The intersection of NILS, NFTS, AI Creations, Big Data and Metaverse
“NILs, NFTs, AI creations, big data and the metaverse will inevitably intersect. Intellectual property law will be one traffic cop at this intersection that is crucial to directing the traffic.”
What is at the intersection of names, image-like rights (NIL), non-fungible tokens (NFT), artificial intelligence (AI) creations, big data, blockchain and the metaverse? Intellectual property rights, of course, because IP is connected to everything. New technology requires updating intellectual property laws and regulations to deal with these advances.
Digital computing is advancing at warp speed, including AI, big data, transformative multimedia platforms and social media platforms. Current laws and regulations are often outdated, among them privacy, but at the center of the intersection are intellectual property rights – copyright, patents, trade secrets, publicity rights, data rights and trademarks.
The technology and related legal issues are becoming more widespread, as evidenced by recent court decisions and guidance statements/requests for comments issued by the Copyright Office and the US Patent and Trademark Office (USPTO).
For example, Hermes International SA, a luxury handbag brand, won a lawsuit in federal district court against a digital artist behind the “MetaBirkin” NFTs. Hermes was awarded $133,000 in damages. The defendant, Rothschild, created and sold 100 MetaBirkin NFTs linked to digital images showing Hermes’ iconic Berkin bag, but covered in colorful, cartoonish fur instead of leather. Another cross is seen in Thaler v. Perlmutter, in which the US District Court for the District of Columbia ruled that AI cannot be the author nor the creator of an AI tool. In addition, i Thaler v. Vidal, The Federal Circuit ruled that AI cannot be listed as an inventor on a patent application.
Another point of intersection was demonstrated when, on March 16, 2023, the Copyright Office issued a policy statement to clarify the practice of examining and registering works containing material generated using AI technology. In summary, the Copyright Office said that while “it is well established that copyright can only protect material that is the product of human creativity” – that does not mean that technological tools cannot be part of the creative process. The above makes it clear that these problems are here to stay.
For definitions of terms in the article, please click here.
NILs, NFTs, AI, Big Data and Metaverse Intersection: Hypothetical
A highly recruited high school basketball star who plans to play Division 1 basketball for a top-ranked program develops their brand based on their nickname, Sky-Freeze.
Senior sportswear brand Sky-Freeze establishes a social media following by posting workouts and highlight reels. Sky-Freeze seeks NIL-based endorsements and creates limited edition NFTs from highlights illustrating signature moves, with game and training footage. Sky-Freeze establishes an avatar on a metaverse platform and seeks NIL-based agreements for the avatar on the metaverse platform. The avatar wears Sky-Freeze branded clothing in the metaverse and sells it to other avatars for cryptocurrency. The NFTs are also sold to those outside the metaverse. The sale is under a smart contract, and ownership is tracked on a blockchain ledger.
AI on the metaverse platform creates real basketball games where Sky-Freeze’s avatar competes against other avatars based on AI analyzing big data of video footage of actual games. The statistical performance of the avatars is analyzed using big data analytics to predict the avatar’s performance and every move on the pitch. These interactions generate a new set of highlights in the virtual world, which Sky-Freeze also seeks to exploit by using NIL deals on the metaverse platform for the avatar and NFTs for the metaverse-created AI-based highlight.
Sky-Freeze uses certain brands and styles of sneakers as you explore the hardwood. He wants his avatar in the metaverse to have the same style of sneaker with fanciful color combinations like dotted patterns, which do not exist for the real sneaker design, but otherwise generally look like a well-known brand sneaker. Some of the real-world video footage used to create an NFT also includes footage from a local media broadcast and contains images of other players as well as images of Sky-Freeze’s high school logo and that of the opponents’ school. You get a picture of this “not-so-serendipitous” intersection.
What are some legal issues?
- Right of publicity in the metaverse – does it apply to an avatar?
- If Sky-Freeze does not own real-world video footage, can Sky-Freeze exploit it as an NFT?
- Should you edit the brands and images of others?
Let’s examine some of these legal questions through the lens of a few technologies at the intersection and explore some predictive legal solutions.
Name, image and likeness (NIL)
Sky-Freeze can clearly exploit their NIL in the real world under the normal standards of the right of publication. Furthermore, it is clear that one should leverage their NIL through NFTs in the real world. When the NCAA removed restrictions on earning money from NILs, college and high school athletes signed lucrative NIL deals, which often included NFTs. Those who monetize NIL will inevitably spend NFTs of the captured content, in the real world and potentially in the metaverse. The popularity of buying NFTs has grown. The NBA and NFL establishing NFT platforms prove the growth. NIL collectives also create their own NFT communities for collecting funds for athletes.
Sky-Freeze posts on social media and free video sharing platforms to leverage NIL. Content includes daily activities and scripted training sessions of Sky-Freeze’s moves on hardwood. However, the posts may contain content from actual games, such as highlights. In either case, the practitioner must be careful not to include someone else’s NIL without prior written approval. Furthermore, the performer must be careful not to include branding, trademarks or copyrights of others in the content without prior written approval. For example, the media will often cover part or all of a high school basketball game. Now that high school athletes are taking advantage of their NILs, more comprehensive agreements and guidelines are needed between schools, athletes and the media. Can Sky-Freeze get a parent or friend to capture parts of a game and post the content without blurring the image to avoid showing other athletes who may also be taking advantage of their NILs or other people’s branding? Can an athlete repost video of their game if they did not record the video or have someone record the video? For example, an NFL player should not take a video clip from footage owned by a media outlet under contract with the NFL and sell the footage as an NFT to exploit the NIL without a written agreement. An athlete must not infringe the intellectual property rights of others.
It is only a matter of time before growth occurs in the metaverse as seen in the real world, especially as AI on a metaverse platform becomes more sophisticated. Who will own NIL and any related NFTs in the metaverse? Certainly, ownership of original metaverse content and NFTs derived therefrom should be determined by the terms and conditions governing a real person’s access to and operation in the metaverse. If access to the metaverse platform is fee-based; if the metaverse platform is simply a tool that allows an individual in the real world to create an avatar and operate and interact in the metaverse; and if all content generated in the metaverse is the result of a real person interacting through a user interface to navigate the metaverse; then the real world should not have to give up any rights to NILs and/or NFTs derived from metaverse content of metaverse interactions. However, one must not violate the intellectual property rights of others in the metaverse. It is clear that the exploitation of NIL in the metaverse not only intersects with the metaverse platform, but potentially intersects the associated AI, big data, big data analytics, NFTs and blockchain, and at this intersection is intellectual property rights.
If the AI on the metaverse platform generates much of the digital content, without the need for significant user interaction, the terms and conditions may lean towards the owners of the metaverse platform and associated AI having more rights in the NILs and NFTs from the metaverse content. However, such a right should be granted through an agreement. For example, if a video animation is made of Michael Jordan that is clearly intended to represent Michael Jordan, such video animation should not be made without Michael Jordan’s permission, and ownership of any NFTs derived from the video animation should be by agreement. The same should apply to the metaverse. NFTs in the metaverse are akin to a product or commodity in the trademark sense.
Non-fungible tokens (NFTs)
NFTs can be owned and sold as the digital file itself, the secure token or the right to present the digital file as perceptible in some way – visual, audible, tactile, gustatory or olfactory. The owner of the original content from which the NFT originates typically retains all intellectual property rights and may restrict how the NFT can be perceived or shared by a buyer, but the owner likely allows a buyer to resell the NFT.
What if an NFT is created from a metaverse-based NBA highlight reel taken from two NBA star avatars competing in a metaverse-based NBA championship where the actual play-by-play interaction is controlled by AI that has analyzed reams of digital data from real-world footage of the two real individuals competing? NFT is unique to this AI generated metaverse based content. In this case, the NFT, while original to the metaverse, is based on the NIL of the basketball star, and thus still requires an agreement. By way of illustration, the NBA, through its contracted media outlets, has the ability to broadcast and rebroadcast entire games, portions of games and highlights. However, the media revenue generated is shared by agreement with the team and transferred to the players via contract. A similar structure may exist for the metaverse.
Therefore, Sky-Freeze seeking to exploit NIL by using NFTs should not use content in their NFTs unless they own the content or have a written agreement to use the content. Ideally, they should use content that they have captured or commissioned to capture on their behalf. This includes those seeking to exploit NIL in the metaverse by also using NFTs whose content originates from and resides in the metaverse. For example, they may have an avatar on a metaverse platform, where the avatar clearly resembles the real-life basketball star. Content originating from the avatar engaging and interacting in the metaverse can be captured for NFT content.
As mentioned above for the Hermes International SA lawsuit, the defendant in the case, Rothschild, created and sold 100 MetaBirkin NFTs that are linked to digital images showing Hermes’ iconic Berkin bag, but more fancifully. The jury determined that Hermes’ trademark/trade dress rights were infringed by MetaBirkins and do not fall under the exception of a work of art and free speech. Clearly, although different in appearance, NFT is leveraging the brand recognition of Berkin to financial advantage. A big brand should be able to maintain its brand in the real world and in the metaverse and benefit from the financial gain. Therefore, if Sky-Freeze uses branded shoes in a dotted pattern that does not exist in the real world, but looks like the real shoe, permission is required to wear the shoe.
Time to update IP laws
NILs, NFTs, AI creations, big data and the metaverse will inevitably intersect. The Act on Intellectual Property Rights will be one traffic officer at this intersection which is crucial for managing traffic. Each of these technologies will affect the real and virtual worlds. State and federal legislators and the legal community must revamp the laws to deal with these technologies, especially in the area of intellectual property rights.
Image source: Deposit images
Image ID: 108227056