4.1.1. An overview of Second Life

Second Life is one of the first and most popular social-creative metaverses, developed and released by Linden Lab in June 2003 as a three-dimensional virtual gaming and social platform (Zack, Reference Zack2007, p. 225). Users of Second Life craft their avatars and other virtual objects, often by investing considerable time and financial resources, and exchanging virtual objects with other users for Second Life’s virtual currency, Linden dollars (Sheldon, Reference Sheldon2007, pp. 756–757; Lastowka, Reference Lastowka2008, p. 911). Unlike combat-collection MMORPGs, users do not have to follow any quests or storylines in the Second Life metaverse (Kribble, Reference Kribble2007, p. 13; Van der Graaf and Cobarr, Reference Van der Graaf, Cobarr, Koohang, Harman and Britz2008, p. 4). The laws of physics of the real world operate differently in Second Life; users can teleport to their destinations, fly effortlessly in the skies of the virtual world, and swim in the depths of the ocean without sinking or dying (Wang et al., Reference Wang, Su, Zhang, Xing, Liu, Luan and Shen2022, p. 3; Yemenici, Reference Yemenici2022, p. 78). In addition, the Linden Scripting Language and sophisticated content-creation tools allow users to rebuild the virtual environment by modifying the game script (Botterbusch and Talab, Reference Botterbusch and Talab2009, p. 9; Lessig, Reference Lessig2006, p. 108; Stoup, Reference Stoup2008, p. 317). The metaverse also allows users to upload their works, such as designs of clothing, accessories, or vehicles, to the game server.

Linden Lab has embraced the concept of the virtual economy in Second Life, acknowledging UGC as the primary and driving component of the business model (Suzor, Reference Suzor2010, p. 1857). In 2019, the UGC-based virtual economy of Second Life was estimated to be worth 567 million US dollars (Stephens, Reference Stephens2022, p. 8). To incentivise UGC and encourage creativity on the platform, Linden Lab has revised Second Life’s TOS multiple times, which now recognises that users retain “full intellectual property protection for the digital content they create, including characters, clothing, scripts, textures, objects, and designs.” While this allows users to licence and sell their original UGC without fear of a lawsuit in the metaverse, they cannot claim rights to Linden Lab’s own content (Karimov, Reference Karimov2021, p. 102). Furthermore, UGC is subject to multiple restrictions and compulsory licences on this platform.

4.1.2. Second Life’s user terms and conditions on user-generated content

There are two types of content on Second Life: Linden Content, which is created or acquired by Linden Lab and licensed to users as part of the service, and User Content, which is published, uploaded, or submitted by users, and referred to here as UGC (Linden Lab, 2017). Users retain their economic rights to UGC, which include the right to use, reproduce, distribute, offer for sale, sell, and license the UGC in the metaverse. In contrast, Section 2(3) of the TOS strips users of their moral rights to the User Content, including the right to integrity and attribution (Linden Lab, 2017). When the applicable copyright law prevents such waiver of moral rights, the TOS declares users’ moral rights as not enforceable (Linden Lab, 2017).

The question of users’ moral rights in the digital environment is neither novel nor unique to the metaverse scenario. Although moral rights represent and protect the valuable bond between an author and an original work (Rajan, Reference Rajan2011, p. 9), their importance has gradually diminished in the discourse surrounding copyright. In particular, moral rights have consistently been overlooked in policy discussions aimed at enhancing copyright protection in the digital era (Kheria, Reference Kheria2007, p. 4). It has primarily been the economic interests of copyright holders—mostly publishers and record labels—that have dominated the copyright discourse (Kheria, Reference Kheria2007, p. 4). This is evident in the negotiations and drafting phases of the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, and the EU Directive 2001/29/EC on Copyright and Related Rights in the Information Society, where the initial attempts to provide stronger protection for moral rights ultimately proved unsuccessful (Rajan, Reference Rajan2011, pp. 261–262). Consequently, digital platforms have been assertive in terms of waiving authors’ moral rights or rendering them non-enforceable through UTCs on a contractual basis. The weakened protection of moral rights has effectively transformed copyright into “an author’s right without an author” (un droit d’auteur sans auteur).Footnote ²

The traditional rationale for the waiver or limitation of moral rights has been their potential to disrupt the interactive nature of the digital environment through the over-enforcement of moral rights by copyright holders (Lehman and Brown, Reference Lehman and Brown1995, pp. 146–147; European Commission, 1995, p. 67; for further discussion on this matter, see also Kheria, Reference Kheria2007, p. 5). In this understanding of the digital environment, it is presumed that any given work will inevitably undergo significant alterations or modifications upon digitisation (European Commission, 1996, p. 27). This means that the digitisation of the original works often results in the loss of the quality of their digital copies, particularly in the case of musical and audio-visual works (Synodinou, Reference Synodinou, Thouvenin, Peukert, Jaeger and Geiger2024, p. 179). Furthermore, it is commonly assumed that the service flow provided by digital platforms could be jeopardised by the rigorous enforcement of moral rights by authors, which could impede the interactive experience offered by digital platforms (Synodinou, Reference Synodinou, Thouvenin, Peukert, Jaeger and Geiger2024, p. 179). It is important to emphasise that the rationale behind the waiver or weaker application of moral rights on digital platforms is based on presumptions that lack substantial empirical evidence.

As observed in Second Life, this pervasive approach to moral rights has been transplanted into the metaverse context through UTCs, which is the conventional method. The same approach to moral rights can be expected from other current and future metaverse developers. Nevertheless, even if the justifications provided by existing digital platforms to limit or waive moral rights were supported by concrete empirical evidence, waiving or rendering moral rights non-enforceable in the metaverse is a rather simplistic approach that neglects the distinctive characteristics of the platform provided by the metaverse. It also underestimates the capabilities of the underlying technology. In other words, the argument that an author’s literary and artistic works are susceptible to frequent distortion in the interactive digital environment may not be universally applicable to the metaverse. For example, according to Section 2(3) of Linden Lab’s TOS, users agree to waive their moral rights even if the UGC is altered or changed in a manner that is not agreeable to the user (Linden Lab, 2017). This stipulation should not presume such an alteration of UGC, let alone use this presumption as a rationale for the waiver of moral rights. The metaverse affords the author/user the ability to not only upload their UGC to the server but also to utilise the built-in content generation tools to create UGC within the metaverse. It is crucial to examine the vulnerability of the UGC made in the metaverse to infringements of the rights to integrity and attribution before waiving users’ moral rights.

The UGC created using the built-in tools of the virtual environment, such as three-dimensional digital geometric shapes, can be expected to exhibit greater resistance to the distortion inherent in the digital interactive environment. As these works have been produced within the metaverse, they would not be subject to the same quality degradation that typically results from the transformation of other works into a digital format. Such transformations into three-dimensional formats would not lead to substantial alterations in public perception either. The works created with the built-in tools of the metaverse and published on virtual land or estates will be perceived by the public in the manner in which they were created. The perception of avatars regarding the digital works created within the metaverse is analogous to the perception of real humans towards real-world paintings or musical compositions. Furthermore, the public in the metaverse consists of avatars controlled by real humans who are acquainted with the visual format of the metaverse and the potential digital forms that the UGC can assume within this digital environment. The creator of the original UGC in the metaverse is also cognisant of the potential alterations arising from the interactive nature of the metaverse.

Although the metaverse has the potential to alter the original works created outside of it and uploaded to its server (Synodinou, Reference Synodinou, Thouvenin, Peukert, Jaeger and Geiger2024, p. 182), this is much less likely for works created within the metaverse. It is therefore necessary to differentiate between these categories of UGC in the metaverse, according to their vulnerability to distortion and alteration of public perception. The metaverse is different from other digital platforms. The waiver or non-enforcement of moral rights to users’ original works in the metaverse through UTCs should not be allowed without careful deliberation. The consideration of the differences between the characteristics of different technologies operating digital platforms is crucial. An author’s moral rights should be upheld when they are much less likely to be infringed upon within the normal operation of the platform.

The limitations imposed by Second Life on users’ copyright to UGC extend beyond moral rights. Sections 1(2) and 1(3) of the TOS highlight the non-proprietary and non-returnable nature of UGC, particularly in the event of service interruption, termination, or account closure (Linden Lab, 2017). The circumstances surrounding service interruptions or terminations may be deemed to be beyond the control of the developer and thus may be regarded as occurring in accordance with the principles of force majeure. However, the decision to close user accounts remains at the discretion of the metaverse developer. As stated in Section 5(1) of the TOS, the decision to terminate the service or close user accounts rests solely with Linden Lab (Linden Lab, 2017). In addition, Linden Lab reserves the right to delete or modify the data of the service without prior notice or liability (Linden Lab, 2017). According to Section 1(5), “Linden Lab owns the bits and bytes of electronic data stored on its Servers, and accordingly will not be liable for any deletion, corruption or data loss that occurs in connection with the Service” (Linden Lab, 2017). It should be noted that this kind of service interruption, termination, or account closure has direct implications for UGC. In Section 5(5), users are duly informed that upon the termination of their account, they can no longer access their account or any content or data stored on the servers (Linden Lab, 2017).

The TOS permit the developer to permanently delete UGC from the server without prior notice or assumption of liability. Users are not necessarily informed of these actions or provided with any recourse or remedies for the loss of their UGC. The excessive control exerted by the metaverse developer over the data of the service and its destiny may disrupt users’ access to their UGC, thereby depriving them of the ability to exercise economic and moral rights, both within and beyond the metaverse. In light of the proprietary character of UGC as a copyright-protected work, the consequences of its permanent deletion seem more severe than the expropriation of private property for the public interest, due to the lack of compensation or remedies. Furthermore, the endorsement of such a deprivation of users’ creative labour through UTCs is contrary to the fundamental objectives of copyright law. The foundation of copyright law is the principle of the author’s uninterrupted access to their creations, which is safeguarded by moral rights that are typically regarded as non-transferable. In addition to the unilateral abrogation of moral rights through the use of contractual clauses, the metaverse developer appears to prevent the author/user from benefitting from economic rights without any remedies or liability. In doing so, the relevant clauses of the UTCs contradict the utilitarian policy objectives that shape copyright law, which aim to ensure that the author can reap the benefits of their works (Peukert and Windisch, Reference Peukert and Windisch2023). Despite economic rights remaining available to users under UTCs, the potential for termination of the user account or suspension of service at any time for any reason introduces an element of uncertainty surrounding the user’s copyright. As a result, the economic rights of metaverse users are precariously suspended by UTCs.

As stated in the previous paragraph, the TOS of Second Life do not provide any remedies for such a “risk of participating in the Service” (Linden Lab, 2017) incurred by users. Meanwhile, users continue to contribute to the growth of the metaverse by creating UGC and uploading it to the metaverse. In this context, the implications of the termination of a user account in the metaverse on UGC can be compared to the consequences of the termination of an author’s copyright in the traditional sense, such as in the case of the author’s death. In the real world, an author’s death does not necessarily result in the complete eradication of their work or its placement in the public domain. Quite the contrary, the purpose of copyright is to ensure the continued enforceability of an author’s work by their heirs for a fixed period following the author’s death. Whereas the termination of a user account may result in the permanent loss of UGC, which could previously only be used within the metaverse. While the termination of a user account does not directly result in any immediate consequences concerning the copyright of the UGC in question, it nevertheless renders the exercise of any economic or moral rights impossible.

A closer examination of these issues reveals a conflict between the copyright of metaverse users to their original UGC and the proprietary claims of developers to the entire service and its components, which are stored as data on a designated server (Caramore, Reference Caramore2008, p. 2; Reuvine, Reference Reuvine2007, p. 286; Slaughter, Reference Slaughter2008). The metaverse developer asserts ownership over “the bits and bytes of electronic data stored on its Servers” (Linden Lab, 2017), which does not treat the UGC uploaded by users to the server differently. This treatment is based on the presumption that, as a metaverse developer offers users the ability to create UGC, which consequently becomes part of the electronic data stored on the server, the ownership of data by the developer applies to UGC. In this logic, without the service provided by the developer, users would be unable to create the UGC in the first place.

In addition to the argument regarding data ownership, Linden Lab, as the developer of this metaverse, aims to retain the freedom to update or terminate it without infringing on users’ proprietary rights (Caramore, Reference Caramore2008, p. 6; Slaughter, Reference Slaughter2008). This possessive approach to the components of the metaverse could be justified by the dependency of the metaverse’s existence on objective factors and circumstances beyond the developer’s control. These include the viability of the developer’s business, unexpected technical issues, and user behaviour. On the other hand, the limitation of the developer’s liability in the event of service interruptions or account termination, which is analogous to the waiver of moral rights, appears to be an expedient solution that fails to consider users’ control over their copyright. In contravention of the objectives of copyright law, developers exploit the freedom of contract afforded to them by virtue of their superior bargaining position, effectively assimilating users’ copyright-protected UGC within their proprietary electronic data. UTCs have historically served as the primary instrument for e-commerce, social media, and music streaming platforms to exercise their significant bargaining power (Alpa, Reference Alpa2024, p. 3). Previous studies have argued that as the bargaining power of digital platforms increases, the rights of users who contribute their UGC to these platforms to receive fair remuneration decrease (Iaia, Reference Iaia2021, pp. 174–175). In the context of the metaverse, UGC is particularly vulnerable to infringements and is therefore subject to additional uncertainty regarding the enforceability of copyright in the event of service interruption, termination, or account closure. The asymmetries in bargaining power between users and metaverse developers, coupled with the ambiguities in the developers’ liability regime, serve to increase the value gap between these two groups of actors (Iaia, Reference Iaia2021, p. 175; Oprysk, Reference Oprysk2021, p. 943). This, in turn, raises questions as to the extent to which creative users will be able to exploit their works in the metaverse and receive fair remuneration.

The metaverse developer may be compelled to terminate the service or user account, which could result in the deletion of UGC. However, in such cases, it is important to achieve a balance between the interests of the developer and those of the users. Following the temporary suspension or termination of the service or user account, the metaverse developer can still demonstrate consideration for users’ valuable assets, including UGC, by providing prior notice and facilitating the secure removal of UGC. In the event of abrupt termination of the service or user account, which precludes the possibility of such rescue operations targeting UGC, the developer should provide the user with appropriate remedies. The remedies intended to compensate the user for the damage incurred as a result of the loss of UGC do not necessarily have to be monetary in nature. For example, in cases of temporary service termination, the developer should offer the user, who has suffered a loss of copyright-protected UGC, certain privileges within the metaverse and endeavour to restore and support the user’s business or creative works.

To gain a deeper insight into the implications of UTCs on users’ copyright, it is important to distinguish between the processes by which authors and users, respectively, obtain and exercise IP rights to their original works in the real world and the Second Life metaverse. In the real world, authors are typically granted a set of economic and moral rights to their literary and artistic works by virtue of their authorship (ipso facto). This occurs without the need for formal approval or registration from a central authority. Conversely, within the context of the Second Life metaverse, the extent to which users may exercise copyright over their UGC is contingent upon the specific clauses of UTCs. As illustrated in Figure 1, the UTCs of the Second Life metaverse function as a prism, refracting the economic and moral rights to UGC in distinct ways. The moral rights of attribution and integrity of UGC are not preserved following the “refraction of the rights” through UTCs. In addition, economic rights are subject to significant distortions as a result of the refraction process. For instance, they are vulnerable to non-enforceability as a result of the deletion of UGC from the metaverse following service termination or account closure at any time and for any reason. Additionally, as will be discussed in the following section, they are subject to various licences that are automatically granted not only to the metaverse developer but also to other users in accordance with the UTCs.

Figure 1. Copyright refraction in the real world and the Second Life metaverse.

4.1.3. Disproportionate licences targeting user-generated content

Second Life can be examined from the perspective of the licences granted for UGC. As anticipated, the UTCs recognise an array of rights exercised by Linden Lab over the content of their metaverse. In addition, the UTCs impose significant limitations on Linden Lab’s liability for IP violations perpetrated by third parties and for the termination of the service (Linden Lab, 2022; see also Lemley and Volokh, Reference Lemley and Volokh2018, p. 1116; Sites, Peele, and Fairfield, Reference Sites, Peele, Fairfield, Dannenberg, Mortinger, Christ, Scelsi and Alemi2010, p. 9). Most importantly, while Linden Lab and metaverse users cross-licence Linden Content and UGC to each other, the terms of these licences diverge considerably in their respective scope and content.

Under Section 2(2) of the TOS, Linden Lab grants users “a non-exclusive, non-transferable, non-sublicensable, limited, personal, revocable licence to use, reproduce, distribute, prepare derivative works of, display, and perform the Linden Content solely as permitted through the normal functionality of the Service and under these Terms” (Linden Lab, 2017). This is referred to as the Linden Content Licence. In contrast, the Service Content Licence, as granted by users to Linden Lab for the utilisation of their UGC in accordance with Section 2(3) of the TOS, has a considerably broader scope (Linden Lab, 2017). It is a cost-free licence that targets UGC and its derivative works, including those derivative works created by users themselves. It permits the use of UGC and its derivative works by Linden Lab for any purpose, including commercial gain (Linden Lab, 2017). The Linden Content Licence confers limited rights upon users for the use “solely as permitted through the normal functionality of the Service” (Linden Lab, 2017).

The Service Content Licence permits Linden Lab to exercise the full range of economic rights over the UGC uploaded to the metaverse. The licence is unconditional, irrevocable, and perpetual, effectively conferring upon Linden Lab the same rights as the owner of the UGC. However, the terms of the Linden Content Licence granted to users do not extend the same generosity to the utilisation of Linden Content. Furthermore, the stipulations of the Service Content Licence are deemed to be unfair, as the substantial role that UGC plays in the Second Life metaverse renders the commercial value of Linden Content contingent upon UGC. In Second Life, no Linden Content exists without UGC.

Nevertheless, to a certain extent, the extensive scope of the licence granted to Linden Lab over users’ UGC can be justified by the developer’s need to operate the metaverse. The normal operation of the metaverse entails the reproduction, modification, distribution, and public availability of UGC. In the digital era, copyright law has been continuously used to challenge the operation of user-generated intermediaries, such as YouTube and MySpace (O’Brien, Reference O’Brien, Fitzgerald, Gao, O’Brien and Shi2008, p. 233). This is due to the actions or omissions of such platforms during their normal operation, which may result in the infringement of the copyright of their users or third parties. In this regard, the advance licensing of UGC enables the operation of the metaverse without infringing the rights of the users to their UGC. However, it should be noted that Second Life also bestows analogous licences over UGC to other users of the metaverse. Under Section 2(4) of the TOS, the act of publication, uploading, or submission of UGC to a publicly accessible area constitutes a grant of a non-exclusive and cost-free User Content Licence to other users. Section 2(4) defines publicly accessible areas as “those areas that are accessible to other users of that aspect of the Service” (Linden Lab, 2017). This licence permits other users of the metaverse “to access the User Content through the Service, and to use, reproduce, distribute, prepare derivative works of, display, and perform the Content” (Linden Lab, 2017). Furthermore, other users are granted a non-exclusive and cost-free Snapshot and Machinima Content Licence, which encompasses the rights “to photograph, capture an image of, film, and record a video of the Content, and to use, reproduce, distribute, prepare derivative works of, display, and perform the resulting photograph, image, film, or video in any current or future media” (Linden Lab, 2017). Under Section 2(6) of the TOS, both licences remain in effect even after the removal of copies of UGC from account inventory (Linden Lab, 2017).

The User Content and Snapshot and Machinima Licences effectively reduce the number of users in the metaverse that the owner of UGC could otherwise exclude from using, reproducing, or distributing the content submitted to the publicly accessible area (Sheldon, Reference Sheldon2007, p. 763). These licences serve to diminish the extent of the legal monopoly that the owner of UGC could otherwise leverage by entering into paid licences. This is because users are usually prevented from removing their UGC from the metaverse and distributing and monetising it in the real world or on other digital platforms. Although the Service Content Licence granted to Linden Lab can be justified by the technical necessities associated with operating the metaverse, some of the rights contained in the licences granted to other users lack a similar justification. For example, the User Content Licence permits other users to engage in the performance and preparation of derivative works of UGC. It is reasonable to conclude that the normal exposure of other users to UGC in a publicly accessible area would not necessitate the preparation of derivative works of the UGC or its public performance. The preparation of derivative works of UGC is essentially related to the reuse of the copyright-protected UGC, which can be prevented by the strict enforcement of copyright (Peukert and Windisch, Reference Peukert and Windisch2023, p. 4). As the exploitation of these economic rights by other users is more likely to serve commercial purposes, the owner of the UGC may have benefited from such instances of reuse through licensing. Furthermore, the extensive licences granted to other users over UGC are also likely to serve the interests of the developer in enhancing the metaverse with added content. The bundle of rights granted to other users over UGC enables them to create new virtual objects and monetise them in the metaverse, thereby contributing to the virtual economy of Second Life. The reduction in copyright protection for UGC is intended to encourage follow-on innovation and creativity in the metaverse. Nevertheless, the increased overall creativity in the metaverse is achieved at the expense of the uncompensated creative labour of the owner of UGC.

The implications of placing UGC in a publicly accessible area of the metaverse differ significantly from those associated with the publication of works in a public space in the physical world. In the physical realm, the publication of a copyrighted work by an author or an authorised individual in a public area, such as a museum or social media platform, does not necessarily confer a non-exclusive and cost-free licence to other individuals. Furthermore, it can be argued that the scope of the User Content and Snapshot and Machinima Content Licences granted to other users as a result of the publication of UGC in a publicly accessible area surpasses the parameters of the doctrine of fair use. The rights are not licensed for a specific portion of UGC or for particular purposes that can be justified by the public interest. As illustrated in Figure 2, the metaverse possesses an idiosyncratic characteristic that is evidenced by the impact of UGC exposure in publicly accessible areas on its IP regime. This represents a critical aspect of the metaverse that is difficult to justify solely by technical necessities. Although copyright is not transferred to Linden Lab or other users through the publication of UGC in a publicly accessible area, the owner is still required to consent to the granting of a wide array of economic rights without the opportunity to negotiate the terms of these licences or to reap benefits.

Figure 2. Comparison between the status of the use of copyright-protected work published in the real world and in a publicly accessible area of Second Life.

In light of the aforementioned discussions, the owner of UGC has only two options to prevent the granting of disproportionate licences to other Second Life users. The first option is for the owner to refrain from publishing the content in any part of the metaverse. The second option is for the owner to publish the content in a restricted area, such as a virtual estate or island, while activating virtual land tools (VLTs). As stated in Section 1(4) of Linden Lab’s UTCs:

Of the two available options, the decision not to publish UGC in the metaverse may prove unfavourable for those users who seek to profit from the reuse of their UGC. Such users may then be inclined to publish their content in a restricted area. Second Life allows users who have purchased a virtual land area from the available grid to access VLTs. VLTs afford users the ability to control access to their privately owned land. The use of VLTs enables users to prohibit other users from entering the virtual private land, observing, taking snapshots of UGC exhibited thereon, or engaging in creative activities as a whole in the restricted area (Stoup, Reference Stoup2008, p. 316). The exclusive nature of virtual lands is reinforced by the fact that VLTs are only available to the owners of such lands.

The resulting access regime of copyright pertaining to UGC uploaded to a restricted area, reinforced by VLTs, resembles those in the real world. The use of VLTs serves to exclude other metaverse users from a bundle of economic rights that would otherwise be available under the terms of the User Content Licence. It is important to note, however, that even the stringent use of VLTs in a restricted area does not affect the perpetual and irrevocable Service Content Licence granted to Linden Lab. As illustrated in Figure 3, the impact of VLTs is limited to the licences granted to other users. Access to VLTs depends on the ownership of virtual land, real estate, or an island, which entails substantial financial commitment. It can, therefore, be surmised that Second Life’s UTCs are advantageous to users who can activate VLTs through investment in virtual real estate. This treatment is disadvantageous to other users, who must accept the “risk of participating in the service” (Linden Lab, 2017) and the consequences of publishing their UGC in a publicly accessible area.

Figure 3. Comparison between the status of the use of copyright-protected work published in the real world and in a restricted area of Second Life.

The critical examination of Linden Lab’s IP policies reveals the existence of an artificial layer between users and UGC. This structure disadvantages creative users who lack significant investment. The copyright ownership of users in the context of UGC in the metaverse is constrained and susceptible to potential disruption due to service interruptions and account termination. The economic rights to UGC are readily accessible to both developers and other users, without adequate compensation being paid to the owner of UGC. Those users who attempt to capitalise on their creative output in the digital market provided by the metaverse are effectively denied this opportunity due to such allocation of rights and licences. The broad licences granted by UTCs permit other users to enter the market freely, not only by copying and distributing UGC, but also by performing and preparing derivative works of UGC. The technological solutions, such as VLTs, that enable users to prevent other users from being granted the User Content Licence require investment in virtual lands. These circumstances of the metaverse, in terms of copyright ownership, are extremely disadvantageous for creative users and therefore require external regulation that targets the extent of power exercised by metaverse developers through UTCs.

In examining the implications of contractual clauses on the copyright ownership of users in the metaverse, it is important to acknowledge that users do not relinquish their fundamental constitutional rights and freedoms by participating in the metaverse, regardless of the extent to which the terms of UTCs may be limiting (Zack, Reference Zack2007, p. 253). The rights of users, in addition to any rights associated with their IP, remain enforceable on digital platforms, including the metaverse. The enforceability of contractual terms that restrict users’ proprietary rights over their intellectual creations may be subject to judicial scrutiny. It is nevertheless important that a statutory framework be established to reinforce the position of users in the metaverse. This issue can be addressed within the framework of consumer protection legislation or as part of a separate legislative initiative focused on addressing the challenges and concerns related to the metaverse. It would be a mistake to assume that digital platforms offering the metaverse experience are no different from existing social media, music, and video streaming platforms. It is also important that a comprehensive overview of the technological capacity of the metaverse and the added layer placed by these platforms between users and their copyrights precede the establishment of those regulatory frameworks.

It is therefore recommended that states implement regulations enabling intervention in the UTCs of the metaverse in cases where users’ fundamental rights and freedoms, including those of proprietary rights to original designs and other creations, are restricted or rendered ineffective by contractual means. These regulations should be based on the principle that users retain their freedom to create in the metaverse and the right to uninterrupted access to the fruits of their creative labour. Such rights and freedoms should not be constrained by metaverse developers through UTCs unless there is sufficient justification based on the technical necessities of the platform (Sheldon, Reference Sheldon2007, pp. 786–787). With a focus on the emerging metaverse policies and regulations in East Asia, particularly in Japan, China, and South Korea, the following section emphasises the necessity for policymakers to address the regulation of user creativity in the metaverse. It also examines policymakers’ awareness in these selected countries regarding the pressing matters of the metaverse and user creativity.

4.2.1. Japan

In comparison to other countries in East Asia, Japan exhibits the most favourable statistics for the predicted market size and the user website traffic of existing MMORPGs (Ministry of Internal Affairs and Communications of Japan, 2023, pp. 14–15). This is accompanied by a notable level of awareness within Japanese society and the government regarding the concept, potential, and limitations of the metaverse (Ministry of Internal Affairs and Communications of Japan, 2023). Japanese companies, including Sony and Nintendo, have already established a presence in this emerging market by offering their own customised versions of the metaverse (Ministry of Internal Affairs and Communications of Japan, 2023). In order to enhance the awareness of the metaverse, the Japan Patent Office recently hosted the G7 Heads of IP Offices Conversation in the virtual space of the Itsukushima shrine in Hiroshima. The directors of the respective IP offices participated in the event via their customised avatars (Japan Patent Office, 2023).

Furthermore, in addition to the growing awareness of the potential of the metaverse for the entertainment industry, Japan has taken consistent steps towards preparing for the legal risks associated with the use of the metaverse. While no specific legislation currently exists in Japan that addresses the metaverse, the IP Promotion Plan has explicitly acknowledged the urgent need to address the issue of legal protection of design and other content in the metaverse (Japan Intellectual Property Strategy Headquarters, 2023). It has been emphasised that collaboration between the public and private sectors is a key factor in ensuring legal protection in the metaverse of the IP belonging to third parties (Japan Intellectual Property Strategy Headquarters, 2023, pp. 12–13). The objective of the IP Promotion Plan is to establish a creator-led content ecosystem on digital content distribution platforms, including the metaverse (Japan Intellectual Property Strategy Headquarters, 2023). Furthermore, it underlines the importance of compensating IP owners for infringements in the metaverse and recognises the advantages of co-creating new content with users from diverse cultural backgrounds (Japan Intellectual Property Strategy Headquarters, 2023, pp. 64–65). Despite the IP Promotion Plan successfully identifying some issues related to UGC in the metaverse, it does not propose concrete solutions beyond hinting at the possibility of copyright reform and suggestions of soft law measures. For example, it mentions the Act on Improving Transparency and Fairness of Digital Platforms, which obliges selected digital platform providers to disclose planned modifications to their UTCs to a central authority in advance. However, the IP Promotion Plan does not provide further clarification on the extent to which this legislation can be applied to metaverse platforms.

The collaboration among government bodies, legal experts, industry stakeholders, and academia in Japan has led to the establishment of a multi-stakeholder forum that discusses the IP-related implications of the metaverse. In November 2022, the Cabinet Office established the Public-Private Partnership Council on Dealing with New Legal Issues Concerning Content in the Metaverse (Ministry of Internal Affairs and Communications of Japan, 2023, p. 31). The council has, in turn, established a sub-committee to deal with the issue of the use of IP in the context of virtual and real spaces. The Public-Private Partnership Conference on the New Legal Issues Concerning Content in the Metaverse (PPC) has particularly addressed the status of UGC in the metaverse and acknowledged the limitations imposed by the UTCs on UGC (Public-Private Partnership Conference on the New Legal Issues Concerning Content in the Metaverse, 2023). Nevertheless, thus far, this discourse has not progressed beyond an exhortation for metaverse users to comply with the rules set forth in UTCs and to act in compliance with the granted copyright permissions for UGC (Public-Private Partnership Conference on the New Legal Issues Concerning Content in the Metaverse, 2023, pp. 22–23). The discussions held by the PPC have addressed the relationship between users and metaverse developers, with a focus on the allocation of IP rights through UTCs. The PPC has advised that developers ensure that users communicate the terms of use of their UGC to other users of the metaverse transparently and unambiguously (Public-Private Partnership Conference on the New Legal Issues Concerning Content in the Metaverse, 2023, p. 26). In addition, it has been strongly recommended that the owners of UGC in the metaverse determine the secondary use of their content on an individual basis and grant licences through an information system established for the management of rights (Public-Private Partnership Conference on the New Legal Issues Concerning Content in the Metaverse, 2023, p. 23).

The Ministry of Internal Affairs and Communications of Japan has published a policy paper that provides a comprehensive report on the metaverse (Ministry of Internal Affairs and Communications of Japan, 2023, p. 30). Although the report does not embrace the notion of users possessing ownership rights to virtual property, it acknowledges users’ entitlement to access and utilise the digital data of virtual property in accordance with UTCs (Ministry of Internal Affairs and Communications of Japan, 2023, p. 31). The report does not propose immediate measures to intervene in UTCs, as it intends to continue monitoring the evolution of case law concerning disputes between users and metaverse developers in Japan and abroad before formulating a definitive government policy. The current state of emerging policies in Japan acknowledges UTCs as the sole governing rule of the metaverse. This approach recognises the broad discretion granted to metaverse developers, who can shape the structure and internal rules of their platforms. Furthermore, it recommends that developers establish user-led rules in the metaverse (Ministry of Internal Affairs and Communications of Japan, 2023, pp. 36–37). However, these policy reports lack an in-depth examination of the metaverse, failing to fully comprehend the encroachment of users’ moral and economic rights over their UGC through the data ownership and licensing clauses in UTCs.

4.2.2. China

China has gained a reputation for its rigorous technological controls and legal frameworks governing the operation of the Internet and the expanding influence of major telecommunications firms. From the construction of the “Great Firewall” to the implementation of sanctions for non-compliant platform providers (Chen et al., Reference Chen, Richards, Thrower and Gillum2007–2008), China’s approach to the metaverse can be characterised as an extension of the same rule-based approach to cyberspace. This approach prioritises the prevention and punishment of criminal activities on virtual platforms, including online gambling and fraud (Abramovitch and Cummings, Reference Abramovitch and Cummings2007, p. 78).

Although on a relatively limited scale, the issue of IP in the metaverse has also been discussed in the context of extending current regulations to virtual worlds (Kalyvaki, Reference Kalyvaki2023, p. 88). From the outset of the development of virtual worlds, China has been receptive to the concept of user ownership of virtual property. In the case of Li Hong Chen v. Beijing Arctic Ice Technology Development Co., the Beijing Chaoyang District People’s Court recognised the commercial value embedded in virtual property, taking into account the money, time, and labour spent by the claimant on the virtual items (Xinhua, 2003; see also Fairfield, Reference Fairfield2005, p. 1084; Kayser, Reference Kayser2006, pp. 66–67; Roquilly, Reference Roquilly2011, p. 661; Chao, Reference Chao2010, p. 9; Glushko, Reference Glushko2007, pp. 518–519). The recognition of virtual property has gained momentum in China with attempts to regulate the metaverse at the municipal level, particularly in the municipalities of Shanghai and Beijing. The stance of the Chinese government was also influenced by this trend, which ultimately led to the establishment of the Metaverse Industry Committee (Ministry of Internal Affairs and Communications of Japan, 2023, p. 20). In addition, in March 2022, the National People’s Congress and the Chinese People’s Political Consultative Conference convened two political sessions in order to discuss and examine the opportunities and challenges offered by the metaverse (Katterbauer, Reference Katterbauer2023).

Despite the early recognition of the concept of virtual property, China has yet to implement comprehensive regulations targeted at the metaverse. Currently, there is no specific legislation dealing with the metaverse. The Three-Year Action Plan for Metaverse Industry Development is one of the most recent policy documents on the subject, which simply emphasises the need for enhanced IP protection in the metaverse (Ministry of Industry and Information Technology Office, 2023). The goal of the three-year plan is to develop the metaverse with structured IP protection that aligns with international standards (Interesse, Reference Interesse2023). In general, China aims to create a content-creation ecosystem and user-friendly IP protection in the metaverse by involving large enterprises, small innovative communities, and artists (Ministry of Industry and Information Technology Office, 2023). However, China’s attempts to regulate digital platforms mostly target the unintended use of algorithms by platform providers to the detriment of users (Katterbauer, Reference Katterbauer2023). The current state of regulation and policy overlooks the impact of UTCs on users’ copyright in the metaverse. The UTCs of metaverse developers deserve the same rigorous scrutiny as the algorithms used by these platform providers to manage user behaviour. Therefore, there is an imminent need for further legal measures to monitor and regulate the impact of UTCs on user creativity.

4.2.3. South Korea

South Korea has demonstrated a long-standing interest in the concept and potential of the metaverse. The country has gradually augmented investment in digital twin city projects, including the flagship project Metaverse Seoul, which is scheduled for release in 2026 (Stephens, Reference Stephens2022, p. 9). Furthermore, South Korea is a prominent global hub for metaverse-related technology, with significant technological contributions from Samsung Electronics and LG Electronics in the field of VR and AR technologies (Kyoung-mi, Reference Kyoung-mi2023). These contributions have also been reflected in the considerable number of patent applications for metaverse-related content, display, and other technologies (Kyoung-mi, Reference Kyoung-mi2023).

South Korea has previously faced criticism for the lack of regulations designed to safeguard and promote the domestic gaming industry (Jin and Chee, Reference Jin and Chee2008, p. 55). The critical observations have urged the government to prevent large corporations from monopolising proprietary rights to game products (Jin and Chee, Reference Jin and Chee2008, p. 55). This is because game developers have not recognised the ownership of virtual property by users, and, as a result, they have successfully refuted allegations of anti-competitive practices concerning the prohibition of user ownership of virtual property (Fairfield, Reference Fairfield2005, p. 1088). Notwithstanding this criticism concerning the failure to safeguard the interests of the domestic game industry, the amendments to Article 13 of the 2007 Game Industry Promotion Act have resulted in enhanced IP protection of game products, which has been beneficial to the interests of MMORPG developers. Article 14, while acknowledging the rights and interests of users in the gaming industry to a limited extent, such as in the prevention and rectification of damages incurred by users of gaming products, fails to address the IP rights of users over UGC (Fairfield, Reference Fairfield2005, p. 1088).

Similar to the lack of regulation on the recognition and enforcement of virtual property rights, the regulation of the metaverse in South Korea has primarily relied on existing norms of criminal law, which are used to prevent and punish criminal activities in the metaverse (Fairfield, Reference Fairfield2008, p. 430). It is nevertheless noteworthy that South Korea is currently the only country in East Asia to have developed a national strategy and ethical principles for the metaverse. The Metaverse New Business Leading Strategy promotes the ethical principles of equity, inclusion, and diversity for the metaverse and advocates for the establishment of self-regulatory standards in the metaverse to govern user behaviour (The Ministry of Science and ICT, 2022). Furthermore, the strategy has prompted the discussion of regulatory frameworks by indicating the formation of a pan-governmental consultative body based on self-regulation, minimum regulation, and pre-emptive regulation of users’ virtual property (The Ministry of Science and ICT, 2022). However, the current focus of metaverse regulation remains limited to users’ safety and privacy.