Commercialising IP rights

‘Commercialising’ in this context means seizing the opportunity to realise value from IP. But in legal terms it’s mostly about having an appropriate license in place for your IP rights and including some very tight definitions.

If a media company, for example, wants to commercialise the IP rights to its franchises and  characters in the metaverse, the considerations won’t be radically different from what they are in other situations. They will be very similar to those for video games, with which such businesses will already be familiar.

The key issue will probably be jurisdiction, which should be securely tied down in the contract. Brexit has led to some divergence between the UK and EU regimes for intellectual property, which also complicates the issue. For example, the UK government chose not to implement the EU Copyright Directive. The differences between the regimes – including differences in case law – have led to extra uncertainty in this area.

Other important concerns will include royalty mechanisms, which might be complex as potential uses will be very broad in the metaverse.

Non-fungible tokens

What if you are using your IP to create NFTs, or licensing it to someone else so that they can do so?

If someone acquires an NFT you’ve issued, or that incorporates your IP, you’ll want to set some boundaries on what they can do with it. In some cases these may conflict with the average user’s expectations – users often believe they are buying the relevant copyright too – so you will need to be very clear about what those boundaries are.

The most common example would probably give the buyer of your NFT a non-exclusive licence to deal with the tokenised IP in a non-commercial way. In the case of an artwork, that might include exhibiting an artwork in their own home or hosting it on their own servers or permitting its inclusion in a public exhibition. There might also be a limited option to reuse the work in a non-commercial way: e.g. on a T-shirt or a poster created for the buyer’s personal use.

One reason for policing the digital use of your IP aggressively is that if other parties use it without your permission to create NFTs or other digital artifacts, they are highly unlikely to impose such boundaries, which may lead to a cascading abuse of your intellectual property.

And you will still want to protect your IP even your NFTs are not for sale but are used in e.g. loyalty schemes or ticketing.

In some cases you may need to ensure that the IP is yours to use in the first place. A business that commissions a work of art and then offers NFTs based on that work to consumers, for example, whether to make money directly or as a marketing freebie, will want to be sure about the chain of title.

IP and digital twins

The concept of a digital twin covers quite a variety of applications. In some cases, it may be little more than a digital design which predates the physical object. In others it may be a detailed digital model of a physical object, updated in real time.

If you own the physical asset and you've created the digital copy, things should be straightforward: you should own any IP that exists in both. But if you have commissioned someone to create a digital twin, the situation becomes more complex – just as when, for example, you acquire a piece of technology designed by someone else and wish to create a digital twin of it, there may be IP obstacles to negotiate, such as patents that might exist in the physical asset.

In any of these cases, there will also be the issue of regulating who owns the data fed into or generated by the digital twin, and how that data is kept secure.

Sometimes digital twins of physical objects will be made for different reasons. The manufacturers of video games, for example, are well used to seeking licenses from manufacturers to include specific cars or boats or planes in their games. And the same licensing principles will apply in the metaverse – although potentially with a much bigger market.

Unlicensed twins

If you manufacture something like a high-end car, the chances are that at some point someone will make an unlicensed digital copy of it in the metaverse. Or a competitor might make a digital version of your product, to model its performance. If you make military hardware, someone might incorporate a digital version of it in a conflict simulation. Should you take action?

There will be a range of considerations, including how the digital twin was created – whether for example, it only duplicates the shape or certain features of your product, or is effectively a digital copy of a physical but non-artistic work, or has been created from your underlying design drawing (which, from a legal perspective, would probably make proving infringement far easier).

It will also be far easier to police the use of your IP on public platforms. If one of your competitors obtains or creates a digital copy of your product and keeps it on their internal systems, you may never even find out about it. With recent technological advances, such as developments in AI, making reverse engineering ever easier, this is another strong argument for keeping your digital assets not only legally but also physically secure.