The year 2021 will be remembered as when legal experts and IP specialists everywhere began to notice the massively explosive virtual work-in-progress known as the Metaverse. Facebook’s change of name to Meta and commitment of 10 billion towards its metaverse division is a clear indication of the direction of travel.

So, what is it? Tech geeks say the Metaverse will become a rich 3D manifestation of our real world today. Just how rich? 

Imagine a weekend 20 years from now. You're drinking a freshly brewed coffee wearing your 3D gear, which allows you to enter your virtual property where your avatar is also drinking coffee - albeit virtually. Like everything else in the Metaverse, it's just data. 

Exactly how will that data, including our personal data, be assembled, displayed, and shared to establish our virtual identities? How will the virtual representations of real-world proprietary products and services be protected in this virtual world?  Will IP rights persist there, and if so which ones?  Will others be relegated to the world of the tangible?

The outcome may be an epically important for start-ups gearing up to offer the multitude of virtual products and services to be transacted over the course of Metaverse time.

We know the products and services in our real world may be the subject of valuable IP rights, governed by national governments, and by an ever-expanding set of global treaties and collective actions. The start-up sector has become more familiar in recent years with just how critical IP rights are, as an asset and a tool in any scale strategy.

The evolution of IP to meet changing demands

IP has evolved to meet changing demands and trends before. Back in the ‘70’s, software "per se" was initially regarded with scepticism and was declared unpatentable in most jurisdictions. IP Professionals quickly developed techniques to embody software in technical clothes to provide something other than software "per se", and soon we were obtaining patents in most jurisdictions for "computer-implemented" inventions with a "technical effect."

Meanwhile, a new vacuum cleaner today may embody patentable features, like those made famous by James Dyson in the '90s. New products with cool aesthetic features, may be protectable by registered designs, such those air fans we’ve seen recently. But both the new vacuum cleaner and new air fan are tangible: we actually touch, purchase in a well-established commercial transaction, and own them. Likewise, the dust in your lounge, or the stale air in your bedroom are things we physically experience.

How IP laws in the physical world and the metaverse differ

In the physical world, an owner of IP rights such as patents, registered designs, trademarks, and copyrights can enforce them against unauthorized activities. Will the owners of proprietary products and brands be able to monetize in the same way in the Metaverse? Two factors may determine the outcome: the virtual unauthorized use leading to a realworld unauthorized use, and second, a physical location tied to the virtual use, for purposes of defining legal jurisdiction and the laws that apply to this virtual existence.

When our avatar pushes a button on a virtual coffee processing unit, it’s not an actual "use" in the physical sense, but more like a representation of one. The virtual design embodied by the virtual coffee processor may be identical to the real world coffee processor, and the virtual design may have a direct bearing on a real world purchase. Your friends (living anywhere of course) might drop into your self-designed virtual location for their own virtual cup of coffee from the same branded coffee processor and they hear that you "love the coffee."

The registered design rights might then lead to an unlicensed competitor selling an unauthorized coffee processor where your friends are looking forward to purchase their own. The IP rights holder would be able to take action against the unauthorized use by the manufacture, use and sale of the physical coffee processor as a result, in the locations where the unauthorized coffee processor is manufactured, used and/or sold. The key here is that the IP rights holder would need to have evidence of the location of these activities. In the case of your friends, their web address would be a key indication of the location but only if that information is available and not “anonymized” or otherwise privacy protected.

What this means for the free market

This brings us to the most important question of all. The free market has been governed directly by the various national governments under our currently existing regulatory IP infrastructure. Meanwhile, rudimentary segments of the Metaverse, have been around for some time, as gaming, role playing and social platforms, which are the property of the domain owner, as the gate keeper of the rich virtual experience. By analogy city-states that evolved and grew in the middle-ages, each controlled by an independent leader. Eventually, and with the exception of a few, most such city-states became federations that are the countries we now know.

In the Metaverse, the city-states might be the domain owners of the discrete virtual worlds we will visit. Your seaside paradise might be accessible by one domain, and the purchasing of the physical version of that great virtual coffee processor will be accessible by another domain, perhaps by way of a partnered link from one to the other, and under the care (and control) of the domain owner(s). They in effect become “intermediate regulators” which will quite likely interrupt our current regulatory IP framework as virtual products and services, with essentially no realworld link.

We’re in the midst of a massive, potentially disruptive redesign of IP rights regulations. Time will tell and perhaps sooner than we can even imagine.