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Immersive, Connected, Decentralized: The Promise and Disruption of Web3

Law 1-Day Conference attendees: Scroll down for CLE materials

This presentation discussed various promises and challenges presented by the immersive experiences made possible by Web3 (like the metaverse), including privacy and data collection considerations, intellectual property ownership and licensing in light of the decentralized nature of blockchain technology, and advertising and regulatory developments (including dark patterns, loot boxes, cyber scams).

Words of Wisdom

"Your actions are advertising in the metaverse."
     — Robyn Mohr, senior counsel at Loeb & Loeb LLP

Key Takeaways

NFT, Blockchain, and Crypto 101

In today's technologically advanced world, the legal landscape is constantly changing to adapt. For instance, with NFTs cryptocurrency, and blockchain, the transfer of funds, creation of art/content, and ownership of these objects can become complicated.

The speakers explained and summarized the landscape as follows:

NFTs are a digital asset that represents real-world objects (like art) which are stored on the blockchain, and they are bought and sold online, often with cryptocurrency.

A blockchain is a distributed database of verified records shared among different parties on a peer-to-peer network and cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Examples of cryptocurrency are Bitcoin and Ethereum.

Because NFTs are stored on the blockchain, its chain of title for the NFT is public, making it traceable and trackable. This allows users to view the source of the NFT and authenticate the origin of the NFT. NFTs are sold on open or public marketplaces. Some NFT marketplaces are OpenSea, Rarible, Mintable, Foundation, Nifty Gateway and SuperRare.

Within the NFT is a smart contract, and it's important to note that it is not an actual legal contract. The contract has basic "if/then" functions. The smart contract will govern features of the NFT such as how future royalties are earned or what IP rights are included with the purchase of the NFT. To buy an NFT, a user must pay a gas fee for the computing energy and resources expended to validate transactions and to include them in the blockchain. These gas fees must be paid for minting or purchasing an NFT.

NFTs and IP Rights

Like when purchasing a book or a painting, when you purchase an NFT, you typically do not purchase the underlying intellectual property. It is analogous to the purchase of a bricks-and-mortar painting. For instance, if you purchase the actual painting of the Mona Lisa, you would only own the physical painting; Leonardo DaVinci would still own the copyright in the painting. This is the same for an NFT. Only the owner of the underlying rights (right of publicity, copyright, or trademark rights) can mint a non-infringing NFT.

When it comes to trademarks, some brands have decided that their existing trademark registrations already protect them, but others have filed new registrations. As of March 30, 2022, over 3,000 records in the U.S. Patent and Trademark Office database contain the word NFT.

Action Steps

Examples of NFTs:

Beeple's $69 million NFT: Christie's auction of Beeple's "Everydays: The First 5000 Days" was a collection of Beeple's project where a new piece of digital was created art every day. The NFT was a collage of Beeple's first 5,000 works that are part of the project. If you purchased the NFT, you also could zoom in on and display each individual piece of art. The bidding for this NFT opened at only $100. Then, within 10 minutes of bidding, the price shot up to more than $1 million, and eventually was won for $69 million.

NBA's Top Shots: The NBA sells famous basketball "Moments" as NFTs. Unlike most NFTs, NBA's Moments are not sold on the Ethereum blockchain. Instead, they are sold on the Flow blockchain, which was created by the NBA's partner, Dapper Labs. Unlike most NFTs sold in marketplaces such as OpenSea — where the purchaser must create a crypto wallet and purchase cryptocurrency to buy an NFT — anyone can purchase a pack of three Moments with a credit card for $9.00. Users can trade and display their Moments on the Top Shots website. One of the most expensive NBA Moments — a video of LeBron James copying a famous Kobe Bryant dunk — sold for over $387,000.

Advertising in Metaverse:

Virtual influencers are avatars that speak about their experiences within a game or metaverse experience. This can muddle what is or isn't seen as advertising, especially when it comes to children. Video games, such as Roblox, present this issue. There is often no real delineation between what's real and what isn't, and what's the game versus an ad.

To create more structure within this landscape, the game will now ban all advertising aimed at children under 13 with new guidelines.

In the metaverse, data gets "even bigger." Everything can be a data point, such as who a user interacts with; biometric information can be collected and be used for verification. However, at present, there are only state laws on biometric privacy, which only exist in a few states. Most of the time, preexisting laws need to be adapted. As the speakers stated, there aren't metaverse regulations or federal laws. Because of this, companies need to be aware of state laws.

CLE Materials


"Immersive, Connected, Decentralized: The Promise and Disruption of Web3." Melanie Howard, chair of intellectual property protection and chair of luxury brands and deputy chair at Loeb & Loeb LLP; Nerissa McGinn, partner at Loeb & Loeb LLP; Robyn Mohr, senior counsel at Loeb & Loeb LLP; Eyvonne Mallett, of counsel at Loeb & Loeb LLP. 2023 ANA Law 1-Day Conference, 4/26/23.

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