On policy implications of the development of virtual worlds – civil, company, commercial and intellectual property law issues

MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

on policy implications of the development of virtual worlds – civil, company, commercial and intellectual property law issues

(2023/2062(INI))

– having regard to the Treaty on the Functioning of the European Union, and in particular Articles 4, 16, 26, 81, 114 and 118 thereof,

– having regard to the Berne Convention of 1886 for the Protection of Literary and Artistic Works,

– having regard to the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks, as both amended on 28 September 1979 and updated in its twelfth edition (12-2023),

– having regard to the World Intellectual Property Organization (WIPO) Copyright Treaty of 1996 and the WIPO Performances and Phonograms Treaty of 1996,

– having regard to Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the legal protection of databases,

– having regard to Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’),

– having regard to Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II),

– having regard to Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I),

– having regard to Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs,

– having regard to Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (Brussels I Regulation),

– having regard to Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC,

– having regard to Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure,

– having regard to Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC,

– having regard to Directive (EU) 2016/680 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free movement of such data,

– having regard to Directive (EU) 2016/2102 of the European Parliament and of the Council of 26 October 2016 on the accessibility of the websites and mobile applications of public sector bodies,

– having regard to Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union trade mark,

– having regard to Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the protection of natural persons with regard to the processing of personal data by the Union institutions, bodies, offices and agencies and on the free movement of such data, and repealing Regulation (EC) No 45/2001 and Decision No 1247/2002/EC,

– having regard to Regulation (EU) 2018/1807 of the European Parliament and of the Council of 14 November 2018 on a framework for the free flow of non-personal data in the European Union,

– having regard to Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC (Copyright Directive),

– having regard to Directive (EU) 2019/882 of the European Parliament and of the Council of 17 April 2019 on the accessibility requirements for products and services,

– having regard to Directive (EU) 2019/1024 of the European Parliament and of the Council of 20 June 2019 on open data and the re-use of public sector information,

– having regard to Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services,

– having regard to the proposal for a regulation of the European Parliament and of the Council laying down harmonised rules on artificial intelligence (Artificial Intelligence Act) and amending certain union legislative acts (COM(2021)0206),

– having regard to the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 910/2014 as regards establishing a framework for a European Digital Identity (COM(2021)0281),

– having regard to the proposal for a regulation of the European Parliament and of the Council on harmonised rules on fair access to and use of data (Data Act), (COM(2022)0068),

– having regard to the proposal for a directive of the European Parliament and of the Council on liability for defective products (COM(2022)0495),

– having regard to the proposal for a directive of the European Parliament and of the Council on adapting non-contractual civil liability rules to artificial intelligence (AI Liability Directive) (COM(2022)0496),

– having regard to Regulation (EU) 2022/868 of the European Parliament and of the Council of 30 May 2022 on European data governance and amending Regulation (EU) 2018/1724 (Data Governance Act),

– having regard to Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act),

– having regard to Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a single market for Digital Services and amending Directive 2000/31/EC (Digital Services Act),

– having regard to Regulation (EU) 2023/988 of the European Parliament and of the Council of 10 May 2023 on general product safety, amending Regulation (EU) No 1025/2012 of the European Parliament and of the Council and Directive (EU) 2020/1828 of the European Parliament and the Council, and repealing Directive 2001/95/EC of the European Parliament and of the Council and Council Directive 87/357/EEC,

– having regard to Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937,

– having regard to its Resolution of 20 October 2020 on Intellectual property rights for the development of artificial intelligence technologies (A9-0176/2020),

– having regard to Commission communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions entitled ‘Making the most of the EU’s innovative potential – An intellectual property action plan to support the EU’s recovery and resilience’ (COM(2020)0760),

– having regard to its Resolution of 11 November 2021 on an intellectual property action plan to support the EU’s recovery and resilience,

– having regard to the Commission communication of 11 July 2023 entitled ‘An EU initiative on Web 4.0 and virtual worlds: a head start in the next technological transition’,

– having regard to Rule 54 of its Rules of Procedure,

– having regard to the report of the Committee on Legal Affairs (A9-0000/2023),

A. whereas virtual worlds have not yet been widely taken up, although their deployment in a number of use cases in various sectors has raised general awareness and has attracted the attention of public authorities;

B. whereas, experts say it might still take 10 to 15 years for the metaverse to reach its full potential and its development is expected to significantly impact the digital landscape in future years, bringing both opportunities and risks that need to be addressed;

Definitions

1. Notes that the concepts of ‘metaverse’ and ‘virtual world’ currently lack consolidated definitions;

2. Welcomes in this regard the proposal included in the Commission communication for a definition focusing on the main features of virtual worlds, as follows: ‘virtual worlds are persistent, immersive environments, based on technologies including 3D and extended reality (XR), which make it possible to blend physical and digital worlds in real time, for a variety of purposes such as designing, making simulations, collaborating, learning, socialising, carrying out transactions or providing entertainment’;

3. Stresses the key importance of promoting standardisation and interoperability for the full development of the metaverse, as an ecosystem of interconnected virtual worlds;

An appropriate ethical and legal framework

4. Stresses that virtual worlds accessible in the EU should be guided by ethical values, principles and fundamental rights enshrined in the Charter of Fundamental Rights of the European Union and existing EU legislation;

5. Recalls that virtual worlds should be developed and deployed in line with the general principle that what is illegal offline should be illegal online, ensuring that people’s rights as users, consumers, workers, investors and creators are fully respected;

6. Highlights the importance of monitoring compliance and ensuring effective enforcement of the applicable legal instruments in force; calls on the Commission to develop guidelines and best practices, in cooperation with the various stakeholders, clarifying their legal obligations and responsibilities in the metaverse;

7. Underlines that it is paramount that the Commission conducts regular fitness checks of the applicable legal instruments in force and stresses that any future legislation on the metaverse should avoid overlaps or inconsistencies, while filling gaps where needed;

8. Notes that some regulatory issues are nonetheless already apparent in the fields of private international, civil and intellectual property law, as specified in the sections below;

9. Highlights that recent research has shown that VR sensor data is as uniquely identifiable as a fingerprint scan and can be used to infer a variety of attributes such as age, gender, income, ethnicity, and disability status; believes that this raises significant ethical concerns that should not be disregarded; stresses that part of addressing these ethical concerns around the collection of vast amounts of personal data, including biometric data, is to guarantee that consent for the collection of such data is not obtained only at the time of entry to the virtual world, but for each use case in line with the purpose limitation principle laid out by the GDPR;

10. Notes, in this regard, that the actions put forward by the Commission in its communication aimed at raising awareness, improving digital skills and increasing users’ access to key technologies are crucial;

Private international law

11. Stresses that certain traditional territorial principles on applicable law and jurisdiction might prove inadequate to virtual worlds, whose non-territoriality is enabled by the use of decentralised technologies such as blockchain, and give rise to problems when it comes to ensuring the applicability of EU law and the protection of the rights of consumers and businesses;

12. Notes more specifically that, since anyone anywhere in the world can access virtual worlds, the ‘mosaic criterion’ established by the Court of Justice of the European Union, by which the injured party may seek compensation in the courts of the countries where at least a part of the harm occurred, might not hold; recalls, however, that the Court established an additional criterion whereby injured parties can claim compensation through the courts of the country in which they have their main interest and affirms that the codification of this criterion into the Brussels I Regulation could be considered;

13. Observes that the definition of ‘consumer’ in the Brussels I Regulation is currently based on a direct contractual relationship, which is missing for instance between the issuer of a non-fungible token (NFT) and the purchaser when the NFT is put on a secondary market; notes that, consequently, in the event of a dispute with the issuer, the final purchaser would be deprived of the jurisdictional treatment that the Brussels I Regulation grants to consumers;

14. Calls on the Commission to take into account these and other potentially problematic situations and to assess the appropriateness of the existing provisions of private international law in the EU, proposing amendments, where necessary, to guarantee that citizens and businesses do not have to systematically litigate in foreign courts or under foreign laws;

Civil law

15. Notes that the number and economic relevance of commercial transactions within the metaverse is expected to increase over the next decade; stresses the need, in this context, to ensure that providers of virtual goods and services can be identified and held liable for any harm caused by their products;

16. Points out the concerns raised by the advertising techniques used when selling so-called virtual real estate, as users might be led to believe that they are actually acquiring property rights, when, in practice, they only obtain a licence to use the virtual ‘land’; emphasises the importance of ensuring that the applicable terms and conditions are transparent and fair;

17. Recalls that liability rules should fully apply to virtual worlds and underlines the importance of putting in place effective measures to prevent and address any form of harmful behaviour in the metaverse;

18. Is concerned that the use of avatars and decentralised systems, such as those built on blockchain technology, might make it extremely challenging to hold tortfeasors accountable; considers that the implementation of effective identity management systems is key in order to allow for their proper identification and to combat fake identities, also taking into account the specificities linked to the governance of decentralised autonomous organisations and to collective liability;

19. Recalls that avatars do not have legal personality so any issues regarding their legal capacity, rights, obligations and liabilities needs to be addressed with reference to the natural or legal persons using them; considers that, as the metaverse evolves and becomes more complex, consideration should be given to the appropriateness of granting a specific legal status to avatars;

Intellectual property law

20. Underlines that the body of EU law on the protection of intellectual and industrial property rights fully applies to virtual worlds; stresses nevertheless that the development of virtual worlds poses new challenges in terms of enforcement and identification of infringers;

21. Recalls that users in the metaverse are under the obligation to respect right holders’ exclusive prerogatives and their right to fair remuneration; highlights that the use of content protected by intellectual property rights (IPR) requires authorisation through licensing or assignment, unless it is covered by any exception or limitation to IPR protection; reiterates the importance in this regard of ensuring transparency as to the scope of licences so as to ensure that users are able to determine what uses of IPR-protected content in the metaverse are covered by the licences they hold;

22. Welcomes the update brought about by the twelfth edition of the ‘Nice classification’, which allows for the registration of trademarks in classes covering their use in the metaverse; is, however, concerned about the use of NFTs referencing trademarks without the authorisation of their owners and calls for effective measures to be implemented to detect and address these and other cases of infringement; welcomes in this regard the Commission proposal to develop a toolbox to fight counterfeiting;

23. Acknowledges the applicability of liability rules as laid down in the Digital Services Act and of the special regime established in Article 17 of the Copyright Directive to cover the uploading of user-generated content; believes, however, that further clarification is needed on how existing rules should apply;

24. Stresses that NFTs do not grant any IPR as such on the digital asset and signals the need for further transparency in order to avoid fraud and the frequent confusion between the right to the token itself and the right to the underlying protected content;

25. Recalls the difference between AI-assisted human creations and AI-generated creations; recalls that, while the current intellectual property framework remains applicable to AI-assisted creations, AI-generated creations create new regulatory challenges for intellectual property rights protection;

Accessibility and digital literacy

26. Emphasises that virtual worlds will provide opportunities for the provision of public services of general interest, to the wider benefit of citizens; underlines, however, that inclusion of and accessibility for all users in the EU must be ensured both in terms of cost and use of hardware and the understanding of software; notes that accessibility is particularly important when it comes to vulnerable population groups and should take into consideration aspects such as geographical location, gender, level of educational attainment and socio-economic background;

27. Adds, in this context, that digital literacy is of the utmost importance for ensuring a safe and socially beneficial uptake and informed use of virtual worlds and to promote democratic control;

28. Recommends that the ‘virtual worlds toolbox’ intended for the general public, as outlined in the Commission communication, be developed further, in line with the recommendations of the Citizens’ Panel in order to help citizens better understand how to manage their virtual identities, their virtual creations, their virtual assets and their data, and to contribute to a comprehensive EU strategy for virtual worlds that is both sustainable and human-centric;

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29. Instructs its President to forward this resolution to the Council and the Commission.

EXPLANATORY STATEMENT

With this draft report, the two Rapporteurs acknowledge the growing economic, social and even political importance of virtual worlds.

Given the early stage of their development, in light of the outcome of the work of the Citizens’ Panel on Virtual Worlds, and taking account of the Commission’s Communication of 11 July 2023 entitled ‘An EU initiative on Web 4.0 and virtual worlds: a head start in the next technological transition’, the Rapporteurs aim with this report to outline the main legal issues posed by virtual worlds.

This effort is meant both to indicate to the Commission the need to examine possible legal issues that are not addressed in its Communication and to serve as a basis for future work for the Parliament in the next legislature.

After welcoming the definition of ‘virtual worlds’ delineated by the Commission in its above mentioned Communication, the Rapporteurs assert the need for an ethical and legal framework for this new technology and analyse the most problematic aspects that fall within the competence of the Committee on Legal Affairs, namely in the areas of private international law, civil law and intellectual property law.

These issues, although scattered across different legal domains, present common features: the technologies underpinning virtual worlds, and in particular the decentralised nature of blockchain and of non-fungible tokens (NFTs), are either incongruous with some of the concepts and principles traditionally at the heart of the Union legal acquis, like the territoriality of the provisions on applicable law and jurisdiction, or severely hinder the enforcement of Union law, as is the case with the protection of intellectual property rights and the identification of infringers or tortfeasors.

The Rapporteurs, moreover, express concerns about the lack of transparency that characterises the marketing of NFTs and note that, for instance, the expression ‘virtual real estate’, sometimes used in this context, is susceptible to make consumers mistake the licence agreement they are concluding for the acquisition of an actual property right.

In order to ensure a safe and socially beneficial, inclusive and affordable uptake and informed use of virtual worlds and to promote democratic control, legislation alone is not sufficient. The Rapporteurs therefore conclude their reflections by recalling the importance that accessibility, public services and digital literacy play for a human-centric digital transition, in which every citizen can benefit from access to this new technology, no one is left behind and the values, principles and fundamental rights of this Union are upheld.