The Future Lawyer Weekly Briefing – W/C 3rd January 2023

NFTS AND METAVERSE: CHALLENGES FACING THE INTELLECTUAL PROPERTY SPACE

Briefing by Kodjovi Daniel

The culminating growth of technology has created a leeway for innovations to revolutionise the world.

Concepts like non-fungible tokens (NFTs) and Metaverse have drawn the attention of investors and corporate entities, thereby creating more opportunities for advancing these concepts.

Just as the world is borderless, the NFTs and Metaverse space is also without borders due to the iteration of a virtual world. This has spurred dangers ranging from infringements to the inability to obtain adequate redress regarding intellectual property rights such as copyright, patent, or trademark.

This article will elucidate some of the nitty-gritty of NFTs and Metaverse concepts and examine the IP challenges facing NFTs and Metaverse.

Concept of NFTs and Metaverse

NFTs are a type of cryptocurrency representing the ownership of digital or physical assets and can be used to represent anything from in-game items to digital art.

NFTs were used before the advent of the virtual words that exist in VR. Mobile games such as CryptoKitties popularised the use of NFTs for in-game items, and platforms such as Ethereum have been used to create entire virtual worlds.[1]

On the other hand, the Metaverse is a three-dimensional virtual world in which consumers immerse themselves in buying and selling goods online. The metaverse aims to transition the connection between physical and digital lives seamlessly. It is a combination of virtual worlds and augmented reality.[2]

Factors bedevilling NFTs and Metaverse: apropos intellectual property rights and implications on parties

Anonymous: Cybersecurity has remained an unsettled phenomenon leading to more controversial issues in cyberspace. Often, people find it challenging to identify the creators of a given work in the Metaverse when the work results from a decentralised collaborative process performed by users anonymised behind avatars.

Digital assets: The scope of protecting various intellectual property rights under the current IP regime is clear nationally and internationally. For instance, Copyright Alliance reported about 20 incorrectly decided lawsuits, most of which concerned intellectual property disputes.

The question is: Can digital assets be qualified as goods to register various intellectual property rights?

Jurisdiction: Which clothes the court will have the power to adjudicate is a prevalent problem in the intellectual property sector. Research shows that infringers are identified not only within a nation but also outside the continent. This distils the question of which court will be able to entertain such lawsuits.

Importance for lawyers and law firms

Considering the challenges mentioned above, the importance of seeking the legal opinion or expertise of a law firm or lawyer cannot be overemphasised.

One of the possible solutions a lawyer can proffer to address these challenges is to clamour for the domiciliation or enactment of an intellectual property law that clearly defines if a digital asset can get the status of an intangible asset. Most IP lawyers are abreast of these concepts and have immeasurable experience treating similar situations.

Furthermore, lawyers can quickly identify intellectual property rights in the NFTs and Metaverse spheres. Leveraging such rights will protect one’s business and deter intending infringers from carrying out their atrocities.

Even before entering an agreement with third parties, an IP lawyer or law firm (as the case may be) can draft a new encompassing agreement that leaves no stone unturned, thereby selecting the applicable law and harnessing the lacunae in the available statutes to the benefit of the client to avoid unnecessary technical and subsequently, legal issues.

Conclusion

The introduction of NFTs and Metaverse is a laudable initiative, but if the challenges affecting the IP space remain unresolved, it will lead to futility. Notably, these challenges can only be resolved with the help of lawyers or law firms.

Sources

[1] Fintech News, ‘The relationship between NFTs and Metaverse’, (November 2, 2022), <https://www.fintechnews.org/the-relationship-between-nfts-and-the-metaverse/> accessed 31 December, 2022.

[2] Influencer and Marketing hub, ‘Understanding NFTs and The Metaverse’, ( October 25, 2022), <https://influencermarketinghub.com/nfts-metaverse-report/amp/> accessed 31 December, 2022.

FINANCIAL SERVICES OVERHAUL

Briefing by Amrit Notay

Between 2007-2009, the UK Government spent £137bn of public money to bail out banks due to the 2008 Financial Crisis.

As a result, the government introduced rules to separate retail banking from investment banking operations. However, UK Chancellor Jeremy Hunt aims to overhaul these regulations.

The Reforms

The ‘Edinburgh Reforms’ is the term being used to refer to the 30 proposed reforms of the financial services regulations. The Chancellor has proposed a relaxation of financial services rules, including the ring-fencing regime, which would no longer apply to retail-focused banks. The ring-fencing regime is where banks must separate retail banking services such as mortgages and loans from investment banking services.

Alongside reversing the ring-fencing regime, the following proposals are also being made:

• Removal of the cap on bankers’ bonuses
• Allowing insurance companies to invest in long-term assets such as housing
• Allowing ring-fenced banks greater flexibility through being able to take part in more financial activities

Why is an overhaul being proposed?

The government see the relaxation of the rules as a way of highlighting the freedom offered to the UK through Brexit. The rules on financial services were introduced through EU laws after 2008, which have been said to be “burdensome”.

The Chancellor said he wants to boost the economy to allow investment in sectors such as education and energy. The Reforms are to be implemented to make the UK a dynamic and competitive financial services hub, promote effective use of capital, and create “a sector at the forefront of innovation and technology”.

Impact on wider society

Growth in the UK economy has been stifled, partially due to the financial services rules requiring companies to hold capital without using it. Therefore, these reforms will hopefully add a competitive edge to the financial services market, leading to new opportunities, including innovation.

However, there are concerns about the reforms being of high risk. The reforms could destabilise the economy if they do not work the way the government hopes, leading to inflation becoming a permanent problem. Consequently, there are fears that the Reforms could lead to a crisis like the 2008 financial crisis.

The Reforms could lead to the UK financial sector being at the forefront of innovation. And technology, we could see this impact on consumers; for example, consumers may have access to new products and technologies they would not have had before the Reforms.

Impact on the legal sector

Larger banks are less likely to be happy with an overhaul, having already spent significant amounts of money on the ring-fencing regime. Therefore, the banking and finance sector could see an increase in advising large banks on their options should the Reforms be implemented.

The effect could be seen as a change in consumer-focused regulatory laws; the government is also considering reforming the Consumer Credit Act whereby provisions within the Act may be moved into the Financial Conduct Authority’s rulebook.

This reform could lead to the FCA’s rule-making powers expanding and provide the FCA with the augmented potential to protect consumers should they lose some of their rights under the Consumer Credit Act.