The emergence of the metaverse, a collective virtual shared space that converges virtually enhanced physical reality and physically persistent virtual reality, is rapidly transforming our digital experiences.
To fully realize the potential of this new digital frontier, industry participants, regulators, brands, users, and other stakeholders are seeking ways to standardize protocols and ensure seamless interfaces among devices, platforms, and realms. Only through standardization and interoperability will humans be able to immerse themselves in a wholly inclusive, innovative, and user-friendly digital experience. Both the journey to this holistic metaverse and the landscape it will create once we arrive are littered with legal conundrums. Overcoming these issues will require a collaborative effort to create a metaverse that is not only exciting and engaging but also secure and equitable.
Defining Interoperability and Standardization
Interoperability in the metaverse goes beyond sharing 3D models and visual avatars. David Smith, founder and CTO of Croquet, a browser-based operating system for the metaverse, explains that “It is essential that metaverse worlds are fully collaborative and easily connected via live portals, and that smart objects and components can be moved and reused across worlds.”
Common standards are essential for various VR platforms to communicate and work seamlessly. They provide a more integrated VR ecosystem that benefits everyone. Most industry insiders agree that the metaverse’s infrastructure will include several key components:
- A common language for VR applications and interfaces
- A standard format for 3D models and textures
- Paradigms for how virtual objects interact
- Identity management and financial transaction verification standards.
These standards will ensure consistency, allow easy updates across platforms, and make the metaverse more affordable and accessible. They also provide a foundation for creating and applying legal frameworks to the metaverse. But only if developers, vendors, and content providers can agree on ways to protect everyone’s rights and share the benefits equitably.
Lack of Legal Robustness and Specificity
There’s currently no comprehensive legal regulation addressing metaverse interoperability specifically. Existing legal and regulatory frameworks like intellectual property law, consumer protection law, intellectual property protection, and international trade regulations can apply to certain aspects of metaverse interoperability but are hardly comprehensive. Industry standards and codes of conduct can also promote metaverse interoperability, but they are not legally binding.
- The Privacy Problem – We often imagine the metaverse as a singular entity, but experts expect it to comprise multiple virtual realities, each created by distinct platform providers. Operability likely will require these providers to share their data – information about users’ avatars, virtual assets, and certain user predilections.
Partners and even competitors will need to agree on their mutual and distinct responsibilities associated with collecting, storing, exchanging, and safeguarding this shared data. General Data Protection Regulation in Europe and various state privacy regulations in the U.S. When the metaverse is used in work, education, or healthcare contexts, operators collecting such data will be subject to sector-specific privacy laws. It is easy to see how this could hamstring the metaverse’s development as metaverse platforms are expected to accommodate a variety of virtual identities originating in different realms, controlled by various organizations, and interacting with a range of service providers.
Consequently, a complex network of controllers, joint controllers, and processors will likely emerge, each having to adhere to intersecting regulatory demands.
- Intellectual Property Paradox – The ethereal and non-physical nature of the metaverse blurs the boundaries of traditional property and creative ownership adding another layer of complexity to navigating intellectual property rights. The core issue lies in the determination of IP ownership in this virtual universe.
While US copyright law does not explicitly stipulate that only human authors, artists, coders, musicians, and other creators can be granted copyrights, trademarks, and patents, the courts and the Copyright Office have consistently ruled this to be the case. In the metaverse, creations made by avatars, bots, and software without substantial human contributions could be attributed as AI-generated rather than human-made, potentially placing them in the public domain.
The vastness of the metaverse brings into question participants’ ability to transact and create within these novel 3D spaces. The issue is only compounded when the need for interoperability is included. The functionality to transfer digital assets and virtual goods between different platforms requires platforms to address legal considerations and how they relate to the technological constraints or licensing rights imposed by other companies’ underlying technology. This situation underscores how law often trails behind technology, responding to changes rather than steering them.
- Antitrust Apprehensions – The extraordinary investments required to bring interoperability to fruition raise concerns that only a few large companies will be able to control the direction, format, and tone of the metaverse to suit their specific business models and monetization goals. Should these ulterior motives be fulfilled, Big Tech could use its market influence to limit competition, limit consumer choice, and stifle innovations that threaten its profitability.
Meta’s annual investment of $9.3 billion investment in the metaverse, Microsoft’s acquisition of Activision Blizzard for $68.7 billion, and Qualcomm’s establishment of a $100 million metaverse fund have all attracted regulatory scrutiny and highlighted the massive financial backing that these companies are pouring into the development of the metaverse. This could give them an unfair advantage over smaller players and startups who may not have the same resources at their disposal. The case is similar in China, where Alibaba’s investment of $60 million in Nreal, an augmented reality glasses maker, and ByteDance’s expenditure of $775 million on VR headset maker Pico, indicate the high stakes involved in the race to dominate the metaverse.
This oligopoly could potentially lead to “killer acquisitions,” where large firms buy innovative competitors primarily to simply halt their innovation and preempt future competition. This state of the market has led some experts to call for open metaverse standards, creating a community metaverse that encourages innovation and ensures the rule of law applies in virtual experiences just as it does in the physical world.
Policy and Regulatory Implications
These competition and antitrust concerns highlight the need for a regulatory framework that promotes fair competition, guarantees consumer rights, and encourages innovation. As the metaverse continues to evolve, it will be crucial for policymakers and regulators worldwide to address these issues proactively.
Regulators are also stepping in to address these concerns. For example, Germany’s competition regulatory agency is already trying to tackle dominant positions in the emerging virtual reality market. The need for competitors to communicate, collaborate, and ensure platform interoperability in the metaverse, however, could potentially lead to a series of antitrust challenges.
There is an ongoing debate in the EU on amending merger regulations to tackle mergers and killer acquisitions in digital markets. In the US, there are calls to reform merger control to address market power stemming from data collected by devices and other forms of coercive choice architecture. However, while some experts argue that antitrust law should be adapted to identify competitive issues arising in the metaverse world, others propose promoting consumer autonomy, prohibiting the use of dark patterns, and implementing data silos to block cross-market data flows.
The Road to Interoperability
Today, the metaverse exists more as a concept than reality as businesses and developers take diverse approaches to building virtual spaces, avatars, and 3D environments and enabling user interaction. For true interoperability, common standards and formats need to be established across key domains like payments, digital asset ownership, identity/anonymity, and identity management. Judging by the time it took for basic Web2 standards to emerge, finding common ground in the metaverse may take years or decades.
Enterprise use cases and profitable business models utilizing the metaverse will also need to be defined and demonstrably safe and efficient before companies make major investments into shared technologies and infrastructure. For now, metaverse applications remain fragmented, a far cry from investor and author Matthew Ball’s vision of the metaverse as “a massively scaled and interoperable network of real-time rendered 3D virtual worlds that can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.”
To become effective, the metaverse must overcome three important obstacles:
- Identity Management – Users want anonymity and pseudonymity so they can freely explore new personas and worlds, yet accountability and trust demand verifiable identities. Striking this balance remains a puzzle. Currently, online identity relies on email, social media logins, and private companies like Google and Apple. This centralized model is at odds with the metaverse’s decentralized ethos. Blockchain-based decentralized identity may offer solutions through cryptographic signing and reputation systems, but the suitability and privacy of digital signatures are still debated.
More fundamental is the question of who gets to issue and manage digital identity. Should tech giants control access to the metaverse through existing logins? Should new decentralized organizations arise? Can governments be trusted to issue portable digital IDs? No consensus exists. Compounding this is the complexity of identity itself in the metaverse, encompassing avatars, preferences, behaviors, abilities, and possessions. Standardizing this networked identity across worlds will require overcoming both technical and organizational hurdles.
- Commercial Equity – Allowing seamless navigation between virtual worlds would provide a continuity of assets and identity for users that would stimulate commerce by ensuring purchases reliably retain value across platforms. For example, an avatar could buy Nike sneakers in one world and wear them in another. This confidence in cross-platform functionality will drive metaverse spending. Expanding this concept, interoperability also enables innovative business use cases like sharing digital supply chain twins with partners.
Interoperability would encourage competition and innovation by lowering barriers to entry. Standards prevent tech giants from exerting market pressures and anti-competitive techniques to quash competition from smaller developers in building novel virtual worlds. Without a dominant platform, consumers benefit from choice, diversity, and competitively priced offerings in the metaverse. By encouraging competition, standards promote affordability and inclusion.
- Accountability – As we have seen in Web 2.0 environments, identity fraud, financial crime, harassment, and other harms may proliferate in the metaverse. To create a safe, trusting space where people and businesses can comfortably interact, stakeholders will have to collaborate to build accountability models that provide recourse and redress for victims.
We can look to principles and precedents from the physical world for guidance. Laws, regulations, and norms governing property, transactions, and individual liberties offer models to adapt.
Platforms must also be held accountable with transparent processes for reporting harmful content or conduct, reviewing complaints, and enacting sanctions like warnings, account suspensions, blacklisting, or fines. Still, regulation presents difficulties when platforms are decentralized with no central authority.
Alternative accountable governance models like digital courts run by DAOs could emerge to settle disputes and enact remedies. Compensation funds could provide resources for victims. Ombudsmen or civil society watchdogs can advocate for safety standards. The solutions may involve compromise between competing values like privacy, security, liberty, and expression. But through cooperation and experience, stakeholders can craft balanced systems that promote safety while supporting the metaverse’s social and economic potential.
The physical world provides guideposts, but accountable governance for the metaverse will require new thinking and technical innovation tailored to its virtual frontiers. With diligence and collaboration, we can foster both accountability and opportunity.
As interoperability technology matures, users can freely transfer data and its value between different metaverses. However, achieving interoperability in an open metaverse will be more nuanced and technically challenging, as all the systems and standards to make it happen are not yet in place. Balancing technological innovation with regulatory oversight will be critical for the successful and ethical development of the metaverse. The future of the metaverse depends on striking the balance between these opposing forces.
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