VR/AR
VR lawyer

Eleven Crimes that Occur in Virtual Reality

 1000 648 David B. Hoppe
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While still in the early stages of adoption, virtual reality already plays host to a range of criminal activities, from extortion and terrorism to money laundering and prostitution. The law has yet to fully catch up with crimes in virtual reality, but the types of harm that can be done in virtual worlds and their implications are becoming increasingly better understood as the technology grows in popularity. 

In 2019, in the US alone, 42.9 million people will use virtual reality. Virtual worlds are increasing in number, popularity, and complexity, and giving rise to interesting legal questions and problems. Some forms of criminal activity map over directly from the real world, but even these can raise legal questions, for example regarding jurisdiction. In the civil context, if two parties sign a contract in a virtual world, which state’s or country’s laws should govern the contract if not specified in the contract itself?

Depending on the situation, the distinction between what constitutes actual crime and what is simply ‘virtual’ crime is unclear; such situations are causing lawyers, psychologists, sociologists, and other experts to reconsider what is actually damaging and what should be considered criminal. For example, if someone were to “physically” assault another person in VR, so causing them to experience distress or even a physical sensation of pain, should that be treated in the same way as physical harm in the real world? Given the relative immaturity of the virtual reality industry, many of these questions are presently unanswered.

Death Threats and Assault

Since many virtual reality games involve “killing” other players, death threats are a common occurrence in these settings. The differentiating factor between ‘smack talk’ or role-play and true, criminal death threats is intent. In VR, a death threat that is an actual display of aggression and intent can be a visceral experience, particularly if you can see the virtual representation of the threatening individual. While the laws vary by US state, any form of expression of harm with the intent to scare or actually harm another can be considered assault.

Money Laundering

Money laundering is “the process of disguising the proceeds of crime and integrating it into the legitimate financial system.” Many virtual worlds have their own currency system which users can purchase with fiat currency and then use to buy digital items and services within the virtual world. In countries where financial regulation is outpaced by technology, this can create a safe haven for criminal activity including money laundering. In such cases, criminals simply exchange illegally obtained money for in-game currency.

Terrorism

Terrorism has already infiltrated the virtual world. Not only are counterterrorism officers training on virtual terrorists, but terrorists are able to use virtual reality to plan, strategize, simulate, and train for terrorist attacks. Perhaps even more problematically, these platforms can also be used for recruitment purposes as terrorist propaganda can be presented in more visceral and compelling ways than other media and platforms. Virtual reality can be used by terrorist organizations to train recruits on the use of weaponry as well as to desensitize them to scenarios that may result from their actions. These techniques are also employed by the US military.

Intellectual Property Theft

The theft of intellectual property is a longtime and pervasive issue in both analog and digital worlds, and this carries over into virtual reality. For example, virtual reality content creators may produce virtual clothing that includes trademarked brand names for their avatars to wear or even use celebrity likenesses as those avatars. While some cases are clear cut infringements of intellectual property rights, questions such as what constitutes fair use in the virtual world cause complications and gray areas.

Child Abuse Media

The exchange of digital media that portrays the abuse of real children is an ongoing crime in the digital world which also follows into virtual reality. The exchange of imagery portraying real world people and situations is definitively a crime, whether in the virtual world or not. However, the line becomes blurred as it pertains to age play in the virtual world. While the US has ruled that a consenting adult portraying themselves (by a virtual avatar) as a child and engaging in explicit acts falls within the realm of fantasy and are not criminal. This does not extend to other countries, however, and does not account for increasingly real depictions as VR fidelity becomes more sophisticated.

Fraud and Cybercrime

Cybercrime is an issue almost anywhere there is an internet connection (and sometimes even when there isn’t). Taking advantage of the opportunities presented by virtual reality simply represents an extension of the real-world activities of criminals who defraud people and systems in other digital environments such as within online games.

Stalking and Griefing

Cyberstalking is a crime wherein criminals use digital means to invade privacy and harass others, usually with obsessive fervor. This behavior can carry into virtual reality, although the experience may become even more disconcerting for the victim due to the immersive nature of the technology. People, sometimes in groups, who do this for the sake of intimidation and harassment, are often referred to as “griefers.”

Prostitution

Virtual reality can be used as a setting in which to arrange real-world sexual encounters for money, but prostitution within virtual worlds can also be a criminal act subject to prosecution. In some jurisdictions, paying for even simulated sexual contact, such as that between avatars, may be considered prostitution and is punishable by law.

Sexual Assault

Because of the immersive nature of virtual reality, victims of sexual assault in virtual reality can experience many of the same feelings and issues as victims who have been subject to the crime in the physical world. However, some of the consequences of sexual assault in virtual reality obviously differ from the possible real-world physical consequences, and as a result, the degree of severity which with it is treated can vary, and as in the real world, the definition of what does and does not constitute sexual assault can vary widely depending upon the situation and jurisdiction.

Extortion

The Chinese government imprisoned a known gang member for three years for extorting virtual goods and currency. As we spend more of our time in our increasingly real and complex virtual worlds, the items within them will grow in value to us. This will make virtual reality ripe for criminals who care to use extortion.

Identity Theft

There are two sides of identity theft in virtual reality, one of which is illegal and another which frequently is legally ambiguous. The first case is identity theft in the traditional sense, in which a criminal uses a virtual reality platform to represent themselves as another person, perhaps to utilize their credit to buy costly goods or perhaps for more nefarious purposes.

The second case involves theft or misappropriation of a virtual identity. In many forms of virtual reality, users utilize an avatar which is linked to their own identity and is the equivalent of their physical body in the real world. What if other players “steal” their likeness? What if they pose as another user in order to defame them? What if they hold this identity as a form of blackmail? Virtual reality and identity together pose a lot of questions, so naturally, the idea of identity theft in virtual reality does too.

VR lawyer

Quality of User Experience is Driving VR/AR Sales

 1000 648 David B. Hoppe
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Recent sales figures and forecasts indicate that high-quality user experience is a principal factor driving VR/AR hardware sales, a fact that bodes well for the market.

The Novelty is Wearing off… for the Better

IDC predicts that the VR/AR market will grow at a compound annual growth rate of 66.7% from 2019 to 2023, with unit sales expected to reach 68.6 million units. Segmented sales data shows that the VR/AR market is now moving towards platforms that prioritize quality of experience over other factors. Standalone headsets are expected to have the fastest growth rates, followed by tethered headsets. However, lower-cost screenless viewers such as Google Cardboard or Samsung Gear VR have slowed considerably.

This trend suggests that consumers are moving on from VR as a novelty and starting to embrace VR as a serious entertainment experience. In the short term, this is causing product rotation as customers purchase more expensive headsets. For example, in 2018 screenless viewers made up 29% of units sold, and this category is expected to drop to 15% in 2019.

Quality First

In 2018, Sony (PlayStation VR), Facebook (Oculus), and HTC accounted for 77% of headset revenue. These vendors provide the flagship headsets for quality of user experience at competitive prices. Vendors that have focused on factors such as reducing cost and ease of setup at the expense of user experience have been losing market share.

Vendors of integrated headsets are arguably better positioned to incorporate technological advancements moving forward, as advancements in 5G, sensor intelligence, and cloud-based computing have the potential to reduce size and weight, improve the form factors of VR/AR hardware, and increase the all-important ‘cool’ factor while improving ease of setup and use.

VR Sales Momentum is Strong

In March this year, Sony announced it had sold 4.2 million units of the PlayStation VR. Then during an analyst meeting in July, Mark Zuckerberg, the CEO of Facebook, suggested Oculus headsets were also selling well, stating, “This quarter, we shipped Oculus Quest, our first all-in-one headset with no wires and full freedom of movement. It has gotten great reviews and we’re selling them as fast as we can make them. More importantly, we’ve delivered an experience that people keep using week after week, and buying more content.” Some analysts are predicting that the Quest will sell over 1.3 million units in 2019.

In June, Steam saw an 80% year-on-year increase in connected headsets. Steam also had over 1 million connected users during the month of June. It is predicted that based on current user growth rates, Steam will have over 2 million VR users per month by 2020.

Location, Location, Location

The user adoption rate for location-based VR (LBVR) is similarly positive, demonstrating that customers are willing to pay for high quality out-of-home VR experiences. For example, Munich-based startup Hologate is experiencing a steady increase of about 200,000 players per month. Hologate is currently active in 21 countries and 250 locations. The average Hologate operator serves1,500 players per month.

Los Angeles-based Tyffon Inc. has been raising capital to expand its location footprint. Tyffon’s investors include Tokyo Broadcasting Systems, Sega Sammy Holdings, The Walt Disney Company, Mizuho Capital, Tokyu Recreation and Canal Ventures. Tyffon will open a third Tokyo location this year. Currently the company has locations in the Odaiba and Shibuya districts of Tokyo and will open a “Tyffonium” in Los Angeles this year.

SpringboardVR, which offers an LBVR platform for location operators, expects to be supporting 1,000 locations by the end of the year.

The scale and scope of LBVR partnerships and licensing agreements are on the increase. For example, ILMxLAB and The Void collaborated to produce a free-roam Star Wars VR experience in Star Wars: Secrets of the Empire, which released in January this year. The title has been well-received, potentially paving the way for future movie franchise and VR collaborations.

According to Cliff Plumer, CEO of The Void, “As the first project to collaborate with the Walt Disney Company on one of the biggest IPs in the world, it was thrilling and frightening all at the same time. We knew going into it that the quality of work and the bar would be raised high. We had no choice but to achieve what Walt Disney Studio and Star Wars fans expected.“

The below table presents the current number of locations for major LBVR players, though many plan to continue expanding and open new locations in the short term.

The Outlook for Now is Positive

While VR/AR has receded from the headlines following the boom of recent years, recent sales data and forecasts are positive, and trends point to increasing sophistication of both supply and demand in the market, facts that bode well for the long term outlook of this very much still-developing sector.

VR lawyer

VR, AR and Loading a C-5

 1000 648 David B. Hoppe
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One of the earliest, and most consistent users of virtual reality has been the military. In all kinds of military jobs, VR provides a way to enhance work to make it more accurate, more efficient, and less prone to costly mistakes. One example is the work of a “loadmaster”, the person responsible for loading, unloading and properly balancing the cargo inside a military transport. By augmenting what a loadmaster sees inside the cargo space of a plane, the vital, error-intolerant work of properly arranging and securing the tons of material inside a cargo plane can be accelerated, and made much more reliable.

VR is widely used in the military for similar situations, in which routine tasks or dynamic environments have to be mastered with zero margin for error. Examples include flight simulation for pilots and crews, battlefield simulation for ground troops, medic training for corpsmen and other battlefield personnel, weapons practice and training and as with the loadmaster software, vehicle simulation.   Also, given that a lot of what the military actually does costs large amounts of money, or is extremely dangerous, military operations are a perfect environment for AR.c-5a_cockpit

Loading a military cargo plane is complex, high-stakes work. It often has to be done under a lot of stress, or in difficult environments. Errors can down the plane. So, AR is an excellent way to augment what the loadmaster actually sees and does during preflight checks, to make sure there are no mistakes and nothing’s missed. Interestingly, though, the use of AR/VR for military purposes can become a national security matter, which makes some software subject to an entirely new regulatory scheme – export controls. Augmented reality systems to aid in loading cargo planes, according to the relevant authorities, is a military asset. It’s considered a “munition”. Which is a whole other area of law that the VR/AR industry is increasingly having to come to grips with.

In 1976, the U.S. government enacted ITAR, an acronym for International Traffic in Arms Regulations. Originally put in place during the end of the Cold War, this set of regulations was (and is) intended to safeguard United States national security and further US foreign interests by regulating the import or export of defense-related items, which include both physical objects and professional services. The simple, obvious idea was to control which countries had access to which US military assets, to insure that we weren’t, in effect, arming those perceived as enemies of the US. Increasingly, military assets also include technology, particularly defense-related software and now, virtual and augmented reality. The system for loadmasters is an example.

When it was originally developed, ITAR was focused on the classic, typical tools of warfare – ships. Aircraft. Naval vessels. Tangible objects that actually did things. Technology was in its infancy. The last Apollo moon mission ended just four years before ITAR was enacted, and it’s helpful to remember that the computing power for those missions was incredibly primitive – a smartphone is millions of times faster and more powerful than the computers used to send men to the moon.

siauliai_airport_runwayHowever, as the definition of warfare, and the role of technology in it, rapidly broadened, the definition of “munition” had to grow as well to include software, satellites, everything that went into modern warfighting. For example, GPS satellites, which now power everything from the direction system in rental cars to cruise missiles, wasn’t even begun until 1978, but now, satellites and related technology are a fundamental, and closely monitored, category of military assets under ITAR. The loadmaster AR system, made by a company called Navmar, is another.

Founded in 1977, Navmar Applied Sciences is one of thousands of small and medium-sized defense contractors around the country. Headquartered in a suburb of Philadelphia, Navmar began by developing and marketing “highly specialized acoustics engineering and analysis support to the Naval Air Warfare Center in Warminster, Pennsylvania. Here our engineering staff worked in concert with naval base researchers to develop new innovations in anti-submarine warfare.” In the past forty years, the company has grown to over 200 employees, at ten locations around the country. They now provide dozens of products and services in in six different categories, one of which is the loadmaster augmented reality platform. Which is governed by ITAR.

For companies in the virtual reality business, this creates a new kind of regulatory obligation that conceivably applies to almost everyone. In addition to the typical legal issues any business faces, VR/AR companies also have to grapple with the process of having their technology reviewed, and a determination made as to where and how it fits into the regulatory scheme of ITAR. Conventional defense contractors are used to this – they’ve been doing it for a long time. But for tech companies, especially fast-growing, early-stage VR companies, this is something new, and something really, really important.

There are a number of different potential outcomes in the ITAR certification process for a company’s software, which are far too complex to describe in a blog post. Suffice to say that it’s a specialty unto itself. The ideal outcome is a declaration that a company’s product is an “EAR99”, meaning, overall, it’s not classified as a military-related product, and typically doesn’t require an export license. This isn’t completely the end of the story – you still need to insure that the product isn’t being diverted to a prohibited country, or used for a prohibited purpose, for example. But an EAR99 classification is a very desirable thing.

But the main point here is that having this determination made is not optional. Penalties for noncompliance, and/or not obtaining a license are severe, and include both fines and jail time.  “Severe” means a fine of a million dollars per violation, applicable retroactively The best advice is this – if you’re involved in virtual or augmented reality at all, it’s a very good idea to find out whether and how your product or service fits into the enormous machinery of ITAR, and above all, not to overlook it. This is about national defense, homeland security and an entire ecosystem of regulatory actors who you neglect at your peril.

VR lawyer

VR and Mental Health

 1000 648 David B. Hoppe
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In drama, there’s this fascinating convention called The Fourth Wall. The Fourth Wall is the term used to describe the way in which the actors in a live theatrical performance pretend there’s an invisible wall between themselves and the audience. The audience can see through the pretend wall, and watch the players, but the players pretend the wall is real, and have to act as if they’re unaware they’re being watched. It’s a remarkable bit of artifice, because, of course, being watched is the entire point of the exercise. In certain modern forms of drama, the wall is eliminated, and the players will come out and directly address the audience, but that’s more the exception than the rule.
The wall exists in films and television, too, thanks to the limits of technology. You are watching the action, from the other side of a screen, and you can always look away, stop the film, or whatever. There is still and always the option of not participating in the process. In the end, the audience members have the option of observing or not.

This is a way of preserving the integrity of the narrative. The equivalent of the way a book works – word by word, page by page, chapter by chapter – is a movie, play or television show in which the people who are watching collectively agree not to interfere in the process, and let the play take them where it will. It’s not immersive, because immersion would mean participation, which would disrupt the storytelling.
The entire point of virtual reality is, of course, precisely this immersion. In VR, the audience and the event are one thing. The wall is gone. You’re not watching something unfold, you’re part of it. This gives VR an overwhelming degree of immediacy and impact. It’s one thing to watch the action from the fixed location of your seat, as it occurs behind a conceptual wall. It’s quite another to be standing in the middle of it, moving through it and effectively part of it. For an adult, passing through the wall is a very powerful experience. Scientists, however, are now beginning to explore whether for children, and perhaps for some susceptible adults, the experience could actually be damaging. Given the popularity and growth of VR, the legal liability this would produce is enormous. Viewed from 30,000 feet, the subject of unexpected forms of liability and damages arising from VR use is a case study in how legal theories coalesce around a new technology, and how adoption and disruption have the potential for unintended legal consequences.

When it comes to VR, there are two general categories of this kind of potential injury. The first is vision. In the real world, your eyes focus and converge on the same point in space. If you’re looking at a tree on the other side of a meadow, your eyes automatically focus for that distance, and look at it. These two mechanisms work together, in an automatic function called the accommodation-convergence reflex.
VR is different. It basically works by fooling your eyes. The actual object you’re focusing on is exactly the same distance away all the time – the VR screen. However, on the screen, images represent objects that may look near or may look far away, and so the automatic reflex is replaced by an artificially created conflict. This can occasionally be disorienting, but the effect is short-lived. Typically, the effects of this, as with most of the other effects of VR, rapidly disappear when the headset’s removed. Your brain, and eye, adjust back to the real world from the virtual world and it’s all good.

A similar effect occurs when you’re looking at a VR display on a stereoscopic screen. The real world, of course, isn’t divided into two separate visual experiences which your brain unifies. However, VR headsets working by fooling your brain into seeing one thing, even though you’re exposed to two displays. In both cases, the eyes need to adjust to an unnatural environment, and with the exception of a few isolated examples, adjust back after a few seconds of looking at the real world. At least so far, adults have no problem with VR.
The potential problem – and legal liabilities – may arise when children begin using VR systems, particularly in large numbers and for extended periods of time. The current behavior of young people with smartphones is a testament to the way kids can become absorbed in a technology, literally to the exclusion of everything else. If you’ve ever seen a group of kids together, and all simultaneously staring at their phones, you know what I mean. There’s no reason to think that VR will be any exception to this trend. And while no conclusive evidence of any form of visual impairment has yet been observed, the projected enormous growth of the use and ubiquity of VR, particularly among young people who brains and therefore visual systems are still developing presents what can be described an as-yet-unknown hazard. If it emerges, the impact will be enormous. Millions of children with visual problems exacerbated by VR is a class-action attorney’s dream. Given the plaintiff bar’s aggressiveness and skill at coming up with new theories of liability, it’s simply a matter of time until the allegations of damage caused by prolonged VR use have some kind of a day in court.

The second potential category of  VR problems like this are, of all things, mental. The immersive, overwhelming experience of VR may, it seems, present a mental health hazard to people who are already struggling with, or vulnerable to, various mental or emotional maladies.
There are already documented, isolated examples of people allegedly suffering from addiction to video games. In one widely-shared example, a young Chinese gamer allegedly died after spending nineteen consecutive hours playing World of Warcraft. The examples of death or injury claimed to be from video game addiction are rare, and to this point, anecdotal.

However, mental health professionals have already expressed some concern about the potential for significant challenges virtual reality presents to people who are already afflicted with mental or emotional disorders. VR, of course, is an enormously affecting experience, with an environment that literally supplants reality. Remember the missing Fourth Wall. In addition, because it is so immersive, it also is a vastly more stimulating experience. It’s much more arousing to the brain and neuroendocrine systems, which is a recipe for abuse and addiction. Pharmaceuticals do exactly the same thing, simply using chemicals in place of visual and auditory effects.

The therapeutic potential of VR for people grappling with emotional, behavioral or mental challenges is substantial. But by the same token, it’s also easy to visualize VR as a kind of self-medication. If interacting with the real world is challenging or traumatic, imagine the allure of substituting an elaborate virtual alternative. Many mental disorders include issues with discerning between fantasy and reality, and take forms as diverse as paranoia, delusions, adjustment disorders, and in the most severe examples, outright psychosis, including hallucinations.
If the line between fantasy and reality simply failed to exist at all, as might be the case with VR abuse, then rather than helping treat and resolve mental disorders, VR was used to exacerbate them, the liabilities would be enormous, particularly those arising from harm or danger occasioned by VR-powered delusions or other behavior. This would be especially true if abuse of virtual reality was also combined with some sort of drug dependency.

Similarly, this same form of self-medication use of VR could simply delay treatment or make it pointless. A wife and mother who suffers from depression, and finds it appealing to spend days inside a nonexistent virtual world rather than wrestling her emotional demons to the ground in therapy arguably has had VR make had her symptoms made worse. The legal implications of this are enormous. The very potency of the virtual experience also presents very real risks of abuse, addiction and possibly damage of the most profound sort.
And as always, the technology is new, the potential is enormous, the growth is rapid, and the conclusion again (and perhaps somewhat ironically) remains: wait and see.

VR and Franchise Law: Franchisee Emptor

 1000 648 David B. Hoppe
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One of the most interesting thing about the evolution of virtual reality is the constant, ongoing interaction between this rapidly-evolving technology and business. There isn’t any template for the development of the relationship, particularly not when it takes place at such high velocity. Often the result is conflict. A perfect example is the privacy and intellectual property law that affects whether and how you can use a celebrity’s likeness in a VR application. If Lady Gaga’s replica is part of your VR environment, you may find yourself hearing from her lawyer. When the virtual and the real collide, the virtual may well prevail.

But not always. Another emerging area is franchise law, apparently, and it seems that in that situations where franchising and VR intersect, surprisingly, there are few problems. The law of franchising simply seems to prevail.

A little background is helpful at this point. Here’s part of a press release describing the adoption of VR technology by an enterprise called The Franchise Consulting Company.

The Franchise Consulting Company, Inc., the global leader in franchise buying and education, announced today that it will launch the world’s first Virtual Reality platform dedicated to helping consumers purchase a franchise. The platform is a breakthrough for entrepreneurs shopping for franchise investments, as well as for franchisors offering business opportunities, as it allows prospective buyers to experience a realistic inside tour of locations – without having to get in a car or on a plane.

To be officially revealed at the “Discover A New World Conference” in Cancun, the platform, named TheFCCVR (www.TheFCCVR.com) was designed from the ground up to deliver gorgeous, immersive virtual reality experiences to those interested in purchasing a franchise. The company plans to give away 10,000 Free VR Headsets to anyone who is seriously interested in owning a franchise.

If you dig a little deeper, the story gets very interesting. The upshot seems to be that the Franchise Consulting Company (FCC), as its name implies, generates revenue by connecting would-be franchisees with appropriate franchise opportunities from a consideration set of around 3,000 franchising opportunities, according to the website. This makes sense. Launching a franchise is a big bet, and having an expert intermediary involved seems logical.

Even more interesting is the way this service is positioned. The FCC website places a great deal of emphasis on emotional, personal and interpersonal factors, and says things like this: “Time and time again we’ve noticed one key attribute that great franchise owners’ share – a strong sense of self-awareness. It can be a daunting task to truly understand yourself and the opportunities your talents, interests, and wealth can create. We have the experience and knowledge to help you find the business that fits what you want to achieve.” They have almost seventy consultants, with backgrounds in franchise operations, to help clients.

Buying a franchise is not cheap – often, it’s a seven-figure investment. It’s also an intensely personal decision. There are thousands of different companies ready to franchise their systems, and becoming a franchisee means devoting a significant chunk of your life and your fortune to working with them. You’re deciding who you’re going to work closely with for a very long time, and in what environment, in support of what kind of brand, all of it.

Which is why VR makes sense. If you’re a franchisee, and you’re evaluating hundreds of different potential partners, it’s not realistic to travel all around the country for a month, looking at all of them. You can review them from your home or office, and FCC is so eager to have you do this that they’ll supply the headset.

But what if, later, you decide the VR experience was misleading? If you purchase a home because of how it looked in a virtual representation, and later decide or realize that it doesn’t look like it did in the display, you have a cause of action. The architect, the homebuilder, everyone involved might be liable. What you saw doesn’t correspond with what you eventually got, and there are legal remedies available.
Interestingly, however, and particularly given my role as a transactional attorney, that doesn’t seem to be the case in franchise arrangements. Although this is nowhere near conclusive, and I would need to consult with a franchise attorney to be sure, the interesting thing about franchise arrangements, and the thing that apparently minimizes the liability associated with using VR to market them, is that legally, they’re almost exclusively considered to be financial arrangements, and the cause of action typically is based on financial results.

More specifically, franchise arrangements are regulated by the Federal Trade Commission, which grounds its supervision in a document called the Franchise Disclosure Document, or FDD. This document, which has to be delivered to the franchisee at least two weeks before the deal closes, sets out the terms and conditions of the franchise, and serves to protect both parties in case something goes sideways later.

The contents of the FDD are almost purely financial. Key provisions include the estimated initial investment, operating capital requirements, projected revenues and profits, and so on. Further, and even more interesting, the FDD usually contains an integration clause and disclaimers that expressly eliminate liability for any representations made in the course of discussion of the franchise that are outside the FDD. In other words, whatever’s said that’s not in the FDD isn’t legally relevant, because the FDD controls. And the FDD, along with being hedged with disclaimers, discusses almost purely financial issues.

In this context, then, a VR introduction to a property under consideration for a franchise is considered a representation, and both the contractual structure of the franchise relationship and the legal basis for action afterward seem very much confined to the financial aspects. This restriction isn’t infinite, of course. I’m sure a blatantly misleading or flatly untrue tour of a franchise property using virtual reality would generate some basis for a lawsuit. But absent that, or something like it, it doesn’t seem to matter what the franchise representative says or promises, if you invest in a franchise and ex post facto end up believing that what you got isn’t what you saw, you’re kind of out of luck. What matters isn’t the VR experience, it’s the numbers, the results, and what’s within the four corners of the FDD that preceded the deal. This seems like one of the rare examples in which, when there’s a head-on collision between the virtual and the real, the real prevails.

A Deep Dive: Law, Virtual Reality and Augmented Reality

 1000 648 David B. Hoppe
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This is a sparring program, similar to the programmed reality of the Matrix. It has the same basic rules, rules like gravity. What you must learn is that these rules are no different that the rules of a computer system. Some of them can be bent. Others can be broken. Understand?

-From the film The Matrix

One of the most well-known cartoons about technology ran in The New Yorker’s issue of July 5, 1993. It depicts a dog sitting in front of a computer, telling another dog that “On the Internet, nobody knows you’re a dog.” Trenchant as this observation was then, it’s even more so now, thanks to virtual and augmented reality. The questions this situation raises about things like law, identity, liability and privacy are enormous, and as is often the case, the leading edge of thinking about these things is law reviews.

According to Wikipedia, a law review is defined as “a scholarly journal focused on legal issues.” While this is true as far as it goes, it’s a signficant understatement. It’s kind of like saying Moby Dick is a book about a whale. In point of fact, law reviews are often where the implications of legal or social changes are thoroughly explored for the first time. They’re intellectual labs of a sort, where academics address some of the theoretical, complex and strategic questions – the really big ones – the come up in the law. An upcoming article on the legal implications of virtual and augmented reality in the University of Pennsylvania Law Review is an excellent case in point. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2933867  While this blog isn’t typically a source of criticism of other articles, this particular article, authored by Mark Lemley of Stanford Law School and Eugene Volokh, is one of the first to take a deep dive into the legal implications of V/R and A/R, and part of it are excellent. It unearths some of the basic, critical questions technologies like V/R and A/R are forcing us to ask.

As law review articles usually are, this one is highly theoretical and very abstract. It’s an attempt to harmonize, if you will, the application of existing legal concepts to the brave new world of V/R and A/R, and it’s also one of the first to attempt something like comprehensiveness. The article, which is over sixty pages long, addresses criminal law issues, copyright, tort law, regulation, contract law – pretty much everything legally relevant to A/R and V/R.

Ideally, law review articles force the reader to think more deeply and more theoretically, about the basic principles that underlie legal questions. And when it comes to V/R and A/R, one of those principles is that of consent.

Unlike in the real world — the environment for which legal concepts were originally developed — a virtual world is not, at least not yet, something a participant enters involuntarily or accidentally. By donning a V/R headset or a pair of A/R glasses, a person is, according to Lemley and Vohokh, voluntarily agreeing to enter a virtual or semi-virtual world, and in consenting to do that, is often bound by a completely different set of rules than apply in the real world.

First of all, because augmented or virtual reality is both not real and voluntary, rather than being subject to many of the constitutional and civil protections the conventional legal system provides, users are instead subject to the terms and conditions drafted and provided by the owners and operators of the virtual environment itself. This means that a lot of the legal remedies that would be available in the real world have been contracted away, such as liability for a V/R system that causes users to walk into a wall. Or accidentally hit someone, because the V/R system caused them to. Everything you experience in VR happens inside a proprietary, artificial environment – a “walled garden” if you will – which allows the terms of use of the makers of A/R and V/R platforms to limit or eliminate their legal liability. This probably will expand over time to include issues of ownership of data created by or within the V/R system.

Which raises a second interesting, if currently abstract, point. V/R systems operate by collecting and organizing an enormous amount of information about users’ activities. As the pervasiveness and power of V/R in particular increases and expands, this will come to include information about transactions, conversations, intimate acts and conversations – almost anything that can be simulated inside a virtual environment, which is to say, almost everything. In short, as virtual and augmented reality grow in scope and influence, participants – which will come to mean almost everyone – will be creating an almost infinitely detailed audit trail of everything they virtually do, hear, say, and promise. By entering a virtual environment – and remember, it’s voluntary – participants will also be creating a perfect, complete and infinitely detailed record of themselves, second by second.

The legal and governmental implications of this kind of information are immense – and completely unexplored. Never in history has it been possible to collect – and theoretically, access – this kind of information. Over time, and a lot of caselaw, courts are going to have to determine how to treat it, and how to answer a host of very thorny questions about control, access, privacy and so on. For instance, is there some kind of virtual subpoena that can be used to retrieve this data? Who owns it in the first place?

Finally, and perhaps most significantly, the entire field of virtual reality is, according to Lemley and Volokh, ultimately going to require a reconsideration of the very definition of “harm” in the first place, and at some point, the reevaluation of the American system of tort law, which has been a foundational element of our legal system for hundreds of years.

Heretofore, law has drawn a clear line between that is  physical, tangible and real, and what is not. Although there are areas, such as copyright law and certain forms of intellectual property, where this distinction is not quite as absolute as it once was, by and large, remedies only exist for things that actually happen to us, in the physical world we collectively inhabit. Thoughts are not things, and cannot cause harm. “Sticks and stones” and so on.

However, V/R and A/R platforms are specifically designed to mimic the real world as closely as possible. They draw on all the technology, processing power and expertise available to simulate, ever more accurately, the real world. The line between what’s real and what’s virtual, to the user, becomes blurrier and blurrier, and in some instances, may cease to exist at all. Imagery and physical presence are becoming more and more alike, and this presents intriguing, and very complex, new legal challenges.

Consider, as the article does, the entire concept of an avatar. The avatar, a digital self, moves, walks, talks and appears to others, and to the avatar’s owner/operator/creator. Suppose, as the creator, you decide to have your avatar appear nude, or sporting Nazi apparel, or in some kind of similarly objectionable form. Obviously, the game platform can be engineered to prevent this, or at least to make it optional. People viewing your avatar can select whether or not they’re willing to virtually experience it in its objectionable state. This capability alone presents a fascinating twist on the real world, in that when we walk down the real street, we may be able to decide how we look, but that doesn’t require the consent of those who see us. In a virtual environment, it can.

But what happens if they undertake the reverse? If they manipulate your avatar digitally so you appear nude? Or as Scarlett Johansson? Or Pol Pot? Or your late, beloved grandmother? To you, nothing has changed. However, others are now, of their own volition, experiencing you differently? And what happens if they share this capability with their friends? And it goes viral? Suppose the way your avatar – which does business in the virtual world, has relationships, makes promise, and with constantly increasing precision, looks real, can be altered by those who encounter it to be objectionable. You have lost control of how you appear to everyone else, but what’s appearing isn’t you. And it’s not even under your complete control. Neither is how you sound, how you move, everything that makes the physical you you. Ruth Bader Ginsberg could appear as Ron Gronkowski, or as Dave Grohl. Which would completely alter the effect of her avatar, and her.

Within a virtual environment, the most basic questions of identity, self, and thus, responsibility under the law are no longer some sort of natural expression of an authentic presence. Rather, they’re artificially created, subject to the rules of a computer platform that may or may not be operated for profit, and changing very rapidly. Virtually any human activity will soon be capable of taking place in a virtual environment, and like a lobster molting because the shell containing it is too constricting, the law is going to have to change and adapt, and may even break wide open. Lemley and Volokh’s article is a searching, initial and important analysis of what that change may look like, and what its implications may be.

Even if you’re a dog.

Virtual Reality, Virtual Certification

 1000 648 David B. Hoppe
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There’s a fascinating short video about pretty much the exact opposite of augmented reality, which nevertheless, has an important message about the widespread impact of something that initially seems local. One of the markets where Augmented Reality technology has, to quote Steve Jobs, put a big ding in the universe, is aerospace. The implications, and the legal consequences, are fascinating.

Back to the video for a minute. It’s called How Wolves Change Rivers and it’s about returning wolves to Yellowstone, where they’d been hunted out of existence seventy years ago. The story goes as follows: – when the wolves returned, they began taking down deer, their natural prey. The surviving deer, in return, began avoiding valleys, where wolves now lurked. Without the deer browsing, trees began to thrive. Songbirds returned, as did beavers. The beavers began building dams, which began to change the course of rivers. Ultimately, virtually every living thing in the ecosystem was influenced by what’s called a “tropic cascade” – the impact of a species at the top of the food chain on everything else. All this also affected the landscape itself – resurgent vegetation stabilized the banks of rivers, which ran straighter and began to develop pools.

A similar set of forces is beginning to manifest itself within industries that are leveraging A/R. Aerospace is one of them, and the story there, like the Yellowstone wolf story, is one of change.

Globally, there has been a rising demand for air travel, particularly in regions where it previously wasn’t widespread, like the Middle East and Africa. As one marker of this, both the Middle East and the Asia-Pacific markets saw increases in aircraft procurement of 10% in 2016 alone, which is phenomenal. More people are flying further in more planes than ever before.

The challenge, of course, is that aircraft are expensive, complex machines which requires skilled maintenance. And the supply of qualified aircraft mechanics and engineers has not kept up with demand – not by a long shot. Obviously, nobody wants to cut corners on the training for someone who’s maintaining a passenger jet engine, so becoming a fully certified aviation mechanic can take between 5 and 8 years. It also requires infrastructure – classrooms, facilities, engines to work on and so on.

The shortage of fully qualified mechanics is most acute in the places in the world that are new to aviation on a commercial scale – again, parts of Asia, Africa, and the Middle East. There are plenty of aviation engineers in San Francisco, or Tokyo or London – major hubs. The entire nation of Abu Dhabi has fewer than 400. This is particularly a problem for long-haul flights and airlines, where the only alternative may be to fly an engineer to a remote location when needed, which leaves a very expensive aircraft sitting around for days awaiting repair.

This is a serious problem, and a major bottleneck in the growth of aviation. The shortage of aircraft engineers limits the ability of airlines to expand, to add new routes, and so on. Because by definition, planes travel from one country to another, they’re subject to global safety requirements that may be much stricter than domestic ones. It doesn’t matter if your flight begins in Istanbul, if it lands in London, your plane has to meet British safety requirements. If you can’t do that, you can’t serve that route, and no matter what kind of customer demand exists, you can’t grow.

Enter the wolves – I mean, augmented reality. The entire problem of lacking qualified engineers in remote places can be addressed through technology. Using A/R, a junior or less-skilled technician working on, say, an engine can be supervised and guided by both the A/R system itself and a more senior technician elsewhere in the world, who’s watching and assisting remotely. As we saw with our previous post on the DAQRI helmet and headset system, using A/R, a third party can see what the technician does, and can provide guidance every stop of the way. By embedding near-eye displays and cameras in the headset, an observer can assist without interfering with the technician’s work. Some technologies enable them to affect the actual augmented display the on-site technician sees, by highlighting objects with an arrow or a circle – “This is the part with the problem”.

The final stage of all this is where the legal issues arise. Under current regulations, a repair has to be signed off on by a senior or qualified technician on site, who physically inspects the situation and blesses the work. To fully leverage the potential of A/R in commercial aviation, this has to change. It has to be feasible for a senior technician, using A/R, to inspect the local mechanic’s work and/or assist with it, and then certify that it has been completed correctly in a manner that satisfies the regulators worldwide.

This may sound radical – a mechanic signing off on work he hasn’t actually performed, done by someone he hasn’t ever met, perhaps, thousands of miles away. But global standards have existed for similar certification in all kinds of other fields, including the checks and balances needed to insure that they’re correctly applied, that risk is mitigated, and so on. Think of letters of credit. E-signatures. Wire transfers of funds. Cross-border service of process. Even secured transactions. All of these things involve exchanging assurances that one person far away has accurately done what another person is relying on.

Perhaps, what’s needed in the end is the beginning of a global framework for certifying performance of certain acts virtually. The details, as always, will take quite a bit of time and effort to sort out, but the global benefits to trade are obvious, and enormous. And again, this is not something unusual in scale for trade. The Financial Accounting Standards Board recently, and after ten years of work, revised and updated that regulations that apply to revenue recognition – when, say, a construction company in Brazil can recognize revenue as earned, and when it can’t. This is intended to make rules and their application reliable and consistent in every jurisdiction. Particularly given the capability of most virtual technologies to track work, and to record it, this should not be hard.

What will be hard is getting everyone together. The first step, perhaps, would be working towards a global body that begins to examine the feasibility of virtual certification of repairs and actions, supported, funded, and participated in by enough economically significant governments. The benefits, again, are obvious – the ability to remotely support hands-on work, and to certify that it has been done correctly, would eliminate a lot of the potential legal challenges, liability issues and so on, speed up the velocity and ease of trade, and ultimately, benefit everyone. All of our collective rivers would run straighter, and the pools would become deeper.

Who Does Luke Skywalker Work For?

 800 600 David B. Hoppe
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Remember the first Star Wars movie? Remember how it ended? Luke Skywalker is in his fighter, screaming down a kind of alley on the surface of Darth Vader’s Death Star. The Death Star is powering up and preparing to obliterate the rebel base – in fact, the entire planet it sits on. Uh-oh. Luke has to shoot a laser torpedo, or whatever it is, right into the entrance to an exhaust port while flying along at top speed. If he hits his tiny target, it will destroy the Death Star and save the galaxy.

When Luke gets in range of the exhaust port, he activates what’s basically an augmented reality device that turns his helmet into a heads-up display showing him exactly how to hit the port. Then, suddenly, the voice of Alec Guinness enters Luke’s brain, and says: “Luke, use the Force.” Luke, of course, turns off the A/R device, destroys the Death Star with a perfect shot, and launches hundreds of millions of dollars in movie revenue. The movie itself is a classic hybrid of some of the most ancient myths and issues the human race has ever contended with, but one question lingered like a quasar pulsating on the perimeter of space for some of the audience:

“Was Luke an employee or an independent contractor?”

As usual, augmented reality raises as many questions as it answers.

One of the most consistently fought-over questions the IRS (and state taxing authorities) have repeatedly had to grapple with over the years has been whether someone who is performing a service for someone else is an employee, or is a contractor. It’s a very situation-dependent assessment, and the IRS has developed a multi-part test to help arrive at the answer. There is no bright-line procedure, but rather, a series of factors the IRS can evaluate to arrive at a classification. And A/R may have the potential to disrupt this test. Meet DAQRI.

Based in Los Angeles, DAQRI is a tech company that has developed and is marketing a series of A/R enabled devices – currently, a helmet, and a pair of glasses – that are intended to bring A/R into the workplace. The helmet, for example, creates an intelligent heads-up display that “reads” a worker’s physical environment. It then uses sensors, processors and software to interpret that environment, and extend the worker’s expertise and intelligence into the environment. Brian Mullins, the company’s CEO and founder, writes: “We become so limited by this idea of technology replacing workers when the better idea is to power-up their senses and extend what they’re capable of doing.”

The company’s promotional video, which can be found here, demonstrates this. In part of it, a worker is moving through some kind of factory, and stops to look at a pressure gauge. Through the heads-up display the DAQRI system “sees” the gauge, outlines it in green, identifies it, identifies normal pressure ranges (which are also displayed), reads and interprets the gauge’s reading, then places a bright green check mark, signifying that the pressure reading is normal. The worker moves on.

In another segment, the DAQRI system displays a heads-up to-do list, telling the worker what tasks need to be performed inside the factory, what needs to be checked, repaired, and so on. In another, another worker moves through a different facility, and uses DAQRI’s thermal sensor capability to see his environment in terms of temperature. Cooler objects are blue, warmer ones brighter, up to and including a red shade for hot objects, such as steam pipes. The system will help workers identify problems before, perhaps, they’re visible.

In essence, like Luke before he resorts to the Force, the workers in this video are no longer solely operating in the physical environment. They’re working in the A/R system’s interpretation of it, and literally second by second, are being both closely monitored and instructed. When a worker looks at a piece of machinery, the display shows him what it is, how it fits together, and piece by piece, what to do to repair it. It’s really impressive.

The upside of this is, of course, obvious. The worker now has vastly more information, is presumably safer, more efficient, and much, much more productive. When he looks at the section of piping, the A/R display will tell him exactly what the different parts are he’s seeing, what they do, what temperature they should run at, and if necessary, how to repair or adjust them. Because there are cameras embedded in the device, the worker can also have supervisors or other experts actually “see” what he sees, and instruct him.

The downside? This scenario increasingly blurs the line between workers and contractors, which has an enormous impact on all kinds of legal issues, from union membership to taxation to liability for industrial accident. Hypothetically, even if someone is an independent contractor, the total shift in the nature of his day-to-day work could result in courts determining that he is, in fact, actually an employee.

The determination of whether someone is an employee or a contractor is tricky, complex, and often involves litigation. There’s a lot at stake, and much of the determination has to do with how independently the work is being done, versus how much control the company may have over what’s being done. Generally, the more control, the more likely it is that someone’s going to be determined to be an employee. The more independence, the more they’re likely to be found to be a contractor instead.

One way this question’s addressed is using a 20-factor test, created by the IRS, that examines how much independence a worker has. The 20 factors used to evaluate the validity of independent contractor classifications include several issues in which a worker who, thanks to an A/R helmet, is being controlled minute-by-minute, may be found to be an employee when, previously, he might have been found to be a contractor instead. A few examples – the factor is first, followed by my comments in italics:

Level of instruction. If the company directs when, where, and how work is done, this control indicates a possible employment relationship. This is exactly what happens. The company directs the operations the worker performs moment-by-moment through the device.

Amount of training. Requesting workers to undergo company-provided training suggests an employment relationship since the company is directing the methods by which work is accomplished. Same thing – the company is directing how the work is performed, and arguably, work in an A/R environment can be considered “training”.

Degree of business integration. Workers whose services are integrated into business operations or significantly affect business success are likely to be considered employees. With an A/R display, a human being is literally physically integrated into the operation. You arrive, don the helmet, and are then part of the infrastructure of the facility you’re working in.

Extent of personal services. Companies that insist on a particular person performing the work assert a degree of control that suggests an employment relationship. In contrast, independent contractors typically are free to assign work to anyone. This is complex, because the person doing the work has to be wearing the DAQRI helmet, and receiving instructions. However, if they are, it doesn’t matter who they are.

Flexibility of schedule. People whose hours or days of work are dictated by a company are apt to qualify as its employees. The hours of work are dictated by the company in the sense that the A/R system controls when and how you work, moment-by-moment.

Need for on-site services. Requiring someone to work on company premises—particularly if the work can be performed elsewhere—indicates a possible employment relationship. This one’s easy – you have to work on company premises.

Sequence of work. If a company requires work to be performed in specific order or sequence, this control suggests an employment relationship. The DAQRI system dictates the sequence of tasks, down to the second.

Provision of tools and materials. Workers who perform most of their work using company-provided equipment, tools, and materials are more likely to be considered employees. Work largely done using independently obtained supplies or tools supports an independent contractor finding. If the key piece of equipment is the A/R helmet, which is provided by the company, as is the software the runs in it and the instructions it generates, that moves the needle towards “employee” findings.

The commercial potential of the DAQRI system is enormous. In initial projects, some involving the assembly or maintenance of extremely complex technologies (jet engines, airplane wings) the error rate has been reduced, literally, to zero. However, Nature always balances her books, and this kind of efficiency requires some changes, and imposes some costs. In these environments, workers are functionally working under extremely close supervision, albeit supervision by software systems. Given that autonomy is one of the hallmarks of being an independent contractor, and lack of it is part of what defines an employee, work in an augmented environment may mean a serious reexamination of the definitions of the two terms. Interestingly, AR may redefine work – just not in the way everyone intended. And, unfortunately for Luke, being a Jedi Knight and relying on the Force seems to include no job security.

Club Penguin for Adults

 1000 648 David B. Hoppe
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On December 15, 2016, Oculus officially launched Oculus Rooms, the VR pioneer’s first move into social VR. Essentially, the idea is that you and your friend/acquaintances/enemies can gather together in a virtual space, and interact. Here’s the company’s somewhat breathless description of the whole idea:

The first wave of VR was all about the magic of presence, the immersive sense of actually being inside a virtual space. The next step is to let you feel that same sense of presence with other people in VR.

Finding your friends in VR is easy. Just link your Facebook and Oculus accounts or search for people by their real name or Oculus username. Once you connect and become Oculus friends, you can see when your friends are online, start a voice call, or jump into an experience together.

Starting a party is easy. Click the “Party” tab in Oculus Home, select who you want to join the party, and you’re good to go.

Today you’ll also be able to experience Oculus Rooms, a private virtual space to spend time with friends in VR. We focused on enabling social activities that mirror how you may hang out with friends in real life.

Once you and your friends are in a Party together, you can easily join Oculus Rooms. From there, you can choose what you’d like to do: gather around the TV and watch videos, play matching or guessing games, or hit the group app launcher to jump to a multiplayer game like Dragon Front or Drop Dead. Look for even more apps to support this feature in the coming months.

If this sounds a little familiar, it’s because this same territory – large-scale virtual worlds – has been explored before, and is well-known, except that earlier, cruder versions of the same concept lacked the immersive power VR brings to the party. Virtual worlds like NeoPets, FreeRealms and Club Penguin attracted hundreds of thousands of children, while The Sims, Second Life, Kaneva, Gaia Online, There.com, World of Warcraft, and Everquest catered to adults. In these virtual worlds, users created and inhabited virtual worlds where they could interact, win or earn virtual currency, and purchase virtual goods. They could also, as we will see, create and run sweatshops, slander one another, and create real-world grey markets in virtual products and currencies.

Most of these legal issues await Oculus’s Rooms platform. Although, as with all things legal and VR-related, much remains to be seen and will unquestionably rapidly change, the issues at hand are real and important. Eight years ago, Judge Richard A. Posner of the United States Seventh Circuit Court of Appeals and Senior Lecturer at University of Chicago Law School, appeared as an avatar on Second Life, and engaged in a lengthy free-form discussion on the legal, ethical and moral issues surrounding virtual worlds. The same issues he called attention to then will arise again with VR, but with more impact than ever.

Here are a few of them:

Free Speech: One of the typical arrangements for any kind of virtual world, probably including Oculus Rooms, is that in order to participate, users sign an End User License Agreement, or EULA. The EULA is the master set of rules for the entire game and environment, and among other things, controls speech. Typically, political, religious, overtly sexual or other potentially objectionable speech is banned. In the case of virtual worlds for young people, like Club Penguin, a small army of both professional moderators and deputized users enforce this.

That being said, as virtual world become increasingly immersive and important, it remains to be seen whether and how the EULA will hold up against the First Amendment. If there is an Oculus Room in which a business meeting is taking place, or a political rally, or simply a discussion of a controversial topic, will the EULA trump the virtual right, if such a thing exists, of assembly? Of speech? Of religion? While VR was (relatively) new, and the experiences were not collective, that was one thing. However, as virtual gatherings become more pervasive, more lifelike, and speak to a broader and broader audience, that distinction will be more and more difficult to defend.

Trademark/Copyright: Issues of trademark and copyright have a similarly significant potential to raise thorny legal issues. Unlike previous VR environments, in which the virtual objects that comprise the setting for the platform are either preexisting or very difficult to alter, virtual worlds tend to be open. This means that there is very little control over what users create, and those creations often end up comprising the majority of the environment itself. In some virtual worlds, user-created objects, environments and images constitute 80% of the entire world.

What happens when a user deliberately or by accident creates and virtual object that parallels a copyrighted real one? This question gets especially sticky as virtual currency begins to be used to buy and sell objects, and stickier still when those virtual goods, as they sometimes are, are purchased for real-world money for use in the game environment. If, in an open virtual world, a user decides to decorate his virtual office with a lifelike reproduction of an Andrew Wyeth painting, has the artist’s ownership or right to control the destiny of this own work been infringed? After all, it’s not a real-world object, and it’s bought and/or sold with virtual currency. Who owns it? Who has what rights? What happens if a third party user purchases that office, complete with the painting, to use in the virtual environment?

Libel and Slander: Finally – and again, this subject is just one of many possible areas of legal complexity, how will Oculus handle libel, slander and other injuries to name or reputation in a virtual environment? Can you slander an avatar? Are there damages for interfering with a virtual reputation? In the real world, this is pretty settled law. In the virtual realm, it’s not only not settled at all, but the ground is shifting under our collective feet every day. The adaption of laws intended for one environment to another is always tricky. It’s trickier still when one of those worlds doesn’t actually exist.

Which kind of returns us to where we started. As an organizing set of rules for human beings, law, by definition, has to be based on what actually happens. You can think about burning a house down all you want. You can draw it, write songs about it, practice it, and create computer simulations of it, but until you actually show up in the middle of the night with a jerrycan full of gasoline and a lighter, none of it matters. But virtual worlds have real-world consequences, and the bigger they get, the more this is the case. The entire meaning of “interaction” is evolving, and seemingly, the law is going to have to, too.

VR lawyer

Taking Privacy and VR Seriously

 1000 648 David B. Hoppe
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They’re Watching You. Really.

One of the most vital, yet elusive, legal issues surrounding VR is privacy.

The concept has its roots in the oldest, most basic elements of American law. It’s enshrined, ultimately, in the Fourth Amendment of the Constitution, which has been defined to include issues such as birth control, free speech, and so on. However – and this is a huge “however” – almost all of the judicial interpretation of the meaning of privacy has taken place long before the development of virtual reality. The technology raises an entirely new set of issues related to privacy, which may require an entirely new understanding of some of the most basic building blocks of the Internet itself.

Let’s back up a little. When you go online, you are surrendering an enormous amount of privacy, often in ways you don’t even suspect. A complete list of this would be a hundred pages long, but for a somewhat startling introduction, take a look at your Google Dashboard (which you can reach by Googling the term) and see exactly how much information Google has about you – which they’re using to target ads, among other things. As part of this, for example, they scan and analyze all of your Gmail correspondence, in order to sharpen their profile of you.

As another example, here’s a list of information Facebook (which, with 1.79 billion users and growing, influences around 25% of the entire human race) gathers about you. They know, and are analyzing, things like whether you purchase a lot of alcohol, or who you are inclined to vote for. And again, this is all used to both target ads to you, and to adjust what you’re shown on Facebook.

But notice one thing about all of this information. It’s all data, in one way or another. Or, to put it another way, it all arrives in Facebook’s databases through your keyboard, phone, mouse or touch screen. There’s a device involved, and Facebook is vacuuming up enough data to fill four immense data centers (in Oregon, Sweden, Iowa and Texas) and they’re building more. This makes the entire issue of what’s private and what’s not relatively easy to both define and control.

With VR, however, all bets seem to be off. Because VR privacy is more closely connect to surveillance than anything else. And nobody’s prepared to think through the implications of that, particularly not lawmakers.

The first area where this is happening is head movement. A VR headset is fitted with a gyroscopic sensor, which tracks what you’re doing with your head – in effect, where you’re looking. Since this is what creates the entire virtual environment, it’s obviously pretty important. It’s also an ideal technology for VR technologists to determine where in the environment you’re looking – what’s getting your attention. Basically, they’re watching you to see what you’re interested in. And recording it. And tracking it.

The next step is way beyond tracking where you look. It’s tracking your emotions. An Oculus Rift headset is engineered to be capable of accepting sensors to closely track eye movements and facial expressions. This is ostensibly in order to allow users to have avatars whose facial expressions match their own. However, when combined with bodily motion, like gestures, it’s also very possible to develop system tools to track emotions. Hand gestures, posture, body position and all sorts of other aspects of the way users inhabit a virtual world are well on the way to creating the capability to not simply know what users think or do, but how they feel, react, and are interested. The VR environment, in other words, can monitor your gestures and facial expressions, and begin to log your emotions, as well as the circumstances that influence them. If the mention of Hilary Clinton generates a certain set of movements, they can know you’re a fan.

This is already well beyond the scope of any regulatory framework initially devised to define, and control, privacy. However, it keeps going. First of all, this data is not restricted to law enforcement agencies, or government agencies, or anything like that. It’s gathered by businesses, and is increasingly available to marketers and corporations as well.

Second – and here’s where it gets really spooky – this information can also be used to influence users’ behavior and beliefs. In short, in virtual reality, the virtual environment can be altered in order to reinforce certain beliefs and behaviors, and to inhibit others. We’re getting into rat/maze/cheese territory here. Avatars and environments encountered in a virtual experience can be welcoming and supportive to visitors who hold one set of beliefs, or behave in a certain way, and to be dismissive, negative or rejecting of a different category of visitors. The virtual environment, ultimately, can become a psychological control mechanism.

The efficacy of this sort of stimulus/response cycle in the real world is already quite well known. Human beings are profoundly influenced by their environments, including their behavior. The most famous example is Phillip Zimbardo’s Stanford Prison Experiment, in which college student assigned to play the roles of either prisoner or guard in a fictitious (i.e. virtual in the 1970s) prison rapidly began to exhibit disturbing levels of sadism and cruelty. The experiment had to be called off after six days instead of lasting the planned two weeks, because environment has a profound effect on shaping behavior. Thousands of followup studies have established this fact of human behavior beyond question. People’s behavior is strongly affected by their environment.

Which leaves us where? And remember, we’re in an environment where VR technology is moving forward at warp speed. The current big, clunky VR headsets, for instance, are the Sony Betamax of VR technology – the devices are getting smaller, lighter, more powerful and less obtrusive very, very quickly. But it looks as if it’s going to leave us in a place where information about our most emotional, subjective, and therefore human, behavioral aspects will be used to develop virtual environments that are specifically designed to influence our behavior and beliefs.

To some extent, this isn’t new. Propaganda, editorials, and political satire, among many other avenues, have been used for precisely the same goal for many, many years. This is considered a foundational element of civil rights, and the ability to freely express yourself in an attempt to influence others is broadly protected by the First Amendment. Yet, VR is different and unique because it is an actual environment. It’s a lot harder to put a book down, and think through what’s in it, than to remember than an avatar in a virtual environment is not real, and to be aware that you’re being both closely tracked and perfectly manipulated.

Which brings us back to the legal issue at hand – privacy. As it’s always been defined, and as countless court cases, articles and debates have hammered out, privacy means the right to be let alone, as well as the right to control who sees your personal information, and what they do with it. Thanks to HIPA, for instance, there are very strict regulations on who can see your medical information, and what they can use it for.

However, as we’ve seen with Facebook, consumers are increasingly trading their privacy for technological access and features, and the boundaries are shifting. The issue seems to be becoming not simply what people can do with your information, but what your information can do with, and to, you. Which is a whole different set of issues. In effect, privacy is morphing into a variation on the right to not listen. Or, to quote William O. Douglas, “The right to be let alone is the beginning of all freedom.” VR may be the laboratory for determining, again, what that actually means.

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