Contemplating Intellectual Property Rights in the Metaverse: Statutory Change is Inevitable for AI Creations

In the first installment of this two-part series, we posed a question: What is at the intersection of name, image, likeness rights (NILs), non-fungible tokens (NFTs), artificial intelligence (AI) creations, big data, blockchain, and the metaverse? The answer is – intellectual property. Our hypothetical described a high school basketball star, Sky-Freeze, who sought to leverage their name, image, and likeness (NIL) on a metaverse platform, illustrating how a digital avatar, corresponding NFTs in the metaverse, AI, and big data intersect. This second installment explores how AI impacts the intersection, giving rise to legal issues concerning intellectual property rights.

To fully leverage their NIL in the metaverse, Sky-Freeze’s avatar must continue interacting even when Sky-Freeze is not logged into the metaverse platform. However, it is not practical for Sky-Freeze to log enough time to establish an avatar’s presence. To fill this gap, AI can control Sky-Freeze’s avatar activities consistent with their activities when logged in. Alternatively, Sky-Freeze could hire an agent to control avatar interactions, with the assistance of AI, similar to an agent managing social media.

The AI-generated avatar interactions are based on big data analysis of forms of real-world media content to formulate a digital representation of physical appearance, how the individual moves in space, and how the individual interacts. AI-generated metaverse animation can be packaged as an NFT. Further, the avatar persona could be leveraged as NIL.

In this illustration, the metaverse platform could be configured for subscribers only, charging others to interact, such as at an NBA virtual game, or charging non-stars to interact with the NBA stars. For example, an individual could pay more for a virtual home next to an NBA star’s avatar’s virtual home.

Who Owns AI-Created Content in the Metaverse?

This realistic hypothetical gives rise to various legal questions. For AI sophisticated enough to generate avatar content without interaction from Sky-Freeze, who should own the content?  Who should own the NIL rights, and who should own the data analytic-generated content and the NFTs stemming from this such as highlight reels? Who owns the copyright for the avatar, which is a caricature of Sky-Freeze? Does the AI own, the developer of the AI—the owner of the metaverse platform, or Sky-Freeze on whom the avatar and highlight reel is based?

Content based primarily on the NIL of Sky-Freeze requires some agreement with Sky-Freeze. One can certainly envision an NBA-sponsored platform for avatars of NBA stars, future, past and present.

Sky-Freeze should control the NIL of the avatar if it is clear that an AI-generated avatar is intended to represent Sky-Freeze. However, Sky-Freeze may have to relinquish portions of their rights in exchange for interacting on a platform. Imagine having an animated character that is clearly identified as Michael Jordan and generated by AI. Michael Jordan would clearly control and would have to grant rights to use his NIL. He would not likely own the copyright in the animation but may receive some royalty. Even if the avatar and the avatar’s interactions in the metaverse are created by AI, Sky-Freeze arguably should control NIL rights of the Sky-Freeze avatar.

Arguably, an AI-generated avatar of Sky-Freeze is copyrightable. If it is, who is the copyright owner? Can AI be the owner? Or does the AI developer or metaverse platform own the copyright?

First, the owner of the metaverse platform and the owner of the AI could not use an avatar of Sky-Freeze commercially without Sky-Freeze’s permission. Potentially, as a condition of Sky-Freeze’s ability to join the metaverse platform, Sky-Freeze has to pay a fee for the generation of an avatar. Or they may have to relinquish certain rights in the use of the avatar. Not to mention, permissions are required from the NBA or any other professional or collegiate sports leagues represented on the platform. One has to pay to play and/or potentially give up some rights. Therefore, shouldn’t Sky-Freeze, who pays fees, own all rights in the content or at least only relinquish such rights by way of contract?  Even without being fee-based, the metaverse platform owner and administrator should not be able to financially gain from the NIL of Sky-Freeze without Sky-Freeze’s approval.

Of Course There’s Copyright

With regard to whether a copyright exists if generative AI produces a work, my opinion is, absolutely a copyright exists. Reasonably, no one should argue whether artwork exists or that AI is the generator. The only questions should be, who is the author, and who owns the work?  One clear fact is, generative AI wouldn’t exist but for the AI developer, even in the case of AI creating next-generation AI. Also, the developer designed the AI to create (commissioned to create or made to invent).  Further, the consideration or value granted is the time and talent invested by the developer.  Therefore, AI creation should be considered the same as a work-for-hire. If the developer develops the AI to create creative works or invent, then it certainly looks and feels like a commissioning or hiring of the AI, whose payment is the investment to bring to fruition the AI’s existence. If not, the developer won’t receive a just return for their time and talent invested, nor is a just return received by a subsequent purchaser or user of the AI.

Thus, if any intellectual property right arises from creative works or inventive conceptions, then, in my opinion, the developer of the AI should own it, or the purchaser/user. This assumes that the content created by the AI is unique and new and is not substantially identical to content from which the AI has learned, nor does it embody the NIL of others. In my example, the metaverse platform and AI owner should own any content original to the metaverse as long as it doesn’t embody the NIL of Sky-Freeze, in which case permission is by way of agreement. My opinion is that AI-generated original metaverse content can be the subject of copyright.

Courts and Copyright Office Need to Catch Up

This opinion is contrary to the U.S. district court decision in Thaler v. Perlmutter, which decided that AI can’t be an author or an AI developer.

Thaler sued the Copyright Office for refusing to grant copyright for a computer-generated image. Question – do the copyright statutes allow for non-human authorship? Thaler also appealed at the Federal Circuit asking for a reversal of a finding that AI can’t be listed as an inventor on a patent application. The U.S. Patent and Trademark Office (USPTO) argued that only a human being can be an inventor. This may seem like a practical decision by the court, but as AI becomes more sophisticated, these recent decisions won’t make sense.

More recently, the Copyright Office reviewed a registration for a work containing human-authored elements combined with AI-generated images. It concluded that a graphic novel, See U.S. Copyright Office, Cancellation Decision re: Zarya of the Dawn, comprising human-authored text combined with images generated by AI constituted a copyrightable work, but the images themselves could not be copyrighted.

The Copyright Office on March 16, 2023, issued a policy indicating that while “it is well-established that copyright can protect only material that is the product of human creativity”— AI, therefore, can’t be considered an author—that “does not mean that technological tools cannot be part of the creative process.”

The Work-for-Hire Analogy

Consider an aspiring painter studying famous artists and ultimately developing their own style. No one would suggest the artist could not copyright their artwork even if often mistaken for the work of one of the famous artists. If a party commissions this artist to paint under a work-for-hire agreement, no one would suggest this artist can’t be the author, or that no copyright exists, or it can’t be a work-for-hire, or that the party can’t own the copyright even if the painting is mistakenly thought to be by a famous artist. The same applies to a young author who is struggling with writer’s block leveraging AI to develop ideas and AI-generated paragraphs.

Imagine if AI analyzes the “Game Of Thrones” series and creates a complete screenplay for another season. Should there be no copyright in such a work – keeping in mind that the author had not actually written the final book when the final screenplay was written? This is not to say the original author should not receive compensation by way of an agreement, but to suggest that no copyright exists borders on the ridiculous.

AI is similar to the young artist in that the AI examines prior works and develops a style through learning functions and arguably creates a piece of art that is no less creative than that of the young artist. Why wouldn’t the AI developer be in the same position as the party who commissioned a painting or in the same position as an employer who hires an employee to invent? The only viable argument is that an author or an inventor has to be human. However, the statutes on which the court decisions are based didn’t have sophisticated AI in view. I assert, as in the past, those statutes will be revised.

Consider AI generating a virtual NBA championship using avatars representing current or previous basketball stars on an NBA metaverse platform. Consider a World Boxing Association platform producing an AI-generated championship boxing match between a Muhammad Ali-like avatar and a Mike Tyson-like avatar. What if an unauthorized third party records content and plays it back for profit?  Is there a copyright violation?  It would be ridiculous to conclude there isn’t and that there isn’t some agreement involving the NBA, Tyson, and Ali’s estate.

Similarly, a young electrical engineer hired to develop digital signal processing technology has a condition of their employment requiring assigning all rights to any inventions. No one would argue that the young electrical engineer who combined known items in a novel and non-obvious manner to solve a complex and unsolved problem, therefore having utility, is not the inventor of patentable technology. Further, no one would argue that the company couldn’t own such technology by way of agreement. Why wouldn’t the AI developer or the purchaser of the AI be in the same position? Otherwise, AI development will slow, and truly inventive conceptions and creative works will be donated to the public domain.

Open Questions and Intersections

Generative AI technologies rely on the ability to mine and analyze huge volumes of data to learn from prior events, perform learning, regression, probability, and predictive functions based on past patterns, and assess new inputs in real time, thereby simulating intelligence or performing reasoning functions that perceive information. Legal questions that always arise with big data and big data analytics include:

• who owns the raw data as collected;
• does the collector or aggregator of the data have the right to do so, or is it a violation of privacy; and
• who owns the data analytic output, whether the data is representative of real-world activities or metaverse activities?

Generative AI will generate a new set of highlight reels unique to the metaverse, which are leveraged using NIL agreements unique to the metaverse.

Arguably the AI/metaverse platform owner owns the raw output from the analytic, but if that output is utilized to personify an avatar, such personification can violate the NIL rights of the individual if it is clear the personification represents the individual player. Who owns the digital media generated and collected in the metaverse as made by the avatars’ interactions in the metaverse?  This will likely be controlled by the agreement negotiated with the metaverse platform that allows the individual to interact in the metaverse environment.

Jurisdiction is also a question. Intellectual property enforcement and jurisdiction should be handled in the metaverse as it is in the real world. That said, in the near term, the forced cessation of any infringement of an intellectual property right in the metaverse will require jurisdiction over owner/administrator of the metaverse platform and will require any court or governing body to have jurisdiction over the owner/administrator to ensure enforcement or cessation occurs – similar to any online internet activity.

It is clear that AI impacts the intersection, and that intellectual property is in the midst.

Image Source: Deposit Photos
Image ID: 632825038
Copyright: [email protected]
Author