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Metaverse: Legal Ramifications & Conundrums



The Next Wave; The Emergence of an Immersive Reality

It is remarkable how rapidly computer technologies are evolving and how extensive they have become in an increasingly digital society. The most recent embodiment of this trend is the “Metaverse” concept, which is the creation of a digital world thatreflects thereal world by integrating earlier web technology innovations with blockchain. As Zuckerberg puts it, Metaverse is about being “in” the environment. The term was originally coined by author Neal Stephenson in 1992 to describe a future world of virtual reality. The virtual world of Metaverse liberates people from the limits of time and space in the real world and transports them to the Meta Universe.


The concept is thus a merge of virtual reality and social media networking to enable shared continued experiences, and it is inevitable that challenges will arise despite its many benefits. From a legal standpoint, government planning and regulation may necessitate a thorough appreciation of the associated concerns. With the integration of augmented reality (AR), virtual reality (VR) and Artificial Intelligence (AI), Metaverse holds immense potential in the way businesses will be conducted in the near future. However, the shift to online living leads to societal challenges that perhaps we are not ready for. How far are these online environments going to transform human lives? These are questions to which there are no clear answers yet. Though still at a nascent stage, businesses should be wary of the risks involved before taking the plunge to invest in Metaverse.


Metaverse and its Most Likely Applications

Viewed as transformative and disruptive, it is envisioned that Metaverse will revolutionize how people work, learn, and socialize in a manner comparable to how the adoption of the Internet altered society in the early to mid-2000s. Its applications are expected to be varied, however for discussion purposes to name a few, they are as listed below:


Video Games

Video games are perhaps the most apparent use of the Metaverse. Fortnite by Epic Games, Minecraft by Microsoft, and Roblox give the opportunity to connect with other people online in a virtual environment, and all three are accessible in virtual reality (VR). Augmented reality (AR) is used by other games to digitally improve reality. Niantic’s Pokémon Go, for instance, geocaches imaginary critters all over the globe and enables players to “catch” them using their mobile devices. The difference between virtual reality and augmented reality is that AR is centered on creating digital images in the real world as opposed to purely being in a virtual setting.


Work Environment; Collaboration and Co-Creation

Improved communication-technology mediated via the Metaverse will probably bring about a revolution in the workplace. Microsoft is creating a product called Mesh, whereas Meta is producing a product called Horizon Workrooms. Both companies envisage users meeting as avatars in a three-dimensional virtual realm, allowing for a higher level of immersion than is possible with two-dimensional video chats. Imagine teleporting from your office in London to Boston without the need to step out of your front door. The concept is believed to enhance social connection, collaboration, and mobility in an immersive platform.


Metamorphosis of Healthcare and Medicine

AR and VR are also being used in health care and medicine. AR has been employed for physical care; doctors have utilized it to operate on real-life patients, architects have used it to design operating rooms where holograms were utilized to visualize people and equipment, and trainees have used it to watch simulations of medical procedures. As argued, it has the capacity to fully reimagine the doctor-patient experience. VR has served as a mental health tool as well. One VR application offers an alternative to traditional talking therapies by allowing therapists to guide patients experiencing post-traumatic stress through a virtual world that simulates their past experiences. As seen to date, physical therapy, cognitive therapy, and rehabilitation have all been conducted in the Metaverse.


Metaverse and its Conundrums

As with every revolutionary technical advancement, the Metaverse will generate new and intricate legal challenges. As the practical uses of the Metaverse continue to expand and develop with technological advancements, so will the legal and regulatory concerns.


The Metaverse is intended to be intricately interwoven, seamless, and devoid of physical space. Each of the below-discussed legal issues will inevitably require practitioners to navigate questions of jurisdiction, territoriality, and conflicts of laws, none of which have been neatly resolved for even the current iteration of the Internet and Artificial Intelligence, let alone fully realized virtual worlds with an even higher degree of interactivity, user immersion and acceptance.


Data Privacy and Security Compliance

Digital privacy and security will be among the most important legal challenges platform owners will face. These concerns are not new to technology businesses, which are under increased regulatory and user scrutiny. However, it is predicted that data in the Metaverse will become tenfold more valuable than it is already, and technology will become progressively interwoven into numerous facets of consumers’ life. This emerging technology will place current rules to the test and increase the demand on regulators to increase their complexity to match that of the technology. Thus, the demands of the emergence of anew ecosystem require relevant benchmarks that go beyond the current metrics of regulation. In addition, a single metaverse run by many companies will need interoperability standards, while isolated, fragmented metaverses would not. Given the vulnerabilities involved when data is transferred from one application to another, user information will be particularly vulnerable to exploitation, and platform operators will need comprehensive agreements to govern data transfers, information security standards, and obligations for compliance.


Intellectual Property

Additionally, there are pertinent intellectual property concerns. Identifying the makers of a specific work in the Metaverse, for instance, maybe more challenging when the work is the outcome of a decentralized collaborative process carried out by individuals hiding behind avatars. Can avatars be regarded as patent and copyright owners? This ambiguity might also affect how courts interpret fair usage. Meanwhile, trademark practitioners are focused on issues such as how trademark dilution may occur in the Metaverse, whether digital assets can count as “goods” for the purposes of trademark laws, and who should be held responsible when the identity of the infringement is unknown. As seen, intellectual property challenges and controversies have emerged in the fashion and luxury products industry. In January 2022, Hermès sued Non-Fungible Token (NFT) creator Mason Rothschild, who marketed a line of digital assets called “Metabirkins,” which were digital duplications of the Birkin bag created by Hermès that sell for tens of thousands of dollars or more, with prices on the secondary market being even higher. Hermès asserted a violation of its trademark and dilution of the Birkin name.


Fintech

There will be a surge in fintech-related legal challenges in the Metaverse, particularly as more businesses sell digital assets and services. Currently, virtual products are sold using cryptocurrencies and other digital assets, and they may eventually be enabled by the same blockchain technology that enables the Metaverse’s crucial interoperability functions. Brands may distribute digital “items” in the Metaverse by selling similar goods to many users (such as branded pairs of shoes or clothes) or by selling ownership rights or identifiers for goods, such as an original work of art. Purchasers of the latter may purchase such items as an investment or for personal collection, even presenting them in a virtual setting. The validity of a particular artwork may be validated on the blockchain using NFTs in a manner like the validation of the cryptocurrency’s worth.


Legal issues relating to accurate ownership verification and possible theft or conversion of genuine and verified transactions will inevitability arise. Consumers may face challenges when using cryptocurrencies as payment for digital products if they are considered financial instruments or securities, which looks more plausible in several countries. The owners of the platforms where the digital assets are located will probably have a responsibility to ensure the security of the digital assets as more people purchase them.


Metaverse Workplace

Though the concept offers greater avenues for collaboration and teamwork, this may lead to new form challenges in a virtual world. As one requires an avatar, this may lead to some issues centering on diversity and inclusion. For example, offensive comments or puns about the selection of a particular avatar may be classified as bullying, harassment, or inappropriate behavior. To add, in situations where a person selects a particular avatar with the intention to ridicule a public figure with certain characteristics emphasized, this may also lead to further issues. Additionally, employers may be held vicariously accountable for harassment, bullying, and discrimination that occurs in the workplace in Metaverse. There are also concerns about using VR for recruitment and how this should be effectively regulated to prevent or mitigate against unconscious bias. Rules that are unique to the Metaverse should be established for the characteristics of employees’ avatars, the way they communicate inside the Metaverse, the management of working hours, and the implementation of safety measures.


Legal Personality of Avatars

Any legal action taken against an avatar might have unintended consequences for the individual behind the avatar. This might include granting an avatar certain rights and privileges. This raises the concern that the concept of causality may need to be acknowledged in a different mechanism in Metaverse. The entire essence of cyberspace is centered on recognizing the distinction between a person’s identity and a virtual one; hence it is suggested that regulating avatars in the Metaverse is essential.


Conclusion

It is impossible to anticipate the degree to which the most ambitious notions of a Metaverse — a three-dimensional virtual environment where millions or perhaps billions of people buy, work, and interact – will become a reality at this time. Although exciting, with the promise of a new world with endless possibilities, it is still a concept. The support of a virtual reality environment takes a significant amount of energy and bandwidth, and VR hardware companies are continually attempting to enhance the battery life, weight, and portability of their devices. Even if the technical conditions for the Metaverse were easily accessible, consumers’ reluctance to immerse themselves further and completely in a virtual environment may impede its widespread acceptance. Lastly, there are disadvantages associated with network settings. Some users may not choose to relinquish the capacity to personalize their online settings in ways that are achievable in restricted and fragmented areas but not in an open and universal Metaverse.


Further to the above, competing Metaverse visions may give rise to metaverses that are never entirely compatible. Despite these challenges, the investment market for Metaverse has never been stronger. Tech titans to fashion labels have recognized the promise of these technologies and have started to pursue novel consumer engagements. It is impossible to tell which of the numerous metaverse initiatives being created by tech corporations and non-tech enterprises will be successful in terms of both technological outputs and broader consumer acceptance. As companies innovate, these advancements will give rise to further legal concerns in the years ahead.


Summary: The most significant legal issues of the Metaverse lie in the areas of clarifying the relationship between the ownership claims of content producers and platform service providers, privacy protection and responsibility for maintaining and processing data, and the possibility of predicting the legal personality of avatars. Also, because of its decentralized structure, Metaverse and its foundation (blockchain) have created restrictions on the traditional aspects of sovereignty, such as legislation and currency production. The role of the regulators in ensuring the exploration of sufficient regulatory sandbox regimes and governance to safeguard user experience and principles of fairness and morality should not be overlooked.

 

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