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With the COVID-19 pandemic, more and more companies have adopted remote work. Employees may choose not to go back to the office, but work from home virtually. In an interview, Bill Gates mentioned that “remote working would only pull more people into the metaverse.”

Metaverse? In simple words, the metaverse is a virtual office space with 3D avatars. The avatars of the employees can attend meetings and interact with each other as if they were attending meetings in real life. Gates mentioned that the idea of the metaverse is it will eventually replicate the feeling of being in an actual room with co-workers, with the help of virtual reality headsets and goggles.

The metaverse is run as decentralised autonomous organisations (DAO), a form of governance based on the blockchain which simplifies decision making and transaction processes through smart contracts. A smart contract represents the rules of the DAO and any edition made to the smart contract would be recorded and transparent.

Saving rental costs, no more traffic jams every morning, working comfortably in pyjamas at home. This sounds like heaven for most people. However, there are some legal concerns with the DAO that we must take into consideration.

The first problem that may spring to our minds would probably be: how should we deal with the legal status of a DAO that only exists virtually? Companies that are registered with a physical office have a separate legal identity which composes of directors and shareholders. A separate legal entity implies that the company itself can be sued or take legal actions, enter contracts in their name, and companies are incorporated in a defined jurisdiction. It’s difficult to imagine how these will happen for DAOs! Can one sue a bunch of 3D avatars, or an “office” that only exists on the Internet? DAOs are unincorporated, with no directors or shareholders, as DAO token holders do not own any shares. Likely, we cannot sue a DAO on its own, but only the members within the DAO, if DAOs are seen as partnerships. It is still unclear how DAOs may incorporate into jurisdictions or how (if ever) DAOs may sign contracts. So, until we have clear regulations on DAOs, we may only go so far as signing contracts with avatars.

Apart from legality, infringement risk will also be a headache for most intellectual property right holders. How will copyright and trademarks be regulated in the virtual world? It is uncertain whether copyright and trademarks can be used for virtual products or services in the metaverse. Do trademarks registered in real life also cover the metaverse? Or are trademarks in real life separated from the metaverse? Imagine what will happen if they are separated. Take clothing as an example: Nike has registered trademarks for the iconic marks “Nike”, the “swoosh” logo, or the slogan “Just Do It”. No other companies in real life can use Nike’s logos on their products. Yet, if trademarks will be protected separately in the virtual world, the “Nike” sports shoes that an avatar is wearing may not be regarded as infringement of the mark of “Nike” registered in real life. Not only is it problematic for existing trademark owners, but it is also confusing for us as consumers.

Not to mention that cybersecurity remains an unsolved problem on the metaverse. Cybercrimes never cease to happen as they bring ludicrous profits to hackers. The metaverse is expected to attract more and new cyberattacks in addition to current tactics of phishing, malware and hacks. External digital devices that are used with the metaverse, like headsets or goggles, would become vulnerable to hackers if they are not properly protected. Further, if the hackers are mere avatars, real victims may not be able to seek legal remedies, given that the legal personality of the avatar is unclear and questionable. To what extent should an avatar be responsible for its actions in the metaverse? What kind of standards should be in place to distinguish between a “legal” avatar and the individual who operates it?

In this regard, the Personal Data (Privacy) Ordinance (Cap. 486) (“PDPO”) is the main legislation in Hong Kong to protect the personal data of individuals by regulating the collection, processing or use of personal data. PDPO is applicable to the collection and processing of personal data activities if the personal data is controlled by a data user in Hong Kong. A ‘data user’ means a person who, either alone or jointly or in common with other persons, controls the collection, processing or use of the personal data. However, due to the decentralised and unbound nature of DAOs, it would become difficult to determine who the data user is, and to ascertain the location of the data user. What’s more, the aforementioned problems about the unidentified jurisdiction of DAOs and the lack of their legal status also increase the difficulty for data protection laws to be enforced.

Indeed, the metaverse is a significant leap in technological development. However, there are many areas that the current policies and laws cannot address. New policies and laws would be needed to cater to the characteristics of a wholly virtual and decentralised realm, or else, if your next office is moving to the metaverse, there seems to be more to worry about than simply the outfit of your avatar.

Published in the May 2022 issue of Hong Kong Lawyer.

References

Frankie Tam and Kenny Tam. (2022, February 18). Metaverse – Why we lawyers care?

Tom Huddleston Jr. (2021, December 9). Bill Gates says the metaverse will host most of your office meetings within ‘two or three years’ – here’s what it will look like. Retrieved from https://www.cnbc.com/2021/12/09/bill-gates-metaverse-will-host-most-virtual-meetings-in-a-few-years.html

Amanda Liu. (2022). Trademark Protection in the Metaverse. Retrieved from https://www.lexology.com/library/detail.aspx?g=1be3918e-e0d1-48f0-99da-0b2d113987a2

Nasreen Parvez. (2022, March 8). What does metaverse cybersecurity mean and involve? Retrieved from https://www.analyticsinsight.net/what-does-metaverse-cybersecurity-mean-and-involve/

Nahla Davies. (2021, December 10). Cybersecurity and the Metaverse: Pioneering Safely into a new Digital World. Retrieved from https://www.globalsign.com/en/blog/cybersecurity-and-metaverse-pioneering-safely-new-digital-world

Pin Lean Lau. (2022, February 1). The metaverse: three legal issues we need to address. Retrieved from https://theconversation.com/the-metaverse-three-legal-issues-we-need-to-address-175891

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