Expert Takes: Michaela MacDonald

What legal challenges in terms of trademark protection does the metaverse pose for stakeholders?

Extending the protection of physical goods and services to virtual spaces is a significant challenge, particularly in terms of jurisdiction and territoriality. This is linked to a defining feature of the metaverse: bridging physical and digital worlds. It requires a rethink of how you determine the scope of protection when physical goods have representations in a virtual environment, and virtual goods are associated with goods and services in the physical world.

This “phygital” component probably calls for new policies. And in our report for the UK Intellectual Property Office, we highlighted the need for dialogue among multiple stakeholders, including public bodies, authorities, policymakers, rights holders, and users.

What gaps exist in current copyright laws regarding protecting metaverse content?

Defining what qualifies as protectable subject matter remains unclear. Also, it is not yet fully understood how rights holders can manage and commercially exploit their Intellectual Property in the metaverse, particularly the concept of digital exhaustion. Furthermore, existing limitations and exceptions need clarification on how they apply in virtual environments. Questions about detection and infringement will become even more relevant. Although more traditional monitoring techniques to enforce copyright might work in a centralised metaverse, decentralised blockchain-based metaverses will require new approaches.

Could you share examples of successful IP strategies used by brands or creators within immersive environments?

Established brands are looking at how to ensure existing businesses are sufficiently protected. They have begun redefining trademark filing strategies by introducing new classes and expanding portfolios of registered trademarks in preparation for expansion into the metaverse.

Video game companies—with their extensive experience of managing IP in an immersive, interactive environment—have valuable lessons to offer. Roblox and Fortnite have adopted a hybrid approach to user-generated content, allocating some IP rights to users while simultaneously protecting their own. In Roblox, users can license their creations to the platform, and Fortnite integrates user-generated content into its business model, balancing the creative freedom and property rights of its users with maintaining control over its own IP. Getting that balance right will be hard and depend on each platform.

The most successful strategies understand the notion and value of community. They communicate with members and adopt semi-formal and informal approaches to ensure the platform retains control over its IP without antagonising the community by making unilateral changes to licensing terms or IP strategies. Understanding the community, its motivations, and its expectations is crucial for success in these environments.

How do you see blockchain technology influencing IP management in virtual worlds?

Blockchain has significant potential for IP management, but it also presents challenges. The processing power it requires is expensive to set up and run. If blockchain were to become the essential infrastructure for registering and enforcing IP rights, it could create substantial financial barriers for creators.

The tamper-proof design of blockchain could make it difficult to manage ownership disputes or modify agreements and licences. Aligning blockchain-based enforcement with national and international laws could be constitutionally challenging. So although blockchain and smart contracts offer transparency and simplify digital transactions, they cannot entirely replace existing legal frameworks and solutions.

With generative AI increasingly used in virtual worlds, how do you see the creator economy functioning when it comes to IP rights?

Generative AI is having a profound impact on the creator economy, creating a landscape that will be complex to navigate for users and rights holders. By 2025, it’s estimated that 95% of digital content will be AI-generated, challenging the very notion of human creativity.

With an online space almost entirely created by non-human agents, the existing IP system may become disconnected from how we consume culture. The way in which we determine the boundaries and thresholds for IP protection needs to evolve. As user- and AI-generated content becomes more prevalent, it produces mixed works that combine input from the user and an AI that uses pre-existing content, which might not be protected by copyright or trademarks. These new forms of creation and innovation will challenge traditional approaches to copyright protection.

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