The excitement building around the possibilities of the Metaverse has many businesses looking at ways to bring their products and services to this new virtual space.

Already the likes of Crocs, Nike, Microsoft and Walmart are taking steps to protect and promote their brand online so that they can reap the benefits of the new commercial opportunities that the Metaverse can offer.

In fact, McDonald’s recently filed a trademark application in the US that will allow it to recreate its restaurants in virtual reality so that users can buy virtual products that are delivered as real food to their door.

What is the Metaverse?

Defining the Metaverse isn’t that simple, as it encompasses many different platforms, approaches and technology.

Most associate it with Facebook and its parent companies moving to become Meta, but they certainly do not hold a monopoly on this concept.

In its most raw form, the Metaverse describes a network of 3D virtual worlds that are interconnected to create a single, universal world that is accessed via virtual and augmented reality technology

Many see it as the next evolution of the internet, and it is often labelled ‘web 3.0’. However, its defined uses are broad and include everything from video games to meeting areas akin to a virtual version of a video call.

Clearly, the creation of separate worlds also opens the possibility to create new economies, resources and activities that all hold value for users.

As such, tough questions are being asked about how this space interacts with existing legislation and rights.

What are the legal hurdles for businesses and organisations hoping to benefit from the Metaverse?

Just as the real world is full of legal issues, the new worlds created within the Metaverse are likely to create their own challenges that will require organisations, regulators and legislators to react and adapt.

Here are just a few of the difficulties that may arise as these worlds evolve and the lines between reality and virtual reality become blurred:

Intellectual property – One of the key areas of the law where we have already seen brands be quick to act is their intellectual property.

Many companies have taken prompt action to protect their trademarks and design rights within the Metaverse, with many filing applications around the world to ensure others don’t use their branding for financial or reputational advantage.

What’s more, brands are seeing the potential to commercialise their real products online through the offer of digital assets, often with a ‘real world’ benefit attached.

This could be in the form of a food order, as in the case of McDonald’s, or an exclusive item for an avatar with the purchase of a physical product.

Things are more complicated given the breakdown of geographic boundaries and legal jurisdictions within this new virtual world, which is requiring brands to rethink how they apply for IP protection and, equally, deal with disputes that arise within the virtual world.

Content creators for these new platforms also need to understand licensing boundaries and usage rights and how these apply to the assets they create and market online.

Digital currencies and assets – The rise of cryptocurrencies, NFTs and other cryptoassets has been immense in recent years and has seen a boom in new forms of investments and spending habits.

Many of the worlds created within the Metaverse will need mechanisms for creating, distributing and exchanging digital currencies and assets, such as skins and accessories for avatars.

Whether these transactions will take place with traditional (fiat) currencies or cryptocurrencies isn’t clear, but both are likely to play a role in purchasing new items and products on and from the Metaverse.

We are already seeing the rise of exclusive NFTs that give avatars unique characteristics, appearances and abilities, which may create further complexity and require regulation. In fact, Volkswagen in South Africa recently announced an NFT hunt within its own Metaverse for users to find 100 unique digital assets.

A Partner at Mackrell.Solicitors, said: “It is clear that cryptoassets will play a significant role within the Metaverse, with the companies behind the platforms that power these virtual worlds likely to create and develop more NFTs and their own unique digital currencies.

“As with other cryptoassets how these currencies and assets are used, traded and invested is likely to attract the interest of outside regulators and the governments behind them.”

Data security and privacy – The new worlds created within the Metaverse will spawn a wide range of user and machine-generated content, such as avatars and digital objects, which will create entirely new challenges when it comes to data security, ownership, control and sharing.

Many real-world approaches cannot pragmatically be applied within this new economy and, equally, governments around the world and the tech industry itself will need to assess the validity of regulations such as the Data Protection Act within these virtual worlds, which paradoxically exist nowhere and everywhere at once.

Businesses will also have to manage their digital security within these new worlds as people try to exploit the technology to gain access to data. Already questions are being asked about securing data, addressing deep fakes, identity theft and hacking, which will require novel solutions and approaches to security and litigation.

“Just as many businesses got used to the challenges created by Web 2.0, they find themselves with a whole new set of challenges in Web 3.0,” said our Litigation and Dispute Resolution Team.

“The challenges for data and security within the Metaverse are vast and will need to be mapped out as technology is developed and evolves, and as more and more data is added to the infrastructure of these virtual worlds.”

Sexual harassment – The Metaverse gives you the freedom to do many different things, including some activities that in the real world could be construed as sexual harassment.

With many employers looking at these platforms as a potential new way of communicating between remote workers the risk of misconduct happening in a virtual world is all too great.

There are already complaints from some recreational users of virtual reality that inappropriate behaviour has taken place, what would happen if an employee were to do something overtly sexual in a virtual world?

As yet, there haven’t been many precedents for this issue to be tested, but there are clear concerns that sexual harassment and other forms of misconduct could happen just as easily online as it does in the real world.

Joanna Alexiou, Head of Employment at Mackrell.Solicitors, said: “The risk of physical harm may be eliminated within a virtual world, but the emotional distress caused by inappropriate and sexual behaviour, even on an avatar, could have a real impact on the emotional and mental health of a user.

“If employers are determined to bring the Metaverse into the workplace they need to set clear policies and boundaries about what is and isn’t appropriate online. These go beyond sexual harassment to include issues such as discrimination and bullying.

“From day one they must have a clear procedure for misconduct within the Metaverse which is as stringent as their rules for the real world. Just because there is not a set of established legal rules within the virtual world it should not mean that abusive actions are allowed.”

Joanna said that the virtual world of the Metaverse would likely be treated like any other communication, such as an email, phone call or video call, when given in evidence during a tribunal hearing, even though no such case has yet to rule on this.

Image rights and sponsorship – The creators of different digital assets in the Metaverse will want to be able to use the image of recognisable characters, entertainers and sports stars.

After all, who wouldn’t want to meet or potentially pretend to be their favourite footballer or actor in a virtual world?

The Metaverse offers people the opportunity to do this, but as with countless platforms before there may be some businesses or brands that try to use a person’s image or likeness without their permission for commercial advantage.

Mackrell.Solicitors, said: “As with TV, computer games and many other online activities, we are likely to see the world’s leading entertainers and athletes replicated within these new digital environments.

“It is important that these individuals update their image rights agreements to consider the impact of the Metaverse and act where they see their image being exploited by a company or individual who does not have the right or licence to use their likeness.

“Failing to defend these rights might not only prevent them from gaining financially from the use of their likeness, but could also endanger their reputation, so these issues should be taken seriously, and action is taken now to recognise both the opportunity and dangers that the Metaverse poses.”

What next?

These points only cover a small proportion of ‘what ifs’ and there are likely to be certain elements of the Metaverse that emerge over time that pose entirely new questions that require entirely innovative solutions – especially where the virtual and real worlds meet.

Given the challenges that lay ahead organisations and individuals must have a team of trusted legal advisers by their side who can answer their questions and represent them should things go wrong?

Our award-winning team are leading the way in many fields associated with the issues above and more. To find out how we can assist you, please contact us.