Intellectual Property in the Metaverse. Episode IV: Copyright

As seen in previous episodes, the Metaverse can be understood as a parallel virtual world, where users can interact through their avatars and perform different activities. In this sense, within the Metaverse, users can create original content or share content that can be susceptible of being protected by copyright. 

At this point, it is important to bear in mind that copyright protection can arise for the computer programs that power/ run the Metaverse – i.e. as for computer programs in general-, but also for the works created in the Metaverse, thus copyright protection can be invoked to fight possible infringements taking place in there. 

Computer programs (software)

The protection of computer programs or software by copyright is foreseen among others, in the WIPO Copyright Treaty (which is a special agreement under the Berne Convention), and at a European level in the Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs. 

Undoubtfully, computer programs are needed in order to create these virtual reality worlds and to implement them. There are specific software and apps designed for this purpose and obviously these computer programs (more precisely, the source code) can be protected by copyright law. 

Regardless of the fact that these computer programs are designed to shape / run the Metaverse, there are no additional specificities to be observed, in the sense that the same rules as for normal computer programs are applicable. 

Creations within the Metaverse 

By using the above-mentioned computer programs/ software to design virtual worlds, the different elements that constitute the Metaverse are created. For instance, buildings, marketplaces or even the avatars. However, the protection given to these creations might differ from the copyright protection granted to software, as they are considered as graphical user interfaces. In a judgment from the ECJ, the court stated that although these creations cannot be considered as computer programs they can be considered as artistic works, thus be protectable by copyright, as long as such interface is the author’s own intellectual creation. 

At this stage, one of the open questions around ownership of the elements of the Metaverse arises. As regards the features created by using computer programs, ownership of the software does not imply the ownership of the creative element. As mentioned in our previous article “Intellectual Property in the Metaverse. Episode I”, there are several categories of Metaverse. A distinction can be made between: 

- Open metaverses, where users are able to create new features. In this sense, the company in charge of developing that Metaverse will create a basis and then integrate a software to allow users to produce new elements. In these cases, the terms and conditions can foresee a compulsory licence in favour of the metaverse owner, for the elements created by users. 

- Closed metaverses, in which users cannot create any additional element. In such cases, the ownership corresponds to the company owner of the Metaverse. 

Infringement of copyrighted material 

It is therefore possible to face infringement of IP rights in the Metaverse – in relation to works originating from outside and in relation to works originating from inside. 

As seen before, new original works are being created inside the Metaverse. As these works are likely to be protected by copyright, a third party reproducing or sharing this online content without consent could be committing copyright infringement. 

The same can happen if a third party introduces works generated outside the Metaverse – i.e. from the real world, like a painting or pictures-, and shares them in the Metaverse without the authorisation from the copyright holder (or without benefiting from a copyright exception). 

For those cases of infringement, it is possible to take enforcement actions. However, the copyright holder can face some difficulties, for instance when it comes to identifying the real identity of the infringer, as the blockchain grants privacy. Or even the acceptance by users of terms and conditions that exonerate the Metaverse platform from liability in case of an infringement performed by a user. 

The vast majority of infringement cases that are taking place in the Metaverse are related to Non-Fungible Tokens (NFTs). 

 

NFTs

As a reminder, NFTs (Non-Fungible Tokens) are defined as new digital assets, powered by Blockchain technology, in which all the transactions are recorded. In other words, an NFT is a software code, basically a smart contract associated with the NFT metadata, that can be traded on the blockchain. 

In the previous article of IP in the Metaverse. Episode II: Trade Marks, we already went through some relevant cases of NFTs infringing existing trade marks. But what about copyright? Can NFTs be protected under copyright law? Can their use make someone liable of copyright infringement? 

Just like the Metaverse, NFTs are a brand-new technology that leaves some questions open, more precisely, as regards the applicability of copyright to NFTs or the ownership over the digital copy. Generally speaking, as mentioned before, NFTs are digital assets (virtual paintings, pictures, real estate, or an item that can be used by an avatar, like a handbag), to which is associated a token (a metadata file working like a digital certificate of authenticity and ownership, registered on the Blockchain).

NFTs can be sold or licensed through sales or auctions, and they involve both digital but also non-digital assets, as for example in the Nike vs StockX case.   

From its side, copyright protects the original digital creation and grants its author some exclusive rights, for instance the right to copy or distribute the work. Therefore, the particular artistic work sold as an NFT can be eligible to be protected by copyright if it fulfils the established requirements, e.g. originality and creativity. Notwithstanding, it is important for the purchaser to understand what he/she is actually acquiring when buying an NFT, as this is one of the key issues that causes confusion. 

In some cases, when purchasing an NFT, the user is acquiring the ownership over the (artistic) work and the token (the metadata file), which includes the copyright. This means that there is a transfer of the copyright ownership from the seller to the purchaser.

In other cases, as the NFT is a combination of a digital work and a token, the purchaser obtains the ownership over the token -i.e., over the software code (the “certificate of authenticity” mentioned above), rather than over the artistic creation per se. This is commonly the case with NFTs – here the “real-life” equivalent of this would be buying a signed copy or an original edition of a book (e.g. the first edition of your favourite novel). What you buy here is a specific valuable copy (signed, ancient…), not the ownership of the work.

Therefore, in such a case there would not be copyright assignment, but there can usually be a licence agreement between the parties that could be included in the smart contract stored on the blockchain. In platforms like Opensea, the creator of the NFT grants a licence to the purchaser, to use or reproduce the digital asset. But there is no transfer of ownership over the artistic element. 

The following examples show the legal uncertainty that surrounds the NFTs world, as the existing regulation is blurry and does not provide specific solutions.

You may have heard of the “Bored Ape Yacht Club” (BAYC), a collection of NFTs featuring cartoon apes based on the Ethereum blockchain. The terms and conditions of BAYC specifically state that the purchaser owns the NFT and the “underlying Bored Ape, the Art, completely”. However, this statement can be ambiguous, as right after that, the following paragraph says that the company “grants you a worldwide, royalty-free license to use, copy, and display the purchased Art, along with any extensions that you choose to create or use, solely for the following purposes…”. 

Another recent case happened when the film producer Miramax sued Quentin Tarantino for auctioning some scenes of the “Pulp Fiction” script. The Director claimed to have retained some reserved rights to the film, including amongst others “print publication (including, without limitation, screenplay publication, ‘making of’ books, comic books and novelization, in audio and electronic formats as well, as applicable), interactive media, theatrical and television sequel and remake rights, and television series and spinoff rights.” For this reason, the director considered that the “print publication” clause allows him to scan and produce the NFTs from his handwritten script, which, according to him, was in any case produced before the contract with Miramax. The trial is still in progress and hopefully the court will soon shed some light on this.

In fact, in a recent copyright infringement case in China related to an NFT, the court ruled regarding NFTs and copyright and the obligations of NFT platforms. The plaintiff created an NFT consisting of a digital artistic work that was later licensed to the NFT platform (the defendant). A similar NFT was created by another user of the platform, that started commercialising it. The court ruled that the transfer or licence of the digital work does not imply the transfer of the intellectual property inherent to it, unless it is envisaged in the agreement. The court held that the NFT platform has an obligation to adapt their mechanisms to check the copyright ownership of the uploaded NFT. Moreover, the NFT platform should have appropriate take down mechanisms to prevent the dissemination of the contested NFT. This has been the first ruling in China regarding copyright issues and NFTs, but for sure it is just the beginning. 

 

To sum up, even if your intention is to buy or to sell an NFT, it is important to understand that the ownership of the NFT is likely not copyright ownership over the underlying work. In other words, if you acquire an NFT, you will own the metadata/ software code, but not necessarily the copyright over the work. This need to be specifically stipulated in a contract/ agreement. For this reason, it is important to check carefully the specific terms and conditions of each Metaverse platform, and make sure they are clear and precise with regard to the rights granted. 

 

Stay tuned for the next and last episode!

 

Picture by Efe Kurnaz on Unsplash