Real Estate, Business Opportunities, and Legal Challenges in the Metaverse
In “simple” terms, the metaverse is a new environment characterized by the interconnection of the digital and the physical worlds. The results of this union are multiple and fascinating thanks to the blockchain technology that allows users to connect and transact in decentralized environments – which, as a whole, are now known as “Web 3”.
For instance, pioneer investors and companies are pouring money into purchasing plots of digital land. These are sold as Non-Fungible Tokens (NFTs), thus giving proof of ownership and evidence of uniqueness to the purchaser. Virtual real estate is maintained on blockchain platforms like Sandbox and Decentraland.
Early-stage investors plan to use their digital plots to offer virtual experiences to users, lease the spaces to companies that sell digital products, sell advertisements, and so on. For instance, a piece of digital land on Decentraland has recently been purchased for $2.5 million by Tokens.com with the intention to develop a virtual fashion district. If the vision of these companies is correct, these platforms will be the like of cities such as New York and London, and ownership of a piece of digital real estate in these metaverse spaces is likely to be invaluable. Inevitably, new real estate and legal contractual relationships and schemes will be conceived.
As activities in the metaverse are steadily growing, companies from different industries should start to adopt methods and procedures to sell their products and services on digital lands. This will turn out to be extremely lucrative because the basket of potential customers is huge by not being restricted to a specific market or area, but easily open to anyone in the world thanks to the distributed and decentralized platforms.
As your blockchain attorneys, we can assist companies in navigating the metaverse in several ways. In this novel business environment, license agreements play an important role in defining what is the licensed virtual content of the transaction. A higher degree of flexibility in connection with the content licensed is necessary to ensure the interconnected services that will be increasingly provided in the metaverse. For instance, the concepts of “territory” and “specific use” will have to be more blurred than those as used in traditional license agreements.
Another evolving concept is the personalization of the offer. While customers have been used to enjoying the products and services passively, the heightened user engagements created by the metaverse environment will arguably have favorable financial outcomes, but at the same time, this will pose legal risks considering the huge amount of data collected, stored, and transferred by companies in the course of business activities.
Avatars populating digital lands will interact and, as such, potentially cause problems, like carrying (inadvertently or not) trademarks of third-parties, thus establishing a potential case of infringement. As the case law currently stands, only if the avatar is not used to sell products or services, the use of someone else’s trademark should be considered artistic and therefore permitted.
The same avatars will generate varied contents through AI softwares. In this area, an expected conceptual expansion should be the affordability of copyright protection for works generated by AI machines.
Clearly, the full effects and culminations of this transfer to the metaverse are still unpredictable, but that does not mean that the transition itself is uncertain; it is already happening. After all, when the first iphone was released in 2007, there was a hedonistic and playful attraction to the new camera, but also skepticism regarding practical uses of the pricey devices. Very few visionaries must have imagined what humans would have done with smartphones in a span of a little over 10 years. Similarly, those businesses today that are willing to think beyond digital art and even only imagine the opportunities that will be available in the metaverse are poised to become the new leaders in their industries and communities.