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Intellectual Property Enforcement in the Metaverse, Part 2 – Fin Tech

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In Part 1 of this three-part blog series, we examined how IP rights are typically enforced online and how this model can be translated into the metaverse. In Part 2, we focus on the implications of IP enforcement of some metaverse properties associated with the blockchain.

Enforcement on Blockchain

Things get more complicated when we turn to metaverses that claim to be “decentralized” and provide something like land ownership on the blockchain. In metaverses such as Decentraland and Sandbox, plots are associated with non-fungible tokens (NFTs), where the non-fungibleness of the NFT and the correlation to spatial location mimic the properties of a real property. Because the metaverse property is determined by coordinates (similar to radio frequency), the Uniform Domain Name Dispute Resolution Policy (UDRP) process as applied to domain name disputes is unlikely to apply to the metaverse, because metaverse territories do not use a naming convention such as URL that may include a trademark.1

Since NFTs are stored on a decentralized blockchain (either Ethereum or another blockchain), the metaverse is somewhat decentralized since land ownership is not determined by a single entity, but instead is based on the purchase and transfer of NFTs in the marketplace. Furthermore, many metaverses are governed by (or intend to be governed) by a Decentralized Autonomous Organization (DAO), where the metaverse is managed, not by a single company, but instead by a voting system, where matters relating to metaverses are decided by vote. The votes of participants in the metaverse are allocated based on a rule, often including land and currency ownership.

Even here, however, a closer look at the terms of service clauses suggests that intellectual property enforcement in the metaverse is still fairly conventional. For example, Sandbox prohibits users from uploading or viewing User Content that infringes intellectual property rights and grants Sandbox the right to edit and review User Content for intellectual property infringement. under Sandbox Terms of ServiceSandbox shall also have the right, in its sole discretion, to accept and reject any assets and/or games that may be infringing. As with YouTube and Meta, the Sandbox Terms of Service allow Sandbox to terminate the accounts of people who engage in infringing activity. Notably, while Sandbox has previously mentioned plans to implement DAO, as of the time of this writing, Sandbox has yet to implement one.

Unlike The Sandbox, Decentraland has a running DAO. Does this change the way intellectual property rights (IP) are enforced? Decentraland also appears to prohibit infringement of intellectual property rights in its Terms of Service, although it does so via the DAO Approved Content Policy. Claims of intellectual property infringement are handled by the Foundation, a non-profit entity, purportedly independent of the Decentraland founders, to whom notices of infringement may be sent. In the event that the alleged infringer objects to the notice of infringement, the DAO determines whether the content of the subject should be removed. As discussed earlier, this is done by voting, in which metaverse participants have votes commensurate with each participant’s ownership of land or cryptocurrency (in this case, Mana). However, it also appears that Decentraland’s Terms of Service give the Foundation the authority “in its sole discretion” to block offensive content and suspend user accounts for infringing intellectual property rights, “to the extent technically feasible” for the organization to do so. Therefore, even with an operational DAO and decentralized land ownership, IPR enforcement appears to be in many ways similar to traditional enforcement.

How will the DAO vote?

It’s not entirely clear if the DAO will eventually vote to remove the infringing content. The decisions of the DAO are supposed to be influenced by a number of factors, including 1) who has voting power in the DAO, 2) the number of votes they have in the DAO, and 3) who can be mobilized to vote on any given issue. The importance of this third factor has been demonstrated in at least one previous case. In November 2021, a vote to ban the name “Hitler” passed in Decentraland by a majority vote, but did not reach a sufficiently high limit of voting power to pass – suggesting that getting enough benefit in The vote may be the same DAO . efficacy bar. It’s not hard to see the importance of the first two factors—especially in the event that incentivizing voting isn’t easy. If entities with a common interest in protecting intellectual property rights buy enough land and cryptocurrency and consistently vote on intellectual property disputes, they can very well create an environment very similar to those outside the metaverse. Moreover, if Decentraland has the ability to identify disputes in the metaverse and an interest in making good faith decisions about intellectual property, enforcement may in fact be like enforcement outside the metaverse.

In Part 3, we will conclude with a bigger picture analysis of the future of intellectual property enforcement in the metaverse as a whole.

footnotes

1 Note, at least in some metaverses, land owners can name and rename their plots, trademark infringement can occur in this scenario, but it’s not a static identifier similar to a URL.

The content of this article is intended to provide a general guide to the topic. It is recommended to take the advice of specialists in such circumstances.

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