[New Wave] The 'Intellectual Property Economy' Created by the Metaverse

With 240 million global members and over 1.5 million active creators, South Korea’s virtual world “Zepeto” features top creator Renji who earns 15 million KRW per month by designing avatar outfits. In the U.S. leading metaverse “Roblox,” Gucci sold a limited-edition digital-only handbag for $4,115. “Decentraland,” where users generate revenue through investing in and developing virtual land, has about 90,000 land parcels, with prices rising from an average of $780 in 2019 to $2,700 this year.

Some argue that the metaverse is not much different from traditional games, but the fundamental reason people are enthusiastic about it differs. Unlike traditional games, metaverse users do not merely consume virtual world content; they start new lives as virtual residents, record their experiences, communicate, and build communities together. They also use creative tools provided by the virtual world platforms to design their own environments. Economic activities of creation, distribution, and consumption occur within the virtual space, made possible because users’ developments and creations are protected as “intellectual property.” For example, Zepeto grants all copyrights and other intellectual property rights of user-created content to the users according to its terms of service. One of the metaverse’s attractions is the existence of an “intellectual property economy” where free creation is possible and the results lead to economic activities. The MZ generation is familiar with digital environments, and the metaverse provides an environment where creation is easy according to one’s will. Although the metaverse economy is still in its early stages, it continues to grow.

Recently, luxury brands such as Louis Vuitton, Gucci, and Ralph Lauren have become popular in the metaverse. This is because users can purchase luxury clothes or bags, which would be unaffordable in the real world, for just a few thousand won and have their avatars wear identical items. However, if creators produce clothing, bags, or accessories bearing these famous trademarks without authorization and sell them, does this constitute trademark infringement in the real world? For trademark infringement to occur, identical or similar trademarks must be used on “designated goods” and “identical or similar goods.” The issue is whether digital clothing in the metaverse corresponds to identical or similar goods as real-world clothing. When registering a trademark, the classification of goods to be used must be specified; currently, clothing is classified under Class 25, but digital images fall under Class 9, so strictly speaking, they are different goods. However, even if unauthorized use of famous brands does not violate trademark law, it may constitute unauthorized use of others’ achievements and thus violate laws such as the Unfair Competition Prevention Act, requiring caution.

Services applying non-fungible tokens (NFTs) to metaverse transactions are increasing. NFTs can guarantee the uniqueness and originality of digital content. For this reason, limited-edition Nike sneakers have been traded for 100 million KRW per pair in secondary markets. NFTs are blockchain-based and record only the file’s location, its hash value, and owner information on the ledger; the content itself is not included. Therefore, NFTs function to prove ownership but do not legally guarantee ownership rights like property ownership. Under civil law, ownership is recognized only for tangible objects, raising the need for digital ownership rights for digital assets. Legislative solutions are necessary to promote digital asset transactions.

South Korea is the most enthusiastic and early public-discussing country regarding the metaverse. If Korea can proactively establish a “digital property rights” system necessary for the development of the metaverse intellectual property economy, it is believed that the country can act as a global metaverse hub and exercise a global metaverse initiative.

Seungwoo Son, President of the Korea Intellectual Property Research Institute