancing norms have already provided an external trigger for generating interest in live music or drama streaming. As the metaverse would provide an immersive virtual experience, the trend would see a boost in India, giving rise to new enforcement challenges for copyright owners. People would start creating new music in the metaverse and performing it then and there. Who would be responsible if their creations infringe on third-party copyright? The metaverse platforms would take protection under intermediary safe harbour laws.

Going after individual infringers would be too impractical for rights holders, leading to a whack-a-mole problem of piracy, the same as the digital content industry is currently battling against. Remedies like notice and takedown, mass blocking orders and proactive filtering by intermediaries serve well, but may prove to be dysfunctional in the metaverse owing to the real-time nature of most of the infringing acts.

Cases of unauthorised use of another’s name and likeness will multiply, as will the disputes around breach of publicity rights. Territorial jurisdiction issues will also arise because the metaverse is a virtual world with no boundaries. The creation of new IP by virtual AI avatars will also give rise to new issues because it will be hard to decide if the AI creations can be protected just like human creations. In other words, can AI-generated outputs be considered “works”, and can AI devices or avatars be the authors?

The above-mentioned issues are the anticipated ones that the world is wrapping its head around, which may entail heavy changes in the law globally. India is no exception because run-of-the-mill IP protection approaches may become pointless.

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