The metaverse: four points for lawyers and their clients to consider

The team from Multilaw explores some of the key legal topics organisations must consider as they scramble to gain a foothold in this new digital frontier

Delivering the metaverse webinar (l-r): Joanne Vengadesan, Adam Cooke, Michelle Ray-Jones, Andrew Tzialli and Jon Heuvel

The metaverse will change the world as we know it. From the way we meet friends to how we pay for goods and services, it promises to have a huge impact on our personal and professional lives. 

That, at least, is how a growing number of tech entrepreneurs, visionary businesses and global brands see the digital future unfolding.

But there are plenty of grey areas already emerging, with far-reaching implications for existing legislative frameworks. To stay one step ahead, it's important that lawyers educate themselves on the legal implications of concepts like NFTs and decentralised finance, and the emergence of new workstreams in areas such as data protection and IP.

As we discovered in our metaverse webinar with an international panel of Multilaw lawyers – the first of its kind in the legal profession – virtual-reality platforms also present lots of opportunities for our clients and for our firms. To help lawyers seize these opportunities, we explore four core areas of consideration when it comes to the metaverse.

"I've got no doubt that lawyers, whether they like it or not, are going to be spending an increasing part of their professional and outside lives involved in the metaverse.” – Adam Cooke, Chief Executive Officer at Multilaw

Brands should embrace commercial opportunities (with an eye on IP)

Global brands as diverse as McDonald's, Hyundai and Gucci have already made high-profile entries into the metaverse. From buying clothes for avatars to creating immersive digital space as advertising, the possibilities for brands are endless. But with these opportunities come possible IP risks. How will consumers know that a digital product or service is authentic?

There is a tension between the borderless environment of the metaverse and the territorial nature of IP law. As intimidating as this may seem, we’ve experienced something similar to this before with the launch of the World Wide Web. It’s not an exact playbook, but the early days of the internet offer us guidance as to how brands can overcome these legal and regulatory hurdles.

“As far as copyrights go, all of these immersive environments are built on software; software is protected in many countries by copyright law. All of the games that are in these environments are [also] protected by software. Lots of different companies are creating these VR headsets: we've got Microsoft, Google and Meta in this space, so there's lots of opportunities for patents." – Michelle Ray-Jones, Tilleke & Gibbins

For brands with concerns about IP who nonetheless want to get started in VR spaces, some good advice may go something like this. Your clients should assess their current product or service offering and mirror that in the metaverse. Consider that some consumers in certain territories will be engaging with a virtual product before they do so in a physical store; a brand's metaverse branch, therefore, could act as a shop window for the real thing. A client's presence in the metaverse will also introduce lots of first-time customers to their company's wares, increasing the feasibility of entering new markets.

"Brand owners shouldn't sleep on this, and this isn't going away. It might sound like science fiction. But what we will see in the future, will certainly incorporate some aspects of what we're talking about with these 3D environments. People shouldn't think that this is just something like flying cars that will never happen." – Michelle Ray-Jones, Tilleke & Gibbins

For further advice on how brands can file trademark applications, watch our metaverse webinar here.

The metaverse will redefine flexible work – but will it come at a cost?

One of the major advantages of the metaverse will be in its capacity to enhance the scope and quality of remote or hybrid working. A medical engineer, for example, could present a 3D model of a newly designed neck brace in a way that would be far more difficult through a Zoom call. And that engineer, no matter where they live, could work for a company headquartered in Chile, Switzerland or South Africa without requiring a visa.

"If the individual is allowed to work in the jurisdiction they are living in, then there wouldn't be an immigration issue because that company isn't requiring that individual to work in a different country." – Jon Heuvel, Shakespeare Martineau

Increased worker freedoms, however, bring potential complications for employers. They should consider the employment laws that apply to any contract, and what tax regime a particular individual may come under. Without proper scrutiny, a business may end up paying corporation tax in two countries as a result of one metaverse-based employee, working in a different country, triggering permanent establishment.

"There are certain jurisdictions where a single employee working from home for as little as 90 days in a year will be sufficient to create a permanent establishment for corporation tax purposes." – Jon Heuvel, Shakespeare Martineau

When it comes to health and safety, and discrimination laws, employers must remember they remain responsible for the wellbeing of workers in the metaverse. Virtual-reality platforms throw up unique mental and physical considerations, such as fatigue from wearing a headset for long periods, or spells without in-person interaction with colleagues. Employers are advised to consider what proper safeguards may look like to protect people from the adverse effects of regular metaverse interaction.

Responsible companies need to consider data protection ambiguity

Imagine that your client is running a US-registered nightclub in the metaverse. Based on user data, they've identified and invited people they'd like to invite; one group is German, another is South Korean, and another is from Mexico. What promises to be an enjoyable experience for virtual clubbers could easily become a legal headache for the organiser, because different data protection rules will apply depending on visitors' locations.

"Companies engaging with the metaverse will have to think about which sets of data protection laws they'll need to comply with. This is pretty complicated, because many privacy laws have extra-territorial effect."  – Joanne Vengadesan, Penningtons Manches Cooper

This problem is referred to as extra-territorial effect. Companies gathering people from different places around the globe in a single virtual space will need to ensure that several data protection regimes are complied with, not just the laws in the country where the company itself is located. In the absence of a universal metaverse standard though, conscientious organisations should show that they're going above and beyond to protect sensitive consumer information.

"We're very far away from an international regime that applies to the metaverse of an accepted standard of laws… What I think is really important is to carry out an impact assessment. Regulators looking at how businesses engage in the metaverse will want to see that they've taken as responsible an approach as possible." – Joanne Vengadesan, Penningtons Manches Cooper

A promising glimpse into the future

“You have these old school institutions that are now looking at some of the newest and most disruptive technology in the world. For that to be happening at a time when tech related investment and venture capital in M&A is down compared to 2020 and 2021, and how divisive this technology can be, I think is indicative of the fact that there's a lot of appetite for the metaverse.” - Andrew Tzialli, Philip Lee

From embassies to fashion brands and financial institutions, organisations are scrambling to gain a foothold in this new digital frontier. This growing appetite for and investment in the metaverse is promising for legal firms as it offers a wealth of new workstreams and opportunities. However, in order to advise clients appropriately, lawyers must be proactive and keep up with fast-moving developments in the space. That means immersing yourself in the metaverse and taking the time to research virtual-reality platforms such as Decentraland and Roblox.

"If you were to look at the Gartner Hype Cycle for blockchain, we're probably down into the trough of disillusionment but we're starting to see this positive correlation towards mass adoption. So over the next five to 10 years, or even sooner, that's where the metaverse will be going. And I think there'll be significant workloads for law firms in that regard.” - Andrew Tzialli, Philip Lee

Navigating The Wild West of the Metaverse

For all the questions and ambiguities that the metaverse brings up, one thing is certain: it will become a fascinating world to watch.

To delve further into these topics and to learn more about the legal intricacies of the metaverse, you can watch our full metaverse webinar here.

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