Metaverse

It is a week since I last checked in with my parents in New Zealand. I live in the UK, and the time difference makes keeping in touch a little complicated. I don’t want to call and risk waking them. Instead, I walk into their house where I see them sitting on the sofa. Their eyes are open, so I know they are still up. I tap them on the shoulder and they smile.

My mother has some music playing. She turns it down a little, and we begin chatting.

Their cat, ‘Horse’, appears and starts purring at my feet. I stroke him for a minute or two. I hear a ‘ping-ping-ping’ in my ear for each of the Calmness Credits I earn while doing so. I’ll trade them for rewards at my health insurer’s online store later. Maybe I have enough credits now for that ‘Mindfulness on Mars’ retreat I saw them advertising.

The scenario I have described may not be all that exciting, but it nicely depicts a virtual-world interaction that takes place in a metaverse, which (in my example) intersects with real life. (I deliberately say ‘a metaverse’ here, as there is no such thing as ‘the metaverse’ yet. Countless providers, including several well-known Internet giants, offer their own metaverses or platforms for third parties to create these on.)

While many elements of my exchange with my parents have long been possible using familiar Internet technologies, here they take place in a 3D environment that I can move through and explore. I can observe what my parents are up to, interact with them (and with Horse) and share experiences and information.

Whether you want to scale Everest, fly to Mars, look up documents in the archives of a distant museum, try on and buy clothes from your favourite store or simply chat with friends and family, metaverses can provide a way for you to do so, through Internet-enabled platforms. These often comprise a 3D virtual world, augmented by avatars and virtual reality objects that can be accessed and interacted with through a browser or a headset, though there is no agreed definition of what one is or what features it needs to provide to qualify.

Various legally separate entities could be plugged in to the metaverse I described above: my insurer, for example, and the pets home my parents adopted their virtual cat from, as well as the media company that streamed the music we listened to. The legal issues presented by even this simple scenario should have lawyers’ spidey senses tingling.

Can anyone walk into my parents’ home and see them sitting on the sofa, for example? Who can ‘hear’ our conversation? What data do the various parties receive? The pets’ home in New Zealand might need to tell my insurer in the UK that I’m stroking my parents’ cat for me to receive Calmness Credits. How is this extra-territorial transfer of personal data facilitated? Do my parents even own their cat, and what happens if they move home or metaverse? Do the musicians receive royalties for the music we listened to? The list goes on!

For the metaverse to become a real success, deep, seamless integration, interoperability and interconnectivity will be needed across a great many services and service providers. In addition to the contract, property, intellectual property, privacy, security, tax, regulatory, licensing and other areas of law that this will inevitably engage (and challenge), questions concerning jurisdiction, territoriality and conflicts of laws will doubtless arise too.

Reflecting on recent innovations in case law such as Ion Science Ltd v Persons Unknown and others (unreported), 21 December 2020, where the Commercial Court suggested the lex situs of a cryptoasset is the place where the person or company who owns it is domiciled, it is apparent that such questions are far from fully resolved even on a conventional view of what the Internet is and what it has long provided for. (Bitcoin began circulating in early 2009, almost 12 years before the court’s decision in Ion Science.)

Increased connectivity, integration and immersion in the metaverse, with its innumerable novel products and services, can only lead to an explosion in legal disputes and greater need for sound legal advice. Technologies that some might initially approach in isolation, such as blockchain, smart contracts, cryptocurrencies, non-fungible tokens (NFTs), cloud computing, artificial intelligence, big data and the Internet of Things, are all likely to converge here and to present legal challenges and questions that need joined-up thinking and joined-up answers.

Take my parents’ cat, Horse, as a simple example of this. He could be an NFT in the metaverse.

In the case of Lavinia Deborah Osbourne v (1) Persons Unknown and (2) Ozone Networks Inc trading as Opensea [2022] EWHC 1021 (Comm), the High Court recognised for the first time that there is an arguable case that NFTs are to be treated as property under English law. Horse’s NFT should therefore provide indisputable proof of my parents’ ownership of him. However, that does not mean my parents can move Horse to another home or metaverse, or that they can give him away as they ordinarily could their own property. This is because ‘ownership’ in a metaverse is not the same as ownership in the real world, and the rights and options available are more likely to be governed by a platform’s (or virtual pets home’s) terms of service, terms of use or end-user license agreement.

I can’t speak to whether my parents would be sad if they had to part with Horse because the terms of service they agreed to required it. However, I expect the buyers of multimillion-dollar NFT artworks would be upset if they were to discover that they could not move their investments from one metaverse to another, or if they found themselves banned from a metaverse for a breach of its terms and were then unable to access or view their NFT artwork, despite case law suggesting they still ‘own’ it.

Exciting though the metaverse is, a lot of work is needed by the legal profession and the courts to ensure the technological innovations it presents can be fully realised and the risks appropriately mitigated. Failing that, we may find ourselves stranded in cyberspace, when we were supposed to be heading off to a mindfulness retreat on Mars.

Article first published by Bloomsbury Professional Online on 4 November 2022.