Series: "Intellectual Property in the Digital Space – Metaverse, Blockchain, NFT & Co"

The Metaverse – three key tips for companies to avoid becoming infringers

The last article in this series focused on the crucial steps that companies should take to protect their brands and strengthen their position against potential infringements in the metaverse.

But what should companies be aware of to avoid inadvertently becoming infringers themselves if they decide to become active in this new virtual world?

Three important tips:

1. Think of the metaverse!

In the past, the advent of the internet has caused considerable problems in the interpretation of licence rights. Many contracts were unclear, leading to disputes over whether the licenced rights included online use.

To avoid a similar scenario in the age of the metaverse, companies should have the foresight to include explicit provisions on virtual use in their contracts. This applies both to companies that already have concrete plans for the metaverse, but also to those that have not yet considered it at all. This applies regardless of whether it involves the acquisition of third-party intellectual property rights or the granting of rights to external partners.

One conceivable scenario, for example, is that a company collaborates with a third-party company, a designer or a musician for a specific product line. If the company wants to have the relevant rights transferred to it, should these also apply to virtual versions of this product line? For example, does the transfer of rights also extend to the creation of NFTs?

Conversely, companies that licence their intellectual property to third parties should define specific conditions for the use of their intellectual property in the metaverse.

(Licence) contracts should therefore include provisions that allow or restrict such use based on the company's strategic objectives. This foresight will allow for a smoother transition into the metaverse without the need for lengthy renegotiations.

2. Secure the relevant rights!

In the metaverse, what may seem like a living and tangible experience is essentially code and software. In most cases, companies rely on third parties - i.e. software developers and virtual reality designers - to create virtual worlds or objects. However, it should be noted that any virtual good, be it a virtual world or a virtual product, is essentially a manifestation of software code. As such, these digital/virtual creations are protected by copyright.

One can imagine, for example, a furniture company commissioning a virtual reality designer to transform one of its characteristic and copyright-protected pieces of furniture into a virtual product for the metaverse. Although such a virtual product is ultimately only an exact copy of a real (already copyrighted) counterpart, it could constitute a new copyrightable creation.

This underscores the need to enter into clear agreements with these designers that explicitly address the ownership and transfer of exploitation rights in the virtual products.

This will avoid potential disputes over exploitation rights and allow companies to fully exploit their virtual goods without infringing the rights of others.

3. Be transparent!

More and more companies are choosing to offer virtual or digital products, often in the form of NFTs. However, to avoid dissatisfaction from buyers or even claims of unfair competition, special attention should be paid to transparency when offering such goods. 

This is because buyers of virtual goods and NFTs are often very uncertain about what they are actually purchasing. Precisely because everything in the metaverse is still so new and there are still no established practices, they are often under the misapprehension that by purchasing digital or virtual goods they are acquiring extensive intellectual property rights in the products.

This may be true in some cases. For example, in the case of the Bored Ape Yacht Club (an NFT collection with profile pictures of a cartoon monkey), the owners of the NFTs are granted the right to use their NFT artwork commercially without restriction.

But the vast majority of companies will want to retain the commercial exploitation rights when creating and selling NFTs and only transfer certain usage rights for non-commercial purposes. However, this should be clearly communicated in the offers.

In addition, the smart contracts on which the NFTs are based can be programmed to include a function that enables creators or companies to participate in the proceeds of any subsequent resale of the NFT on a percentage basis. However, such a mechanism should also be clearly disclosed.

Transparency is therefore essential to avoid misunderstandings and legal disputes due to unfair competition in the future and to ensure smooth participation in the evolving digital world.

See also the other articles of our series „IP Protection in the Digital Space – Metaverse, Blockchain, NFT & Co“:

The Metaverse - opportunities and risks

The Metaverse – how do I protect my brand identity in the virtual world?