The Problems With Trying To Apply Real-World Laws In The Virtual Metaverse

// People are starting to talk about virtual worlds again, ever since Facebook’s Mark Zuckerberg brought up the term “metaverse” in late 2021. The most basic definition of a virtual world is an alternate reality where people can interact with others. Virtual worlds are usually accessed through their computer (or game console) and the internet.

One of the appeals of virtual worlds is that real-world laws generally do not apply there. Instead, users’ conduct are regulated by the Terms of Service (ToS) or the End User License Agreement (EULA), which they must agree to before they are allowed to enter the virtual world.

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As technology improves, virtual worlds will be more advanced and users will be able to interact with each other in more realistic ways, including commercial transactions. While this means that people can have more realistic interactions, some people can use the virtual world to harm others in real life. In these situations, if the ToS or EULA cannot address the dispute then users may choose to apply real-world law to virtual-world activities. But doing so might not always result in a fair outcome.

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So today, let’s look at some problems with applying real-world laws in virtual worlds in general. While all types of laws can apply, I will just focus on the basic laws taught at the first year of law school.

Property Rights. Generally, virtual-world platforms do not like to give actual property rights to their users because of the legal issues that can create. Instead, EULAs give users limited-use licenses to use in-world items. To illustrate, it’s like going to a game room with friends and paying the owner to borrow their Monopoly game. While you play, you get the coveted Park Place and Boardwalk spaces, build hotels on them and get a lot of play money if an unlucky player lands on those spaces. When you are done playing the game, you return everything to the owner. You do not take the hotel pieces and the money with you.

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Supposedly, there will be virtual worlds that will allow users to have property rights on items they create. But these rights will most likely be limited to intellectual property rights. In other words, the right to prevent others from copying them. So if a content creator can prove that another user copied their game images, they might have some remedies, such as deleting the copied items and getting the copycat banned.

Another problem may involve virtual real estate disputes with your virtual neighbors. Suppose you purchased a plot of virtual land and put in a three-bedroom house with a pool and a white-picket fence. But someone bought the virtual lot next to yours and built a 20-story building shaped like a male appendage. This phallic architectural design attracts virtual avatars of ill repute who themselves are wearing exaggerated body parts. The debauchery makes it impossible to enjoy your virtual safe space and will likely affect the value of the virtual real estate. Assuming you cannot simply block them, you might be stuck seeing genitalia on a nightly basis unless the virtual world has zoning rules.

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Contract Law. Generally, I don’t see a lot of changes in substantive contract law to fit virtual worlds. But there are some exceptions. For example, should the statute of frauds apply to virtual real estate transactions?

But one potential issue is choice of law when there is a contract dispute. For example, suppose two people are using a virtual world whose real-world headquarters is located in State C. User Abe lives in State A. User Bob lives in State B. Both Abe and Bob enter into a written contract involving their activities in the virtual world, and there is a breach. If there is a lawsuit, which state’s law would apply if there is a conflict of laws?

When there is a conflict of laws, a contract dispute is usually governed by either a forum-selection clause in the contract or the law of the place where the contract was performed (also known as lex loci). This might suggest that State C’s laws should apply since it is the most-neutral forum, and it is where the developers are located. But what if State C’s real-world laws are not compatible with the virtual world’s environment? Or what if applying State C’s law creates an anomalous result not intended by both parties?

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Enforcing a contract in a virtual world might prove difficult, even with a forum-selection clause. Contract disputes are likely to be resolved in mediation with a virtual-world legal expert.

Torts and Crimes. Anyone who has played an online role-playing game will tell you that there are times when committing torts and crimes are encouraged or even required.

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Without getting into graphic details, certain torts and crimes are impossible to commit in a virtual world unless the developers allow it. But that doesn’t prevent some people from acting like idiots or even dangerously.

In most cases, if someone causes trouble in a virtual world, they will most likely be warned, suspended or permanently banned. But could there be virtual-world activities that are harmful enough to warrant real-life civil or criminal penalties? Generally, if an incident in a virtual world results in real-life harm, there could be real-life legal consequences. For example, users can commit slander, libel, or even criminal conspiracy. It is possible that a user can commit intentional infliction of emotional distress simply by exposing another user’s real identity if that person took great lengths to keep it secret.

Generally, developers of virtual worlds do not want real-world laws being applied to their platforms. Mainly it is because they want to control their world in order to maximize revenue from users while allowing them to have an enjoyable experience. Users likely feel the same way because they don’t want to get a speeding ticket for driving 100 mph in their virtual Bugatti through a virtual school zone. Whether real-world laws could apply to a virtual world will depend on how it is set up. But generally, the more realistic a virtual world is, the more likely disputes will be resolved in a real-life court. But that doesn’t mean applying real-world law will solve virtual world problems.

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at [email protected]. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

Topics

Metaverse, Steven Chung, Tax Law, Technology, Virtual Reality