London Brands Seminar: NFTs and the Metaverse

On 16 November 2022, partners Joel Smith and Sahira Khwaja and other members of our London brands team, hosted a client seminar on the ‘Metaverse’, including a lively panel discussion with Nicola Wood, Chartered Trade Mark Attorney from Group Legal at Vodafone and Simon Baggs, President of Brand and Content Protection at Corsearch, together with Oliver Wilson, Counsel in our Commercial and Regulatory team at Hogan Lovells. The seminar included sessions on: key commercial issues to consider when structuring deals for the Metaverse or NFTs, filing strategies for protecting your brand in the Metaverse and IP enforcement in a virtual world. In this article we summarize some of the key points that our clients took away from the evening.
Commercial issues when structuring deals in the MetaverseAfter a brief introduction to non-fungible tokens (NFTs) and the Metaverse, including an explanation of the various, multiple metaverses which currently exist (referred to collectively as the ‘Metaverse’), Joel Smith, together with associate Andrea Constantine, discussed what to consider when structuring deals in the Metaverse, such as the sale of an NFT. Joel said that managing and allocating risk in contracts is critical to setting up virtual stores, offering digital assets and opening new platforms in the Metaverse. Andrea emphasised that, in order to avoid disputes, it is important to be precise about what you are (or are not) selling, setting up or offering access to, in terms of the digital asset, the virtual store or the metaverse platform (the “Virtual Offering”). Whilst many businesses, particularly luxury brands, are keen to make a foray into the Metaverse, these are some of the questions which brand owners should be considering first:

• Do you have any contractual rights or restrictions, or do your historic contracts need updating to support your move into a Virtual Offering?
  
• Do you have the right to create the Virtual Offering in terms of use of the brand, content or technology?
  
• What rights are you giving the purchaser/user of the Virtual Offering in terms of exclusivity, the underlying IP rights and the ability to trade unfettered (with or without a share of resale proceeds)?
  
• Consider your legal exposure (and extent of your own responsibility/liability) for the Virtual Offering and how you might mitigate, limit or exclude such liability?
  
• How much control do you have to remove or disable access to the Virtual Offering (in terms of burning a NFT, making a digital asset non-accessible or takedown, suspension or termination of user access to the Virtual Offering, or monitoring, removal or editing of non-compliant content)?
  
• Consider the wider financial regulatory, tax, online harm, advertising regulatory, data security and ESG implications of the Virtual Offering, including the jurisdictional impact of borderless access.
  
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