DLA Piper Italy: businesses can’t ignore NFTs and the metaverse

The metaverse will be a challenge and an opportunity for luxury brands, according to a group of DLA Piper Italy partners

The metaverse’s global revenue could reach $800bn in 2024, up from about $500bn in 2020, according to several reports. While a primary market will be for online games and gaming hardware manufacturers, which could exceed $400bn in 2024, all sectors will be affected. For luxury brands, operating in the metaverse has become one of their central challenges and opportunities.

To better understand the metaverse's far-reaching effect, we spoke with several DLA Piper Italy partners about some of the new, emerging issues it is likely to create.

Can you provide some context about the metaverse in today's marketplace?

Giulio Coraggio: "We’re in a period of history similar to when the internet emerged. Initially it was viewed with enormous distrust. Then we had the dot-com bubble. And now it’s evolving into the next big thing – the metaverse. We spend a significant amount of our time browsing the internet or social media on our mobile devices. And it’s likely that in a couple of years we’ll be using AR (augmented reality) systems to socialise, shop and work in the metaverse. Businesses are realising they can’t ignore the phenomenon of NFTs and the metaverse. But they have to be aware of the critical legal issues that can arise with entry into this market."

IP rights are of special concern. How will copyright law be affected in the metaverse?

Elena Varese: "With the innovative nature of this online reality, the metaverse may entail to redefine the notion of author and the concept of economic rights, especially when content may be created by several parties or by using revised works of third parties. It is also possible that new fair use exceptions will be created for online utilisations of product images and works. In addition, new forms of infringements will take place and the liability of the platforms offering potentially infringing contents will be shaped by the new EU laws and by national decisions."

Trademarks play a key role in the real and virtual worlds. How is the metaverse affecting trademark registration and protection?

Ginevra Righini: "The metaverse has significantly affected the trademark practice. Brand owners are filing new applications to protect their trademarks for new metaverse-related goods and services. Indeed, brand owners are fully aware that, even if they are not yet present in one of the metaverse worlds, it is essential that their brand be protected in this new dimension, given the raising concerns of misuse and infringement. The incredibly high number of applications filed this far has even led the European Union Intellectual Property Office (EUIPO) to introduce new items in the Nice classification of goods and services."

Privacy and data protection are also big issues in the metaverse. Can you give us some high level context of this issue?

Cristina Criscuoli: "Clearly this massive, ubiquitous and imperceptible collection of personal data, including highly sensitive data, poses significant challenges to the application of those provisions that today regulate and limit the profiling of data subjects. Transparency and informed consent, pillars of the GDPR, are at the top of the list of thorny issues that the ‘lords’ of the metaverse need to address. Ensuring new internet users are aware of the type and amount of personal data collected, but especially of the different profiling purposes for which the data will be processed – personalising avatars? Providing virtual targeted ads? Customising certain features or services? – will be no small task and brings with it the well-known risks of information overload to which users have long been exposed. It’s conceivable that some types of profiling, such as ad-based profiling, will remain subject to the requirement of prior user consent, creating issues related to the collection of valid privacy consent – specific, free, informed and unambiguous – in the complex ecosystem of entities and data streams that will populate the metaverse. Recent critical positions expressed by privacy watchdogs with respect to the adtech industry’s long subject chain reflect the now difficult coexistence in modern business models of the principle of informed consent."

By all accounts, the risk of being a victim of cyberattacks in the metaverse is very high. How should luxury brands be thinking about this issue?

Giulia Zappaterra: "Companies will need to prepare in advance to prevent these types of attacks – which can include anything from identify or password theft to what we call man-in-the-middle attacks – and ensure that their security systems are safe, secure and free from vulnerabilities that could cause severe damage to a company's economy and reputation and to their users. AI will play a critical role in safeguarding the metaverse in multiple ways. For instance, AI-driven cybersecurity tools may analyse patterns across the network. Also, decentralisation technologies will likely be one of the most useful methods to protect user identities and intellectual property rights as it puts the power back in the hands of users. In this context, however, there’s a lack of regulatory regime. They should, as soon as possible, be put in place."

DLA Piper Italy Partners Giulio Coraggio, Elena Varese, Ginevra Righini, Cristina Criscuoli, Giulia Zappatera are among the authors of a comprehensive guide to legal issues of the metaverse and NFTs. The report, Metaverse: business opportunities and legal challenges, is available here.

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