The metaverse, a revolution with multiple legal challenges

Who owns what in the metaverse? And what law applies in these new immersive spaces? New frontier of tech, the metaverses promised by Meta, Microsoft and others raise many legal questions. The first “cases” are already there. At the beginning of the year, believing itself to be the victim of intellectual property theft, Hermès filed a complaint in New York against an artist who had created NFTs – non-fungible tokens, digital goods that can be bought in cryptocurrency and whose the property is based on the blockchain – in the shape of the Birkin bag, the star product of the famous luxury house.

Certainly, metaverses do not arrive in a legal vacuum. On the contrary, between the European General Data Protection Regulation (GDPR) 2018 on personal data and the Digital Services Act-Digital Markets Act (DSA-DMA), the new Brussels legislation on Gafa which will come into force in 2023, the legal framework governing platforms has even tightened in recent years. The difficulty will rather be to adapt this law, knowing that case law will also be able to clarify the gray areas. For example, the Court of Cassation has long accepted that a theft can also concern intangible property.

“In the metaverse, digital goods are sold on the basis of contracts. However, the principle of the contract dates from the Napoleonic Code, recalls Eric Barbry, associate lawyer at the Racine firm in Paris. There will, of course, be scams and frauds in the metaverse. But, again, the Godfrain law on computer fraud should suffice, since we haven’t changed it since 1988.”

Property rights not always complete

However, there is something new. In the metaverse, it is possible to buy and sell digital goods, these famous NFTs, and therefore to own – at least on paper. This is even the main innovation of the metaverse: these new universes reintroduce the principle of property (and therefore rarity) into the infinite and almost free world of the Web. Therefore, the question that arises is that of the qualification of the digital object. In other words, “what do I buy and what do I sell?” sums up Eric Barbry.

If we have to be careful, it is because, in the metaverse, “the right of ownership is often not complete”, explains Claire Poirson, partner at the Bersay firm. Indeed, it is necessary to distinguish the NFT (the certificate which ensures the authenticity) from the underlying (the digital good in question). However, in some cases, the buyer can acquire the NFT but without the underlying. “You have to be very vigilant, especially since NFTs play a lot on narcissistic reflexes. They create a sense of scarcity where there is none. It’s speculative, ”points out Emmanuel Ronco, partner at Eversheds Sutherland.

All of these details are tucked away in the terms and conditions of major platforms like OpenSea (where NFTs are bought and sold). But also and above all in “smart contracts”, the document that the user signs during the transaction. In these contracts, the platform can, for example, secure a lifetime operating license, which means that the buyer is not the full owner.

“It’s like in art photography: you can buy a copy knowing that the artist has the right to redo the prints”, explains Claire Poirson. In the event of resale of the NFT, the contract may also provide for a commission (resale right) to be paid to the artist behind the digital work. And these contracts even set the rules of succession in the event of divorce or death.

An avatar victim of bullying

In addition to classic property, the metaverse also raises questions about intellectual property. “We can make NFTs on anything that is in the public domain,” explains Eric Barbry. On the other hand, digital goods that embed intellectual property will fall under this regime. In the United States, it is the debate which opposes for example the Miramax studios to Quentin Tarantino. At the end of 2021, the studios filed a complaint against the director who wanted to create NFTs… based on seven scenes from the handwritten script of pulp Fiction not used in the film.

Finally, the metaverse also raises questions about criminal law. Who is responsible when an avatar insults, harasses, or even commits sexual touching on another avatar? At this stage, French law says nothing on the subject. “Pending specific regulation, we will reason by analogy, as often in law”, concludes Emmanuel Ronco. That is to say, by relying… on the very real world.

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The metaverse, a revolution with multiple legal challenges

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