Let’s face it: ‘metaverse’ has become an annoying buzzword over the last few years (although the term originated in 1992 in the science fiction novel Snow Crash). When most of us hear the word ‘metaverse’, one or more of the following might come to mind: (1) it refers to something that “is coming” (or probably here, maybe?); (2) it refers to a future where most of us utilize innovative technologies (perhaps goggles, or something?); and/or (3) it refers to something where the opportunities and challenges are not yet fully understood.

The intent of this article is to: (1) demystify the “metaverse” and describe what it means; and (2) identify some entertainment legal issues that will unfold.

Perhaps the conceptual difficulty with the metaverse is that it does not yet refer to one unitary place or space. It describes several different experiences that could one day converge into a single human experience, but we are not there yet. There are a few other common metaverse qualities that are worth highlighting:

• Interactive Virtual Spaces – Participation in 3D virtual spaces in a perceived virtual universe, which might include watching a concert in a virtual platform (Travis Scott’s performances in the video game Fortnite Battle Royale had more than 27 million viewers) or building your virtual house on your virtual piece of real estate in your virtual community (check out The Sandbox, a user-generated, blockchain-based virtual world, where folks are spending hundreds of thousands of dollars on virtual properties);
• Describes a Future – Perhaps the easiest metaverse concept to grasp is that we are referring to some future iteration of the internet, where we aren’t just consuming and sharing information with others, we are sharing interactive experiences with others;
• Engagement – Similar to the above points, we are describing places or spaces with a high level of engagement in whatever virtual platform we are participating in. We are sharing content, sharing experiences, and participating in events all at the same time and in a shared space; and
• Use of Technologies – A world in which there is mass adoption of ‘the metaverse’ is likely one where we see mass adoption of certain technologies that support or enhance our experience in these perceived virtual worlds, such as virtual reality (VR) headsets and augmented reality (AR) devices – that is, the combination of the real world and computer-generated content technologies (think Google Glass, but cooler). Increased use of generative artificial intelligence (AI) technologies like ChatGPT, DALL-E2 (art generator), and LyricStudio (lyric generator) will likely be seen in the metaverse for content creators, although we currently see application of those technologies in the physical “web 2.0” world as well.

Now being somewhat closer to understanding the ‘metaverse’ concept, it’s time to dive into some fun legal discussion points from an entertainment law perspective. The following is just meant to scratch the surface, as the legal issues and discussion points related to the metaverse (both entertainment and non-entertainment) are seemingly endless.

There Are Laws in the Metaverse:

A good starting point when discussing legal issues in the metaverse is that we currently have an existing legal framework to draw from (this article examines these issues from a Canadian law perspective). As long as people live on the physical planet, laws will apply. In Canada, for example, literary, artistic, dramatic and musical works are protected under the Canadian Copyright Act, which creates a bundle of rights for the copyright owner. That includes the exclusive right to, for example, reproduce, produce, publish, make a sound recording, communicate to the public by telecommunication, or make any contrivance that may be mechanically reproduced. As we enter these virtual spaces and incorporate our creative content, current copyright laws, trademark laws, and other legal principles will serve as a starting point when thinking about protecting such content.

What Content Are You Using?

Metaverse or no metaverse, users of creative content need to understand what content they are using, how they are using it, and determine what rights (if any) are required to use such content. Is your business using a photograph, video or a piece of music? On your virtual platform, do you want to offer digital art or non-fungible tokens (NFTs)? Like the physical world, always consider (1) the content you are proposing to use; (2) the rightsholders of that content; and (3) what rights you may need to secure to use such content. Similarly, when purchasing/acquiring content, care needs to be taken to confirm not only the content and rightsholders, but the specific rights that are being acquired (see, for example, the infamous purchase of the Dune book for $3 million).

An additional challenge we are seeing (and will continue to see) in these virtual spaces is ownership of content created through technology like generative AI (think “Heart on My Sleeve”, AI music that replicates Drake’s and the Weeknd’s voice). Will certain works pass the originality test to attract copyright protection? If so, are personality/publicity rights at issue?

The Challenge of Protecting Intellectual Property:

Although, as noted above, current copyright laws, trademark laws, and other legal principles like personality rights can serve to protect creative content, adequately protecting intellectual property within the metaverse will likely nonetheless be an ongoing struggle given the vastness of the virtual worlds we may one day participate in. For example, how difficult will enforcement be should a user’s avatar appropriate another’s personality for commercial use in the metaverse? In addition, an overarching challenge for existing brands and creative content owners, for example, could be jurisdictional complexities. What laws apply, and to whom, in virtual worlds that are boundless and transcend borders? What about ownership of user-generated content within the metaverse, created by users in real time? Who will own this creative content; the creators, the platform, or will there be a new “opensource” way of thinking about sharing and exploiting content?

The Metaverse – the land of opportunity for Creatives

Although the future of the metaverse is still uncertain, we are seeing (and will continue to see) huge investments in virtual worlds. $450,000 was spent on virtual land to be Snoop Dogg’s virtual neighbor in The Sandbox. Genies, an avatar startup, raised $50 million during its S-C round, a company that now has a valuation over $1 billion. Roblox raised $520 million from Warner Music Group and others, a game that is played by over half of U.S. kids under 16 (61 million daily active users), a company that currently has a $29.5 billion valuation. Three single metaverse concerts by Travis Scott, Lil Nas X and Ariana Grande saw a cumulative attendance of over 100 million. There has even been speculation that 10-15% of our wardrobes could become digital, which is substantial considering the global apparel market is $1.5 trillion. Lastly, although the NFT market is cooling, it still generated around $24.7 billion worth of organic trading volume in 2022 across blockchain platforms and marketplaces.

Needless to say, with all of the legal challenges that come with the metaverse, the opportunities for creatives and their businesses are massive. For businesses, virtual worlds create new spaces to promote brands, sell goods and services (both physical and digital), and utilize limited digital offerings such as NFTs. For musicians, the opportunity to commercialize one’s live performance in virtual venues is very real (it’s estimated that Travis Scott grossed approximately $20 million from his Fortnite performance, including merchandise). Such high-profile performances have the potential not only to drive physical merchandise and NFT sales, but, of course, will drive on-demand streaming revenues. In addition to live performances, virtual worlds create new revenue opportunities for musicians, whether through synch licensing, public performance royalties (see proposed SOCAN tariff 22.G, for example), or other novel uses. Although there is some outrage regarding the “Heart on My Sleeve” track, what about a world where a decentralized autonomous organization (DAO) is created to approve the use of artist likeness rights, the requirement of which is credit to the original artist and a fair royalty structure? Recently, the artist Grimes took to social media, permitting her fans to use Grimes’ likeness “without penalty”, provided the royalties (presumably sound recording royalties) were split 50/50. This is wild stuff.

Final Thoughts and Tips For Content Creators:

Although we don’t know what the future holds, we know that the entertainment business will continue to evolve rapidly. A future that involves virtual spaces and a high degree of engagement is likely here to stay. With that in mind, the following are a few takeaways for content creators and creative businesses as we move into metaverse-like markets:

• For businesses wishing to use certain creative content within the metaverse: (1) carefully identify the content being used or potentially used; (2) identify the rightsholders; and (3) confirm the rights that need to be secured (whether a synch or master use license (or both), license for use of artwork as part of an NFT, etc.).
• Similarly, when purchasing/acquiring content, care needs to be taken to confirm not only the content and rightsholders (as above), but the rights that are being acquired. For example, the NFT that you purchased may be cool, but copyright to the work(s) embodied in the NFT may not have been (and likely weren’t) assigned or transferred as part of the transaction.
• If applicable, owners of registered trademarks should review their goods and services descriptions and consider contacting their trademark agent to confirm whether existing marks would be protected within virtual spaces.
• Content creators (and their lawyers) need to be mindful of new and emerging licensing opportunities within the metaverse and ensure any such licenses appropriately consider potentially new forms of use and exploitation. For example, should your video game synch license today permit broader metaverse exploitation rights?
• Platforms, users, and creators need to consider how to ensure these spaces are safe and appropriately protect creative works.

Most importantly: be inventive. It has never been more exciting to be a creative business or content creator than now. The combination of virtual worlds and interactive new technologies create incredible potential for growth. God speed.