Virtual Reality: A Complex World for Intellectual Property Owners

This blog post analyzes some of the key legal issues relating Intellectual Property rights that the current technological wave of Virtual Reality has brought forth for its users, service operators, and platforms. Specifically, this post analyzes trademark and copyright issues that exist with the advancement of Virtual Reality.

1. Background

According to a top Samsung Executive, (who I cannot name,) “the tech world will change more in the next 5 years than it has changed in the past 50 years.” This was the sentiment in Silicon Valley throughout my MBA Residency there in May 2015. However, this sentiment is not new. During my trip to China in March 2015, Philip Beck, a high level executive in eCommerce and Mobile Gaming platforms in Beijing had forewarned me about this upcoming revolution in technology. But, what is this technological revolution that most tech executives speak of and we consumers have yet to understand? Two Words: Virtual Reality.

Virtual Reality (“VR”) replicates an environment that simulates physical presence in places in the real world or imagined worlds. It can recreate sensory experiences, which include virtual taste, sight, smell, sound, and touch. Companies such as Google, Sony, Facebook, HTC, Nintendo, and Nokia have all invested hundreds of millions of dollars in VR. So, naturally, the current technological wave of VR has brought forth legal implications for its users, service operators, and platforms as it relates to Intellectual Property rights, such as trademarks and copyrights. 

2. Real World Legal Rights in VR 

When VR stakeholders import or incorporate music, photographs, or brand names or logos into a virtual experience, the traditional laws of trademark and copyright apply. This means that such use may require permission from the owners of the applicable rights. Whether permission is required depends on the nature of the use and the stakeholders involved. 

(i) Trademarks

If a User uses a real world logo on a t-shirt that the User created in VR, although the trademark rights to that logo are owned by someone else, such use may not constitute a trademark infringement. This is because the User is not using the logo "in commerce," which is an essential element of an infringement claim under the United States trademark laws. If, however, the User starts selling the t-shirt in VR to other Users, even if the sale is conducted in virtual currency that can be used only in the User’s VR world with no equivalent value in the real world, it would be harder to argue that the User is not using the logo "in commerce." 

(ii) Copyrights

Unlike trademark laws, copyright infringement does not require a commercial tie-in. Any reproduction, public display, public performance, or distribution of another's photograph, video, music, etc. in VR is sufficient for a copyright infringement. However, copyright protection is not absolute, and use of certain copyrighted material in VR is likely to generate vigorous discussions on fair use, a legal doctrine that specifically permits use without permission from the copyright owner.

For example, if a User uses the characters from the Harry Potter book series and gives them different identities and creates an alternate world, all within the User’s VR experience, does such use constitute a copyright infringement? The answer is most likely yes, since one of the exclusive rights of the copyright owner is a right to create derivative works. However, as in the real world, determining whether a particular use in VR falls under the fair use exception will require an extensive analysis of the applicable facts and circumstances in each instance. Furthermore, given the novelty and enormous potential of the VR technology, it will probably take several court cases (and maybe even a further amendment to the existing copyright laws) to establish the scope of copyright protection in VR. 

3. Virtual Rights in the Real World 

When it comes to the creation of content in the real world, whoever creates content owns it, unless certain narrow exceptions apply or ownership is changed by contract. However, the default ownership is not so clear in VR, where Users direct creation but the underlying code enabling the creation of images, virtual property, or other content was created or otherwise is controlled by the Platform. Thus, as between the User and the Platform, ownership may be disputed. However, if today's social media sites and content-sharing platforms ("UGC Platforms") provide any guidance, ownership will largely be addressed in the Platform’s terms of use or participation agreement. UGC Platforms generally provide that users own the content that they create or upload to their sites. Interestingly, if VR Platforms follow this approach, it could create a sticky legal situation surrounding ownership and entitlement to the property.

Assuming Users own IP they create in VR, and want to assert rights to that IP in the real world, it is likely that trademark and copyright laws will apply in a manner similar to how they apply to IP created in the real world, with a few twists. One twist under trademark law is whether a User creating virtual products, such as virtual apparel, could satisfy the "use in commerce" requirement for trademark registration and obtain trademark protection for such virtual apparel. It remains unclear whether a trademark used on such apparel could qualify for real world classification as a “good.” If the apparel is not used as apparel in the real world, the User may be limited to seeking classification as a service, which could limit the User's ability to compete and protect against real world apparel that is similar to the virtual goods the User controls. Another twist relates to copyright. Copyright law protects original works of authorship, and it's questionable what is original and capable of copyright protection in VR if some of the work is based on real world IP.

(i) Caution for Brands utilizing User’s IP

Brands may also have an interest in real world use of property created in VR. Brands are always seeking ways to engage in more meaningful ways with their customers. VR will likely open up unprecedented possibilities for communicating with customers about the Brands’ products, services, and building brand loyalty.

For example, Brands could use VR for focus group testing and getting customer feedback. Content companies like movie studios, production companies, producers, and networks (as well as Brands and Platforms) can use VR to source content, similar to how the Internet is currently used to source UGC. These companies will likely want to own, control, or at least have a license to use all or part of the IP created by Users.

As in the real world, this can be accomplished through terms of use or participation agreements that expressly allocate such IP rights to the Brands, and allow flexibility in the Brands' use of IP created by Users (e.g., in the Brand's advertising, in product development, or for internal purposes).

As with any online service, it is important to have enforceable terms of use and participation agreements governing use. In recent years, there has been some suggestion that certain portions of online terms of use, particularly portions affecting legal rights or remedies, are not enforceable unless a user has affirmatively assented in some way. So, it is essential that Brands that seek to use User IP ensure that Users complete click-through or click-to-accept agreements that clearly state the ways in which a User’s IP might be used by the brand.

4. Bringing it all Together

Legal practice and advice pertaining to VR will continue to evolve as we see where each stakeholder's imagination takes this trend. In the meantime, at least with respect to trademark and copyright issues, your IP attorney can anticipate some of the legal risks inherent in VR by looking at VR Products currently in use and applying the law as it stands today.

How else do you think VR has affected Intellectual Property rights? Please share your thoughts in the comments section below as I learn just as much from you as you do from me.