Osgoode experts warn about the legal impact of the metaverse and other next-gen technologies

Person wearing an VI visor with Metaverse written on it

Lawyers and law students beware: Next-generation technologies like the metaverse, Web 3.0, ChatGPT, blockchain and cryptocurrency could pose enormous challenges to legal systems that those in the profession are only beginning to grapple with.

That was one of the warnings to come out of a recent panel discussion featuring Osgoode professors with expertise in the areas of labour law, intellectual property (IP), human rights, tax law, privacy law and tort law.

The event, titled The Legal Implications of the Metaverse, took place March 9 at the law school and was hosted by the Osgoode-based Jack & Mae Nathanson Centre on Transnational Human Rights, Crime and Security. A full video recording is available here.

“Web 3.0 (or Web3) is on the verge of happening and, as lawyers, we haven’t even mastered Web 2.0,” said labour law Professor Valerio De Stefano, who holds the inaugural Canada Research Chair in Innovation, Law and Society.

“No one could have imagined that social networks could be at the centre of revolutions around the world,” he added. “We as lawyers weren’t prepared for that.”

De Stefano was joined on the panel by Professors Barnali Choudhury, director of the Nathanson Centre and an expert on business, global economic issues and human rights, Carys Craig, an IP law expert, Jinyan Li and Ivan Ozai, both tax law experts, Dan Priel, a tort law expert, and Jonathan Penney, an expert in privacy law, cybersecurity and artificial intelligence.

While the concept of the metaverse remains in flux, it is generally conceived as a virtual world made up of 3D technology, avatars and digital marketplaces. Some of the most popular examples include games or multimedia entertainment platforms such as Second Life, Fortnite or Roblox.

Craig noted that non-fungible tokens or NFTs have become important objects of ownership in the digital world, sometimes fetching astronomical prices, like a one-of-a-kind NFT of the Birkenstock sandals worn by Apple co-founder Steve Jobs, which sold at one point for over $200,000. Amid a meta-marks gold rush, she said, applications for trademarks in the metaverse have even extended to Velveeta cheese in virtual restaurants and virtual Band-Aids.

Increasingly, she added, trademarks in the virtual world are seen as pieces of property in themselves and some investors see a new universe of commercial opportunity. Citing a 2003 article by Duke University law professor James Boyle, Craig said we could be seeing a “second enclosure movement,” akin to the push in 18th and 19th century Britain to take land that had formerly been held in common by members of a village and changing it to privately owned land.

“Now there’s not just a cyberspace to be conquered and claimed but a whole metaverse,” she said. “The future of this for-sale doctrine is really uncertain.”

On the human rights front, Choudhury said the metaverse could contribute to progress in advancing the right to education, the right to health and the right to freedom of expression. But it also poses potentially serious risks to other freedoms like the right to privacy, especially with its tendency towards “data collection on steroids.”

In the offline world, governments have an obligation to protect rights, she said. Not so in the corporate-controlled metaverse. Its expansion could eventually put pressure on companies to take on new responsibilities to protect human rights, she added.

“Unless we want the metaverse to continue to resemble the wild west,” said Choudhury, “we need states and corporations to step up to do their part to protect human rights.”

The task of taxation in the metaverse could be just as troublesome, said Ozai. For starters, the questions of who and what is being taxed, where (as in what jurisdiction) and how much to tax are more difficult to answer. “Tax systems today are designed for a bricks and mortar economy,” he said.

The complications are only compounded by the fact that there is not one metaverse, but different metaverses run by different companies. Ozai said one option would be to treat each metaverse as a “black box” and only tax economic activity when it’s reflected in the outside world. But that approach would risk perpetual deferral of taxation.

Li observed that while the existence of a virtual world, a tax world and a legal world are certainties, how to marry the three is anything but certain. “The multiverse could become a huge tax haven,” she added, “if governments can’t figure out who’s doing what.”

Still, she noted, similar fears accompanied the rise of e-commerce in the 1990s and, ultimately, they were unfounded.

In the age of megadata, concerns about privacy may be more warranted, said Penney. “To be a privacy lawyer today in the world of metaverses,” he joked, “is to feel the glass is empty, broken and I’m going to cut my hand.”

He pointed out that only 20 minutes spent playing a virtual reality game can generate two million data elements on the individual player. The rise of big data and the metaverse is part of a broader trend towards surveillance capitalism, he added. Huge tech firms, meanwhile, are attempting to evade regulation by arguing that their products are only games.

“But if we want to be serious about privacy,” said Penney, “we need to advocate for better privacy protections.”

Despite the potential problems, Dan Priel expressed optimism that traditional tort law could be the solution for many of the disputes that arise in the metaverse.

“Technology may change,” he said, “but there’s one thing that doesn’t change and that’s human nature.”

Participants in the metaverse are still liable to encounter potential torts like identify theft, fraud, passing off, defamation and even malpractice.

“You will have all this in the metaverse just as you do in the offline world,” he said. “But as long as it has real-world implications, then tort law will be able to adapt.”