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Metaverse and the Law

"Metaverse and the Law"
The phrase 'Metaverse' has undoubtedly been heard by any person with an interest in cutting-edge technology. Technology companies worldwide have invested heavily in the Metaverse, to the extent that even Facebook changed its name to 'Meta'.

This new technology will undoubtedly have a significant impact on our society. And, like any other innovation, the Metaverse comes with its fair share of legal issues. The article discusses what the Metaverse is and some of the areas of law that it would affect.

What is the Metaverse?
It is important to note that there is no set definition of the 'Metaverse'. The term 'Metaverse' was originally coined in Neal Stephenson's seminal 1992 cyberpunk novel, Snow Crash.[1] In the book, the Metaverse (always capitalized in Stephenson's fiction) is a shared "imaginary place" that's "made available to the public over the worldwide fibre-optics network" and projected onto virtual reality goggles.

There have been numerous attempts at building metaverses even before the term was popularized. Virtual worlds like Second Life allow users to live another life different from their own, with different occupations, aspirations, and experiences. Another game, VR Chat, uses virtual reality headsets and enables interactions between users through their in-game characters.

The Metaverse is not limited to a specific virtual place or universe but rather a combination of various technologies used in tandem, which give the experience of a believable reality in a virtual world. These include Virtual Reality (VR), Augmented Reality (AR), cryptocurrencies, NFTs, etc. And since the technology has been rapidly evolving, the Metaverse has undoubtedly developed an interface with law.

Some areas of law affected by the Metaverse
Intellectual Property
The Metaverse is composed of various technologies, and their scope in IPR is immense. Artists are using Virtual Reality (VR) and Augmented Reality (AR) to create innovative artworks which had never been thought of before. These works by artists are undoubtedly original and would deserve the appropriate protections under IP Law.

An interface between IP law and the Metaverse is in the form of Non-Fungible tokens (NFTs). "Non-fungible tokens are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other."[2] An NFT is a digital asset representing real-world objects like art, music, in-game items and videos. NFTs are generally bought and sold online with cryptocurrencies, and they are encoded with the same underlying software as many cryptocurrencies.[3] The concept is in the name- it is a Non-fungible token, a token which is unique and not interchangeable.

In India, NFTs have been included within the definition of a 'Virtual Digital Asset' (VDA) in Chapter 3 of the Finance Bill, 2022[4]. Since the legal nature of VDAs themselves is unclear in India, there are issues regarding the regulation of NFTs.

NFTs have frequently been in the news, with thousands of dollars spent on various pictures and videos. And here is where the issues start to form. If the artist of an image creates and launches an NFT of the picture, the owner of the NFT will own merely a copy of the image. NFTs do not automatically come with intellectual property rights[5]. Ownership of an NFT is different from owning the underlying work on which the NFT is based.

Even if the NFT has a unique key which proves its ownership, what is owned is ultimately a copy. It may lead to problems in the future if the true owner of such a picture chooses to prohibit any reproduction or sale of their work. And due to the decentralized nature of the blockchain, such copyrights would be difficult to enforce. If someone mints an NFT without owning the original work, it would amount to infringement. How then, can the owner prohibit someone from reproducing their works if the alleged infringer is anonymous and cannot be tracked?

Commerce and Contracts
Some semblances of the Metaverse have already started integrating into the world of commerce. Many shopping and apparel websites use AR, which enables consumers to try their products in real-time without having physical possession of the same.

Another application of the Metaverse, which has been gaining traction in recent years, is the use of smart contracts. Smart contracts[6] are contracts which automatically execute when certain conditions are fulfilled. If the transaction is a sale, then payment might be efficiently made to parties automatically on receipt of the product. Such contracts eliminate the need for intermediaries, saving both time and money for the parties.

Smart Contracts are also based on blockchain technology, ensuring security and transparency. A blockchain is an open, distributed ledger that records transactions in code. Transactions are recorded in 'blocks', and a blockchain consists of a 'chain' of such blocks.[7] These ledgers are protected by encryption, making them very hard to hack.

In addition to smart contracts, NFTs have an application in commerce as well. NFTs can also represent digital real estate, which is gaining demand in recent times. Land in the Metaverse has reached prices of thousands of dollars for a single plot.

With these developments, some issues have come to light. To what extent can this 'virtual property' be called real estate? If so, will existing land laws cover land in the Metaverse? Will there be separate taxes on this land in the future? Most importantly, are these plots considered movable property (Because of their freely transferrable nature) or immovable property (provided they are technically 'land')?

There are also several issues with smart contracts. While their decentralized and encrypted nature is a boon, it can also be a curse. Since the blockchain is decentralized, it is outside the control of any central organization. If any fraud or misconduct occurs, it would be very difficult to locate the offender in the first place to charge them. And since the blockchain is encrypted, any scams or hacks that are successful would be tough to trace.

Currently, victims of scams or fraudulent contracts have remedies under the law. But if someone has lost thousands of dollars in Ethereum to an anonymous party, their money might just be well out of their reach.

Privacy and Security
The leading technological minds of our generation have grand plans for the Metaverse. The aim is to create a virtual world where the individual can fully immerse themselves and experience things that were never thought possible before.

While this vision sounds like a modern utopia, it brings with it a fair share of concerns. The most prominent argument against the Metaverse is the violation of an individual's right to privacy. Major corporations and social media services already have access to most of a person's data, and critics fear that integration with the Metaverse might make us cross limits that are best not crossed.

Currently, we generally grant access to an app whenever we open it. Privacy policies have become so discreet that even visiting a webpage is sometimes considered to be implied consent for access to one's data. It is daunting to imagine to what extent these policies would go in a future where VR is part of our lives. There may be devices that map brainwave patterns, scan one's retinas while wearing a headset, and gain total access to their virtual life. [8]

A person may be enjoying their virtual life in 2060, unaware that Big Data is monitoring their every move, waiting for them to take some action which may be used to provide relevant advertisements. Many science fiction movies are based on a chip which links to the brain and takes one into a virtual world.

If a company produces a chip in the future, the above concerns are even more amplified. Facebook accounts being hacked are commonplace, and the possibility of such a brain-linked chip being breached is not farfetched. This situation is not mere fiction anymore, as such technology is already being developed.

If we venture into a virtual world, what sort of data can be collected? Who has the authority to do so? With strategically placed privacy policies, can the consent obtained be termed as informed consent? Who has the responsibility to apply data protection laws? How can users be protected against cyberattacks?

Conclusion
Like any new technological innovation, the Metaverse may either be a boon or a curse depending on how it is handled. Swift regulatory and legal changes might be needed to catch up with the rapid pace of development. If proper accountability of corporations is ensured and the privacy and security of consumers are safeguarded, the Metaverse would surely take human society to new heights of progress.

End-Notes;
  1. https://arstechnica.com/gaming/2021/11/everyone-pitching-the-metaverse-has-a-different-idea-of-what-it-is/
  2. https://www.investopedia.com/non-fungible-tokens-nft-5115211
  3. https://www.forbes.com/advisor/investing/cryptocurrency/nft-non-fungible-token/
  4. https://www.indiabudget.gov.in/doc/Finance_Bill.pdf
  5. https://www.mondaq.com/india/fin-tech/1132188/nft-and-its-relationship-with-ipr
  6. https://www.ibm.com/topics/smart-contracts
  7. https://www.forbes.com/advisor/investing/cryptocurrency/what-is-cryptocurrency/
  8. https://www.nortonrosefulbright.com/en-us/knowledge/publications/5cd471a1/the-metaverse-the-evolution-of-a-universal-digital-platform#section3

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