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On a private-private relationship, the Governance of the Metaverse Ecosystem can be structured as follows:

  1. Governance of the Infrastructure Layer or a combination of its components (see here).
  2. Governance of the Experience Layer, including the relationships between the Experience Layer, and the other Layers, as well of the Objects and/or the Rights circulating in the Experience Layer.
  3. Governance of the Objects and their Rights resident at the Experience Layer.
  4. Governance of the Metaverse Ecosystem (see here) to be applied to all or to significantly large number of Metaverse Instances in case the industry decides that this level of governance is in the common interest. Section 1 identifies potential issues related to that Governance at the global level.
  5. Governance of a Metaverse Instance (see here), i.e., the Governance exercised by a Metaverse Manager on the ecosystem hosted by their Metaverse Instance.
  6. Governance of an Operator’s Environment (see here), i.e., the Governance exercised by an Operator on the ecosystem hosted by their Metaverse Environment.

At a public level governance by public authorities operating at a national, international or regional level will most likely be envisaged. Section 8.2 identifies potential issues for Metaverse Regulation.

It should be noted that the need for new forms of governance may arise based on new technologies. An example is the Decentralised Autonomous Organisation (DAO) where the governing rules are encoded as a Smart Contract deployed on a Blockchain. DAOs appear to be good examples of how new technologies can make the rigid hierarchical structure of traditional governance ineffective.

This chapter does not intend to offer solutions to problems, not even to determine that a given issue is a problem. Its purpose is simply to initiate a process that will hopefully lead to the identification and formulation of problems in the expectation that these will be resolved.

Metaverse Governance Metaverse Regulation Metaverse Stakeholders

1        Metaverse Governance

This is a governance layer that may be applied to all or to significantly large numbers of global Metaverse Instances in case the industry decides that having this level of governance is in the common interest.

Such governance of the Metaverse Ecosystem could be competent for management of the Common Metaverse Specifications. For instance, rules or guidelines for:

  1. Management of the life cycle of a CMS Specification technology, e.g.:
    1. Identification of a Functionality.
    2. Acceptance of a technology supporting a Functionality.
    3. Update of a technology.
    4. Removal of a technology.
  2. Management of the life cycle of a CMS Profile, e.g.:
    1. Identification of a Profile.
    2. Acceptance of a Profile.
    3. Update of a Profile.
    4. Removal of a Profile.
  3. Identification of a Metaverse Instance.
  4. Definition of Metadata for a Metaverse Instance.
  5. Interactions between Metaverse Instances.
  6. Interactions between Metaverses and External service Providers.

2        Metaverse Regulation

Over millennia, centuries and decades, different communication technologies have had an impact on society and have been regulated to different extents. The Rights and Duties of Metaverse Stakeholders, e.g., Managers, Operators, and Users in a Metaverse Instance may also be the target of regulation and governance.

This chapter highlights some areas for which adapted or new regulation may be required. For each of these entities, Rights that might be claimed and Duties that might be imposed are introduced.

Property
Trademark 
Authorship
Contract
Tort
Defamation
Privacy
Taxation
Mental health

2.1        Property

The property law applicable to a Universe Environment governs the various forms of ownership of physical and intangible assets, including land, personal property, and intellectual property deriving from the creations of the mind, such as inventions, artistic and literary works, designs and symbols, and names and images used in commercial creations.

Humans spend millions to buy virtual property in Metaverse Environments – land parcels, buildings, avatar clothes etc. – because they believe that, as it happens in the Universe, those Environments will be “more and more populated”, and the property around them could have “more and more value”. While the mentioned forms of physical property that are physical or intellectual but map directly to a Universe Environment are protected by the applicable property law, is the ownership of a Metaverse Asset governed by the same law?

When a User purchases an item in the Metaverse, the Transaction may be recorded in a Blockchain, and the User assigned ownership of an NFT stored in a Crypto Wallet. The NFT and the Metaverse property, however, are distinct. The NFT resides in the Blockchain and is based on the rules of the Blockchain, and the Metaverse property resides on private servers and is subject to the Terms of Service of the Metaverse Instance. Depending on their formulation, the Metaverse Manager may be entitled to remove or transfer a property item in the Metaverse Instance by unlinking it from the original NFT ID. They could also ban Users and prevent them from exploiting a property item because of an action contravening the Metaverse Terms of Service or because the Terms of Service have been changed, possibly without notice, making prohibited tomorrow yesterday’s permissible actions.

The notion of property in the Metaverse has further twists. In most cases, NFT holders have no rights to a token’s underlying creative content. For instance, a User buying an NFT of a media clip does not acquire the ownership of the media it contains, but only the exact expression of the clip. Moreover, NFTs can be programmed to limit the extent the purchased content can be shared or edited, and to attach royalties to the NFT, e.g., triggering monetary benefit to the creator each time the NFT is transferred.

The probability of success of the Metaverse vision will improve if the notion of property in the Metaverse would have a clearer definition much as was done by the Anne’s Act three centuries ago.

2.2        Trademark

A trademark is a distinctive sign or symbol that is used to identify and distinguish the goods or services of one enterprise from those of other enterprises[1]. Therefore, a trademark identifies the brand owner of a particular product or service. A trademark can be used under license of the trademark holder. If that trademarked object is used, the distinctive ability to conjure up an image of a good quality object with that trademark may be diluted. However, if a sweater manufacturer’s trademark is presented as being used on an object of that manufacturer, there should be no dilution because the trademark will continue to make people remember the manufacturer as a great sweater manufacturer [32]. A film producer asking an actor to wear a sweater bearing the trademark of the manufacturer may not need to pay the trademark holder.

If a trademark is used in a Metaverse Environment some questions arise:

  1. To what extent do the laws regulating the use of a trademarked object in a Universe Environment apply to a Metaverse Environment?
  2. How can a Digital Object reproducing a trademarked object be used in a Metaverse Environment?
  3. When does an avatar driving a famous sports car in a Metaverse Environment violate the sports car manufacturer’s copyrighted design and trademark?

2.3        Authorship

Content created by a human in a Universe Instance is protected by copyright, a type of intellectual property that protects original works of authorship as soon as an author fixes the work in a tangible form of expression[2]. But what if a User creates content – e.g., avatars, virtual buildings, squares, and objects, and digital artwork, etc. – in a Metaverse? A few questions may be asked:

  1. Are these content items considered “original works” of authorship fixed in a tangible form of expression in a Metaverse Environment?
  2. Are they protected by copyright and do the authors have the right to recreate, trade, and display the work out to others?
  3. Is this an untouchable right or do other rights such as those mentioned in Subsection 2.1Property take precedence?
  4. Does the act of propagating an Asset created by a User in a Metaverse Instance as their own creative work infringe on the copyright as it happens for copyrighted work in a Universe Instance?

2.4        Contract

A contract is a legally binding agreement between two or more parties each promising to do something or to refrain from doing something based on certain conditions. Contracts are enforceable by the laws of the Universe Environment in which they are made, and courts can be involved to ensure that all parties in a contract fulfil their obligations under the terms of the agreement.

If the contract in a Metaverse Environment is about renting/alienating an Asset, or the provisioning of a service, then contract laws should probably also apply. As indicated in 8.2.1, contract law and not property law should also regulate property in a Metaverse Environment.

2.5        Tort

Tort law governs events where a party suffers property damage, or a personal injury directly or indirectly caused by another party. The notions applicable to a Universe Environment may be adapted to a Metaverse Instance and emotional distress and virtual property damage could be identified as damages suffered in a Metaverse Environment. Physical injuries suffered in a Metaverse Environment are not yet contemplated, but the performance of an Actuator (e.g., a smell generator) activated by a command from a Metaverse Instance because of the activities taking place there may be a possible issue in the future.

2.6        Defamation

Humans may suffer defamation in real life, the press, or on social networks causing harm to an individual’s reputation, personal relationships, and professional opportunities. Defamation may also happen in a Metaverse Environment. For instance, a Virtual Human can make false statements about a User or a human thus possibly damaging the reputation of that User or human. Is the human responsible for that Virtual Human responsible for the statements made by their Virtual Human?

2.7        Privacy

Privacy law regulates how personal information is collected, stored, and used. Some areas of privacy concern in the Metaverse are:

  1. Prevailing law. To what extent is a User in a Metaverse Instance operating under a given jurisdiction bound by the laws of that jurisdiction?
  2. Privacy regulations. What privacy regime(s) should be applied to, e.g., an EU citizen User checking out a U.S. Metaverse Operator’s property hosted by an Australian Metaverse Manager?
  3. Data collection depending on the type of data, e.g., sensor, location, physiological or social, etc.
  4. Users’ data rights and ownership.
  5. Adaptation of current privacy regulations to the Metaverse.
  6. User-to-User privacy.
  7. Minors’ privacy.
  8. Data recording. VR headsets can record information about a person’s movements, appearance, and surroundings.

2.8        Taxation

User may make Transactions in a Metaverse Instance and they may generate value for the affected natural persons or legal entities of a Universe Environment. If a Transaction in a Metaverse Environment is directly connected with goods or services of a Universe Environment, e.g., when the User makes an online purchase of goods and services, the application of taxes may be straightforward. If, however, an Asset is exchanged for another (e.g., an NFT acquired with a cryptocurrency), it may be less obvious that: (a) a taxable transaction (small “t”) has occurred and (b) the value of that transaction for tax purposes.

The NFTs of a Metaverse Instance can be variously considered as commodities, banking, and securities or investment contracts depending on the way NFTs are created and exchanged. Depending on the case in question, the applicable law may differ. The banking, money transfer, and other financial regimes are likely to apply to the issuance, lending, and trading of cryptocurrencies in a Metaverse Environment.

The purchase/sale of Assets should involve sales/income tax regimes, but what if it is difficult to identify the tax residency position of an individual consumer in a Metaverse Instance? The problem is further complicated in the case of a Decentralised Autonomous Organisation (DAO) if the tax residency of the DAO is not known.

A retailer who sells physical goods in a Universe Environment (e.g., a shop) may sell digital goods such as NFTs, skins, and avatar accessories in a Metaverse Environment instead. In the EU, this may be considered as a provision of electronic services, which may trigger a different set of VAT rules.

2.9        Mental health

The mental health of those disconnected from the real world because they reside for a long time Metaverse Environment could be seriously impact. “Zoom fatigue” was claimed by some in the early Covid-19 days when people started spending too much time on virtual meetings. The same could be seen in a more aggressive form with the Metaverse.

Who is responsible for a potential mental breakdown for a person subjected to severe stress while operating in a Metaverse Environment?

3        Metaverse Stakeholders

This Section contains an initial identification of the Rights and Duties of a Metaverse Stakeholder operating under the laws applicable to their Metaverse Instance. They are expressed in a way that implies that a specific Right or Duty can conceivably be assigned to a Metaverse Stakeholder. The actual assignment will depend on the specific case and the extent to which a Right or Duty can be assigned will depend on the context.

In the Subsections below, it is assumed that Rights and Duties may be imposed by a higher-level Stakeholder, in the order Manager-Operator-User, to a lower-level Stakeholder.

Manager
Operator
User

3.1        Manager

3.1.1       Rights

A Metaverse Manager has the Right to:

  1. Select the jurisdiction applicable to their Metaverse Instance
  2. Adopt a particular business model.
  3. Set the Terms of Service.
  4. Set other rules, e.g., privacy and ethical.
  5. Decide the level of Interoperability of their Metaverse Instance.
  6. Perform any of the following: reject, accept, sanction, or expel a Metaverse Operator.
  7. Police their Metaverse Instance.
  8. Settle disputes arising between Metaverse Operators.
  9. Operate one or more Metaverse Environments as a Metaverse Operator.

3.1.2       Duties

A Metaverse Manager has the duty to:

  1. Make known the technical features of their Metaverse Instance.
  2. Offer a declared level of security.
  3. Guarantee the Privacy of the Data of their Metaverse Operators and Users.
  4. Declare to what extent the Manager is accountable for what happens in their Metaverse Instance.

3.2        Operator

3.2.1       Rights

A Metaverse Operator has the Right to:

  1. Offer Services to the Users of the Metaverse Instance where they operate.
  2. Set the Terms of Service.
  3. Set other rules, e.g., privacy or ethical, in the framework of the rules set by the Metaverse Manager.
  4. Post ads in their Environment.
  5. Establish a compulsory licence in their favour for work created in their Metaverse Environment

3.2.2       Duties

A Metaverse Operator has the Duty to:

  1. Make known the specific rules applying to their Metaverse Environment.
  2. Limit the access to their Metaverse Instance to those qualified, i.e., those of legal age.

3.3        User

3.3.1       Rights

A User has the Right to be made aware of:

  1. The legal framework that applies to:
    1. A Metaverse Instance
    2. Multiple connected Metaverse Instances.
  2. Which data types are collected:
    1. Biometric
    2. Behavioural
    3. Emotional
    4. Others
  3. By whom they are collected:
    1. The Manager.
    2. An Operator.
    3. A Partner.
    4. A Service.
  4. For what purposes they are collected:
  1. Advertisements
  2. Statistics
    1. For how long the data will be retained.
    2. Whether an Object in a Metaverse Environment is Digital or Virtual.
    3. The identity of relevant owners of Objects.
    4. The nature of the consent that is requested of the User.

Note: It would be desirable that the User can have their rights available in a machine-readable form.

3.3.2       Duties

A User has the duty:

  1. To accept the requirements of a Metaverse Instance’s legal framework.
  2. To act in good faith in the Metaverse.
  3. To declare whether their self-described identity is faithful or fictitious.

[1] https://www.wipo.int/trademarks/en/

[2] https://www.copyright.gov/what-is-copyright/

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