Introduction An overview of copyrights

An overview of copyrights, Metaverse, and NFTs reflects a rich history of intellectual

property concerns. Beginning in Greece in 500 BCE to today, one sees an evolution in the

intellectual property rights systemization, especially copyrights. This chapter begins with a

brief history of intellectual property rights focusing on copyrights, followed by illustration

of the relationship between copyrights, metaverse, and NFTs.

The concept of intellectual property is not a recent notion. It has a long history

though to be over several centuries old. An early example goes back to 500 BCE when

Sybaris granted citizens "a one-year patent for “any new refinement in luxury". An

interesting fact about the emerging IP right is that it was on the occasion of a recipe

whereby Greek chefs claimed rights over "particular culinary delights.". Then, other

countries started to follow the pattern in their laws “to foster creativity and to make it

possible for the inventor to reap the benefits of their ingenuity.” This trend has continued

until today.

It took several centuries before the concept of intellectual property was turned into a

formal legislation. The first intellectual property legislation was passed in England in 1623

and was named "the Statute of Monopolies". At this time, monopolies took the form of

“government-sanctioned guilds" where industrial guilds were granted “considerable power"

to determine producing and marketing innovations, “giving them ownership and control

over inventions even if they had nothing to do with their creation"7. The mentioned statute

was modified to attribute ownership to the creators, with fourteen years of exclusive rights

over their innovations. In 1710, the “Statute of Anne” was passed, renewing this period, and

granting authors “rights in the recreation and distribution of their work.". These pieces of

legislations are considered to be the first building block in the IP legal body in modern

countries. Nonetheless, there was no uniform system of IP protection because of the

variations in legal systems. Difficulties remained such as lack of international coordination

applying to patents in all countries simultaneously to avoid duplication and maintain

novelty.

The lack of international coordination was formally addressed over a century later. In

1883, intellectual property was globally systemized when the Paris Convention was

concluded. It dealt with the protection of innovation wherever it has been used. It was not

until then that international conventions had a broader scope of IP rights.12 The Berne

Convention of 1886 protected various forms of expression, such as writing, painting, and

vocalizing.The Madrid Agreement of 1891 gave great importance to the protection of

trademarks. Soon, a combination of the offices of the thrice Paris, Berne, and Madrid

agreements created the

"United International Bureaux for the Protection of Intellectual Property" which constituted

“the precursor of today's World Intellectual Property Organization, which is an office of the

United Nations"16. Followed by the agreement on Trade-Related Aspects of Intellectual

Property Rights (TRIPS)1995, intellectual property has become a global system that

overrides geographical restrictions.

Intellectual property rights are, generally, the legal protection of the outcome of

industrial, scientific, literary, and artistic activity. It can be defined as "non-physical

property that is the product of cognitive processes and whose value is based upon some idea

or collection of ideas.". The property right concerns “the control of physical manifestations

or expressions.". It is intended for the intellectual innovation, not the tangibles it embodies.

In this regard, legislation is made for two purposes: firstly, legitimizing fiscal and moral

rights of the innovators over their production and the audience’s rights to access these

innovations, and secondly, motivating innovation and spreading it in the society through

thoughtful methodology. Thus, IP laws grant innovators and creators exclusive rights or

monopolies over their intellectual work for a certain period.

A. Copyright and Intellectual Property Rights

It is important to understand where copyright fits in an intellectual property system. A

system of intellectual property rights protects at least three main categories: copyrights,

trademarks, and patents; it may also include the protection of trade secrets to prevent unfair

competition. For copyrights, the protection "extends to original works of authorship fixed in

any tangible medium of expression", such as “literary, musical, artistic, photographic, and

cinematographic works, maps, architectural works, and computer software”. Copyrights

grant their holders five exclusive rights: “the right to reproduce the work, the right to adapt

it or derive other works from it, the right to distribute copies of the work, the right to

display the work publicly, and the right to perform it publicly."21. The usage of these rights

undergoes time restrictions that vary from one IP system to another. Thus, a system of

copyrights is not meant to be lifelong applicable; it balances between the public and private

interests.

B. The notion of copyright

The notion of copyright has a wider concept than a mere definition of the same term.

promoting creativity, fairness, and public consumption. They assume that “neither the

creator of a new work of authorship nor the general public ought to be able to appropriate

all of the benefits that flow from the creation of a new, original work of authorship.". On the

one hand, creators and distributors lack the incentive for new creations if they “cannot gain

some benefit from their creations.". On the other hand, creators use raw materials such as

"ideas, language, building blocks, and expressive details". In their creative work, "[i]f [they]

were given control over every element and use of the works they created, there would be

little raw material left for later authors". Thus, “the copyright will protect the expression in

work from being copied without permission but will give no protection whatsoever to the

underlying ideas, facts, systems, procedures, methods of operation, principles, or

discoveries". In this regard, copyright legislation varies due to "a complicated legal bargain

that allocates the different benefits that flow from works of authorship to writers, to

publishers, and the public at large in a way intended to promote the progress of science and

useful arts". This applies to various means of expression, such as books, musical recordings,

and computer programs. A system of multiparty beneficiaries may expose copyright to

infringements. Other than mere copying, copyright systems encounter difficulties despite

the legislative developments of copyright laws. One problem is “the scale of copying and

the difficulty in targeting the individuals doing it. Most people must know what copyright

laws order and prohibit due to their complexity. Besides, the “dissonance with cultural

norms about sharing erodes copyright’s moral authority further, lowering its viability as a

property regime. Most importantly, in the digital domain, copying is intractable33. Moreover,

becomes complicated when the world turns from the real world to the virtual world. People

increasingly inhabit virtual worlds and spend time and money there. Consequently, players

who spend hundreds of hours creating their avatars in virtual worlds feel entitled to hold the

copyrights of virtual creations and belongings because of the combination of financial

incentives and social interaction.The traditional paradigm of the virtual world is multiplayer

online games. Notwithstanding, those worlds are so vast that they go beyond mere

entertainment; “people traveling to virtual spaces seek not only entertainment but also

social interaction, community, economic gain, and environments in which to explore

selfexpression.". As such, people could log off virtual spaces while their actions still exist.

Virtual worlds grow simultaneously and are “inextricably linked with the real world” ,

creating an environment for people to live and work, known as Metaverse. As such,

Metaverse is a virtual world that has features in common with our real world.

C. Copyrights in virtual space (Metaverse)

The notion of copyrights in the metaverse is one of the common issues between real and

virtual worlds in the legal domain. Metaverse first appeared in 1992 in Neal Stephenson's

novel ‘Snow Crash,’ as a new virtual world stimulating the real world. To enter the

Metaverse, one needs to "put on headphones and eyepieces, find the connection terminal,

and you can enter the virtual space simulated by the computer and parallel to the real world

in the form of a virtual avatar.". This perfectly describes the technology used to enter this

world: VR or virtual reality. Meanwhile, video games developed rapidly from role-playing,

such as Atari, to multiple playing, such as Microsoft’s Xbox. Some concluded that the

evolution of video games has resulted in the movement to virtual worlds. In 2021,

Zuckerberg revived the term Metaverse by announcing that Facebook had turned its name

into Meta. He “triggered a new round of revolution in the field of VR.", the XR

Alternatively, extended reality can be achieved by investing in XR projects.47 As mentioned,

the fusion of both the real world and the virtual world created the new world of the

Metaverse.

The term Metaverse is described as "a living space and a community." that “deepen

the degree of integration between what is online and offline.". It is a virtual space that “has

both online and real-world dimensions.". In another word, it is "the junction or nexus of our

physical and virtual worlds and 'the convergence of 1) virtually enhanced physical reality

and 2) physically persistent virtual space.". In this world, AR, VR, and the physical world

converge to “enhance our appreciation of the world around us.". It constitutes “the locus for

all forms of work, education, and entertainment experiences”53.

Sooner or later, the Metaverse becomes a technological utility and an investing

environment. Since people spend their time interacting there, they "would spend money

there, too, on outfits and objects for our digital avatars.", such as those in Roblox. Besides,

in Decentraland55, they build, explore, create, trade items, and even make new friends. The

importance of the uprising economic investment field appears in many ways. The virtual

spaces "provide a fascinating and unique laboratory for research on human society.". In

addition, virtual worlds will consist of “the foremost important forums for human

interaction,” which "may induce widespread changes in the organization of Earth society.".

Information analysis becomes crucial because the economy is also turning virtually. The

introduction of what is called "modern economic intelligence." as “part of the corporate

culture of modern business activities." relies on the information flow about those activities.

Hence, the lack of information here” reduces the chances of success in competition.".

Broadly, “[o]nce information is valuable, an overwhelming temptation arises to appropriate

that value, to turn it into cash.". Also, the virtual world has economic tools that assimilate

those of the real world: cryptocurrencies and methods of payments, such as electronic

payment systems.63. This is inextricably linked with proprietary multi-assets trading on

virtual platforms and the bloom of

NFTs.

D. Copyrights and NFTs

Unlike the metaverse, NFTs are more recent creatures in virtual spaces. It was not until

2017 that NFTs became renowned due to creating blurred images called Cryptopunks. Not

only can photos be transformed into NFTs, but they could also be paintings, music, videos,

scripts, animations, brands, and digital artwork. This opened the door of the NFTs market

for more conversion of works into them.65 Followed by Beeple’s Everydays: The First 5000

Days, NFTs bloomed after artwork sales reached over 22$ billion dollars.

Cryptopunks are “10,000 unique collectible characters with proof of ownership

stored on the Ethereum blockchain”. Each of them is a "unique digital collectible character."

whose photo “in the collection is a 24x24 pixel, 8-bit-style portrait with a unique set of

attributes and traits”.They could be sold or bought in marketplaces using blockchain.

Everyday: The First 5000 Days is an artwork created by Mike Winkelmann, known

as Beeple, recording every single day from May 1, 2007, to January 7, 2021, in one

collaged picture “of all the images that Beeple has been posting online daily since 2007.” It

was sold as an NFT in a digital auction for 3.5$ million. It is considered “one of the most

unique bodies of work to emerge in the history of digital art.” The concept of the photo

depends on the differences of basic abstract drawings to comment on the current events

between day one and day 5000.74

The increasing popularity of NFTs has also attracted well-known industries from all

over the world in various areas, such as sports, cinema, and fashion. Also, celebrities

created their NFTs, such as "Snoop Dogg, Paris Hilton, Post Malone, Tom Brady, and Rob

Gronkowski.". This, in turn, provides a fertile environment for intellectual property laws to

grow to cope with the rapid changes in this realm. However, applying current laws to NFTs

is not guaranteed sufficient to settle the disputes. Besides, the lack of legal precedents raises

the need to discuss the topic.

The bloom of the virtual world and its economics brings along the question of the

role of law in the Metaverse. Here, it requires exploring "where it intersects with reality in

meaningful ways.". The confluence between people and virtual environments would

necessarily raise legal issues concerning the applicability of current copyright laws to

upcoming disputes.

Broadly, the "legal implications of virtual worlds." revolves around the question of

"who owns which right?". They spotlight the role law "should have in virtual worlds",

especially concerning property and safety. In the Metaverse, virtual collectibles consist of

both personal and real property that constitute the NFTs. The natural evolution of NFT

trading is the rise of IP questions. The claims of IP issues such as patents, copyrights, and

trademarks are "for the courtroom"84.

Given that EULAs are "often ambiguous"86 not sufficient to protect parties in virtual

worlds; the success of virtual litigation depends on understanding the related legislation.

Besides, the analogy between the real world and the virtual world, in terms of property,

leads to a cross-border problem: "Virtual world possibilities seem attractive," yet "virtual

world limitations will be compared to instances where the real world is more attractive."

There is an obvious imbalance of powers between proprietors and participants in virtual

worlds in favor of the former. Nevertheless, the participants can resort to real-world laws in

response to virtual problems. Integrating both the real world and the virtual world forms the

upcoming development phase. Hence, many legal issues can be predicted at the current time

of the emerging Metaverse.

The legal debates on copyright and Metaverse spring from a broader debate over

artificial intelligence and copyrights. In this context, vaunting machine over humans as

creators is the most controversial issue. A distinction should be made between the work

created with machine help such as computer programs and the work created by AI. While

the former one acts as a tool in the creative process, and then, qualifies the work for

in the creator’s hands but the creator himself. This rises the question of whether creative

works produced by AI qualifies these works for copyright protection. If yes, who would be

considered the author of the copyrighted work. Moreover, to what extent the contributions

of the programmer and the users qualifies for authorship, and in particular, joint authorship.

The answer is not spontaneous yes or no. It may overturn the traditional conception of

authorship in copyright. Besides, the legal implications of the answer are not only

theoretical but also empirical. The way that law tackles the AI creativity necessarily affect

the other aspects of our lives, especially the economic and commercial ones. Considering

the available legal recourses, the courts address this issue caseby-case deciding on the

authorship of certain works or infringement of copyrighted works. The unprecedented

development in AI tools foretells that the upcoming debate would be about AI technology as

an author. Accordingly, revisiting the current notion of the status and legal personality that

qualify for AI for acquiring rights and bearing duties is necessary.

Hence, this research examines the potential legal opportunities of Egyptian Copyright

Law to enter the virtual metaverse.

This was a broad overview of history, definition of the terms, and the relationship

between the concepts of virtual worlds and copyrights. The next chapters build on the

introduction by investigating more legal issues of copyrights in these worlds.

Starting from the development of the technological applications in the virtual world

that outpaces the legislature development in non-virtual law, this research is an attempt to

diagnose the challenges and the opportunities of a legal system to enter the virtual realm to

make the best use of it, with a special focus on the Egyptian Copyright Law.

The research tackles the topic over three levels: Firstly, it explores the interrelation

between copyright laws and technological changes. Secondly, it diagnoses the legal

implications of the virtual worlds on the copyright laws, with a special application on NFTs.

Finally, it sheds light on the Egyptian copyright law entering the virtual era.

Chapter One paves the way for the technological changes to interact with the current

the most operative doctrines in the comparative copyright laws that had developed to cope

with the technological changes: the fair use and the first sale doctrines. In the same vein, it

discusses the fundamental authorship principles to understand the roots of the human

centralization of copyrights. Then, it investigates the pros and cons of the three major

philosophical theories in justifying copyrights in the virtual worlds: the Utilitarian Theory,

the Labor Theory, and the Personal-Based Theory.

Chapter two shows how the Metaverse is struggling with copyright laws, starting

with defining the Metaverse and its relationship with the Intellectual Property Rights. In

two hypnoses, it firstly examines the sufficiency of the current fair use doctrine in

confronting the case of the use of the copyrighted items of the real world in the virtual

world, then it levels up to the case that is completely taking place in the virtual world when

an avatar sues another one. finally, it highlights the legal issues of authorship in the virtual

world.

Chapter three addresses the copyrightability of NFTs as a special application of

copyrighted items in the virtual worlds. It starts with defining NFTs and how they are

created and minted in blockchains. Then, it attempts to fit NFTs in the current first sale

doctrine. It tests the copyrightability of the NFTs according to the current copyright criteria

as reproduction or derivation of copyrighted work. It finally discusses the judicial and

jurisprudential stances on the copyrightability of NFTs in the Miramax-Tarantino dispute.

Chapter four is concerned with the Egyptian Copyright Law and its potential

challenges with the virtual world implications. On the one hand, it debates the traditional

notions of copyrights that centralize the human factor and the challenges that they create

entering the virtual era. On the other hand, it levels up to the dilemma of the

copyrightability of non-human creativity according to the traditional view of copyrights.

II. Copyright laws and technological changes

The laws concerning copyright protection have suffered from complications when it comes

to technological changes. This is because the complexities of the technical issues of the

modern technology for lawmen to understand.

A quote from the US Congress recordings graphically illustrates the tensious

interaction between copyright laws and technological changes:

“Mr. Huddleston. The gentleman realizes this is a highly technical subject and one

that the ordinary Member is not qualified to deal with.

Mr. Bankhead. I understand that.

Mr. Huddleston. And that it is impossible to write a bill on this subject on the

floor of the House. It is impossible to do it with any satisfaction.

Mr. Bankhead. In reply to that, permit me to state it is apparent to me that it is

impossible to write a bill in the committee.

Mr. Huddleston. Let us dismiss the subject, then.”

This dialouge between the US Congress members relfects the tension between

because it is a body of laws that are too complicated to update and revise.93 A narrative

concerning "private parties, vested interests, and the inexorable pace of technological

change." that came to a compromise of "broad rights and narrow exceptions.". This was the

case in the second decade of the 1900s when efforts were exerted to adapt the copyright law

to adhere to the Berne Convention for the Protection of Literary and Artistic Works..

Similarly, private interests were a significant component of the ongoing effort to draft

interests compromised their disputes by treating different industries in disparate ways.". For

example, “authors of particular classes of works were granted specific, enumerated rights;

rights differed among the classes of copyrightable works." Consequently, "narrow

provisions became inapplicable or irrelevant as technology developed," constituting

“significant legal barriers to their activities.". This historical glance illustrates how private

interests' intervening as an alternative to governmental dominance had gone so far from the

objectives of copyrights.

To mitigate the impact later on, the courts have consistently clarified the provisions

and the terms in a more flexible and applicable way to encompass the legal dilemmas

concerning technology; "the codification of courts' solutions to assorted copyright

problems, the clarification and simplification of language, and the removal of some

anomalies created by technological change or historical accident” “produced proposals to

broaden rights and narrow exemptions and privileges." such as developing the performance

right and reproduction right.101 Moreover, in interpreting the current acts, “the courts

developed several general limitations on the copyright owners' bundle of rights." that are

“more general limitations that

have borne the brunt of supplying the flexibility that the statute requires to adjust to

technological change.” These processes developed two fundamental doctrines: the fair use

doctrine and the first sale doctrine.

A. The emergence of the fair use doctrine

The emergence of the fair use doctrine was a direct response to the technological

changes concerning publishing for scholarly purposes. “Fair use originated as a judicially

created, implied limitation on copyright owners' rights." “Fair use evolved in the case law

into a privilege to use a reasonable portion of a copyrighted work for a reasonable purpose."

such as “parody, biography, or scholarly research."106 In Folsom v. Marsh 1841, although

lacking a precise definition, the Court flipped the fair use of copyrighted works from piracy

to fostering creativity. In its jurisdiction, the Court founded the modern fair use doctrine,

stating that: “In short, we must often, in deciding questions of this sort, look to the nature

and objects of the selections made, the quantity and value of the materials used, and the

degree in which the use may prejudice the sale, or diminish the profits, or supersede the

objects, of the original work.”109

The findings of the case laid the foundation of “the four factors for analysis later set

out in the United States Copyright Act of 1976 under the title: "Limitations on exclusive

rights:

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Fair use.", which is considered “the most flexible limitations the statute offers in order to

balance its expansive rights and broad subject matter."

B. The emergence of the first sale doctrine

Similar to the fair use doctrine, the first sale doctrine has also originated to serve the writing

creativity but in the distribution stage. “Under the first sale doctrine, the copyright owner's

exclusive control over the public distribution of copies of a work is exhausted, as to a

particular copy of a specific work, upon the first authorized sale of that copy. The first sale

doctrine permits the operation of lending libraries and second-hand bookstores,

notwithstanding the copyright owner's exclusive distribution right. Cases clarified that the

first sale doctrine terminated the copyright owner's distribution right concerning a particular

copy. In the 1908 case of Bobbs-Merrill Co. v. Straus, the Court held that:

"The exclusive right to vend a copyrighted book given by the copyright law

did not give to the owner of the copyright and book the right to sell for a

price satisfactory to him and by a notice placed in the book fix a price below

which it should not be sold by all those who might subsequently acquire it;

and that, as such a right was not secured by the copyright law or the

remedies which it afforded, a court of the United States had no jurisdiction

to afford relief on the contrary theory.”

As a result, the first sale doctrine was embodied in the 1909 Act. According to this,

“the copyright owner lost any right to display a particular copy in public along with the

distribution right, but retained the rights of reproduction, adaptation, and public

performance for profit."

C. Authorship in copyright laws

Id.

Given that the discussion over copyrights springs mainly from the role of copyrights in

promoting creativity, it should also focus on the author. Creativity and knowledge that lead

to public welfare, through the lens of copyright laws, cannot be just mere products that

enjoy some protection. Instead, the human factor in this creation requires the author's

centralization in the creative work, especially its moral claims. Hence, an author is "the

heart of copyright." who “succeeds in exercising minimal personal autonomy." in

“fashioning of the work.". Nonetheless, few copyright laws define who an author is or what

authorship is. The complexities of defining the author are increasing when the creator is

non-human, such as in the case of computer-generated programs. This opens the door for

interpretation of what is meant by an author. Attempts to compile the authorities from

various jurisdictions have resulted in constructing the "Six Principles in Search of an

Author." to frame authorship in copyright laws. These principles are subsequent and

complementary in terms of authorship.

1. Intellectual work overrides physical work.

This principle suggests that authorship is attributed to the development, synthesizing, and

directing the creation of a particular work rather than the execution of this work. According

to this, a person who merely executes the work is not considered, as per most national

to grant

123

copyrights on the work. This criterion is what distinguishes a human author from a

machinegenerated work.

2. Human controls machinery.

In terms of the human control over machinery, the machine assistance is consistent with the

status of authorship as long as the human role in producing intellectual labor prevails over

the work's production over the machine's role. The type of the machine ranges from tools

such as pens to processing programs such as Word. Whatever the type of the machine is, it

should only supply the creation of a particular work and should not integrate the resulting

work. Accordingly, an author is "the person who drives the pen.". In this regard, changing

the machine that generates the work does not count as machine-generated work despite

being generated by machine assistance as long as no changes occur in its content.128 For

example, pictorial images are generated by cameras, and they can be scanned as well. In

this case, they exist independently, and scanning does not change their content; thus, it does

not amount to creating them. In other words, "mindless implementation of mechanical

means of production does not make one an "author," but subjective, or personalized

manipulation of those means does.".

3. Originality is the core concept of authorship.

Although the concept of copyright is essential, there is no uniform definition of originality

in this context. Generally, it is attached to the individuality of the author of the work.

Id.

Besides, it requires minimal creativity to put into the work. In Feist Publications, Inc. v.

Rural Telephone Service, the Court established two elements of originality: the independent

creation and minimal creativity. The first refers to a work created independently and not

copied from another, and the latter requires the work to "possess some creative spark, no

matter how crude, humble, or obvious it might be."133. Accordingly, the Yellow Pages

cannot be copyrightable because of the lack of creativity in this work. So, a personal stamp

should be added to the sweat of the brow for the work to be original.134

4. Quality reproduction qualifies creativity.

This criterion tackles the midst area of authorship between the mere copying of a work and

the inherently original one. According to this, adding sweat and effort to an existing work

could amount to a copyright protection claim for the resulting work, even if it has no

creativity. This is what is also known as reproduction of work. Unlike copying, quality

reproductions “require [e] great talent and technical skill may qualify as protectable works

of authorship, even if they are copies of preexisting works.". Accordingly, “the more

technology makes it possible for us to make quality reproductions, the less the copyist's

skill should be equated with authorship."136. In addition, the author reproducing a

preexisting work should have the intent

136

of authorship over the created work. This means that an author should intend to create a

work and be entitled to authorship of this work.

5. Intent to be an author.

An author should have the intent to create the resulting work. This applies whether the

author is a sole person or in the case of joint authorship. As such, derivative works entitle

their creators to be authors because they put their effort and creativity into their work and

meant to own authorship. This element of authorship requires an act of will that

differentiates intellectual work from mere coincidental creativity; the former is protected

under copyright laws, whereas the latter cannot be protected because of the lack of

intention.

6. Fixation

Some Anglo-Saxon laws require fixation as a prerequisite for copyright protection. A

literary or artistic work has to be fixed in a tangible medium that is relatively permanent and

stable. The fixation criterion is a condition for obtaining copyright protection over a

particular work, usually required for proofing purposes. It takes many forms, such as

writing, audio recording, and pictorial recording, and may also be on a computer RAM.

Artistic works can be fixed on a sustainable surface, such as cloth, glass, wood, and plastic.

In this meaning, performance cannot be considered fixation.

Id.

D. The philosophical justifications of the copyrightability of creativity in virtual

worlds.

The copyrightability of virtual creation in virtual spaces finds its justification in the

traditional theories of intellectual property rights: the utilitarian view, the Lockean view, and

the Hegelian view.

1. The Utilitarian Incentive-Based justification

The first theoretical approach in justifying intellectual property is Utilitarianism.

Utilitarianism is the most familiar argument, in terms of justification of intellectual

property, that aims at “the maximization of net social welfare.". The utilitarian incentives-

based argument prevails in modern Anglo-American systems.144 Most systems do not

acknowledge intellectual property rights as natural rights; instead, they are mainly attributed

to their utilitarian nature. The United States Constitution grants intellectual property rights

"to promote the Progress of Science and useful Arts.". Before that, several states' laws

adopted a combination of natural rights and a utilitarian perspective until a turning point in

American IP rights occurred. In Wheaton v. Peters, the US Supreme Court announced the

“prevention of information monopolization using copyright law." stating that “the statutory

criteria to secure copyright must be strictly adhered to and that copyright itself existed to

progress society and not only the creator.". Similarly, Thomas Jefferson justified intellectual

property rights away from natural rights, stating, "The patent monopoly was not designed to

secure the inventor's natural right in his discoveries. Rather, it was a reward, and

inducement, to bring forth new knowledge.". According to the utilitarian justification,

systemizing intellectual property “leads to an optimal amount of intellectual works being

produced and a corresponding optimal amount of social utility." In other words, minimal

ownership rights have to be ensured to creators and innovators as “a necessary condition for

promoting the creation of valuable intellectual works”, otherwise, inventors and authors

would refrain from intellectual work.At the same time, maximal social utility “in the form

of scientific and cultural progress" should be embedded in intellectual production to

incentivize innovators to proceed. This requires lawmakers, regarding intellectual property,

to balance "between, on the one hand, the power of exclusive rights to stimulate the creation

of inventions and works of art and, on the other, the partially offsetting tendency of such

rights to curtail widespread public enjoyment of those creations." In other words, “by

slowing down the diffusion of technical progress…it ensures that there will be more

progress to diffuse.".

This is because the intellectual products are “easily replicated and that enjoyment of them

by one person does not prevent enjoyment of them by others." In this way, the consumer

will bear only the "costs of production." 161 and eventually the creator cannot recoup the

"costs of expression" and may seize their creative work. So, it is more valuable to grant the

creator an exclusive right to replicate their products and charge consumers for the price of

"access to those works substantially greater than they could in a competitive market." Thus,

“the government grants rights as an incentive for the production of intellectual works, and

production of this sort, in turn, maximizes social progress." Consequently, the utilitarian

approach is established on the "incentive" justification, which construes the core argument

of granting innovators intellectual property rights.

Under the utilitarian view, the copyrightability of the virtual creation is justified by

the financial consideration. According to this view, the protection of copyrights lies in the

financial incentive which encourages creativity within the virtual world.165 Without the

incentive to create, people tend to exert less effort and time on creativity. In the same vein,

without compensation for participation in virtual worlds, such as artistic and literary works,

people would have little incentive to create. In this context, the compensation takes the form

of granting copyrights or ownership of the created items in the virtual world.

It could be argued that the users may not be interested in creating, and they could be

only interested in playing within the virtual space. In this case, they pay for the developers

to allow them to participate, collaborating with them in constructing the space. For

example, players should create their avatars and reconstruct in-game items to play a virtual

game. The developers provide them with the environment and tools of creation, and they

contribute to the construction of the virtual realm with their time and money. Unless their

creativity is copyrighted, they would lack the incentive for more creation and confine

themselves to playing only. Hence, the virtual space would lack their enhancements in

enriching the virtual space.

Overall, the public good in the virtual world shrinks as fewer players contribute to the

virtual environment. This would decrease the overall public benefit of such contributions

and cause harm to the real-world creators befitting from the virtual world creativity. “Such a

result is opposed to the maximization principle of utilitarianism. Thus, utilitarian

conceptions of copyright endorse granting copyright to players' in-game creations.”

2. The Lockean justification (Labor Theory)

The second theoretical approach used to justify intellectual property has its root in the

Labor Theory. This justification of intellectual property rights lies in the Lockean approach

to human labor: "Individuals are entitled to control the fruits of their labor.". For Locke,

labor is a

"metaphor for productive activities needed to sustain and promote human flourishing.".

These activities include building, planting, producing, inventing, and thinking.Given that

individuals own their bodies and labor, when labor becomes infused in an unowned object,

they cannot be separated; hence, "there is an expansion of rights.".

According to Locke, “rights are generated when individuals mix their labor with an

unowned object" on condition of the non-waste requirement and the enough and as good

proviso; the non-waste requirement avoids spoilage meanwhile, the enough and as good

condition avoids infringing upon individual appropriation through labor. Further

Explanation, the non-waste condition “prohibits the accumulation of so much property that

some are destroyed without being used" employing "invalidat[ing] a property claim if the

appropriator takes more than she can consume or use without spoilage". The enough and the

excellent condition allow "noncompetitive allocation of goods: each person can get as much

as he is willing to work for without creating meritocratic competition against others." In

terms of intellectual property, the creators are awarded, according to this view, based on the

social value added by their intellectual products; "their contribution to the public good

justifie[s] the reward of property rights." The Court perfectly explained this in Mazer v.

Stein by saying that “the enhancement of the public good through the efforts of intellectual

laborers made the creators of intellectual property worthy of reward”.

The copyrightability of virtual creativity finds its justification in Lock’s labor theory.

The Lockean view of property rights, and in turn IP rights, finds labor “the primary impetus

for producing the work.". According to Locke, the creator's labor is the sole of the creation,

and creators choosing to create are entitled to the fruits of their labor. Consequently, they

possess absolute rights over their creation.182

It could be contended that if the authors hold absolute rights over their creation, this

could limit the public access to creativity. In addition, Locke's limitation is that "property

rights attach only where the labor makes the far greatest part of the value of the asset"

would hinder granting copyrights in case the creator's labor is not "the primary impetus for

producing the work"184.

However, creativity in the virtual world mostly depends on computer coding, whose

nature is "essentially limitless". Moreover, the authors can claim copyrights “the virtual

world's storyline and themes as a backdrop or inspiration for a creative work”. Thus, the

Lockean justification of intellectual property rights could support copyrights in the virtual

world.

3. The Hegelian Justification (Personality-based theory)

After the Utilitarian and the Lockean approaches of the property rights, we come to the

personality justification. It is also known as the Hegelian theory of property. According to

personality theorists, individuals are "self-owners" of their personality; thus, they "have

moral claims to their talents, feelings, character traits, and experiences” . In other words,

since we have control over our physical existence, we can extend intangibles, mix them

with tangibles, and, consequently, obtain property rights over them. This is what Hegel

called "external actualization".

For Hegel, the individual's existence depends on the will to "constantly seek

actuality (Wirklichkeit) and effectiveness in the world" where “thought and impulse, mind,

and heart, are combined in freedom” in the sense of “realized self-determination”. Hegel

finds “immediate freedom of an individual” is the main focus, in a hierarchical order of the

said freedom; “an animal is freer than a physical object, a man freer than an animal, the

family freer than the individual, the State freer than the family, World-History freer than the

State”. In such a system, “property is a genre of freedom”195 and “self-actualization”196 is the

ultimate goal of the will’s interaction with the external world.197 Regarding intellectual

property, Hegel refuses the analogy between physical property and personal talents.198

Rather, he finds that “Intellectual property provides a way out of this problem, by

"materializing" these personal traits"199 by turning them from something internal to

something external in one way or another of expression.200 He refuses to “alienate or

surrender any universal element of one's self”201. In this regard, a question arises: “what

justifies the author in alienating copies of his work while retaining the exclusive right to

reproduce further copies of that work?”202. Hegel suggests that “such reproduction is one of

the “universal ways and means of expression which belongs to the author”203.

According to Hegel, personality is a core existence from which springs other rights

as an extension of personality. Applying this view to virtual worlds, avatars become

extensions of their real people. In the virtual world, an avatar completely incorporates the

personality of its user; emotions, gestures, and actions “blurring the distinction between real

and virtual desires”204. Thus, it is considered as the extension of a real-world person, and its

creation is also an extension of personality, and as such, copyrightable.

It could be argued that the concept of personhood is not identified clearly and is "too

abstract and thin to provide answers to many specific questions."205. On the one hand, it is

Supra note 157.

195 Id. at 332.

196 Id. at 333. 197 Id.

198 Id. at 337.

199 Id.

200 Supra note 189, at 43.

201 Supra note 157, at 338.

202 Id.

203 Supra note 189. 204 Supra note 234, at 278 205 Supra note 143, at 17.

agreed that "our feelings, character traits, and experiences."are our own; however, we need

“to establish the relevant moral claims.". On the other hand, moral claims are not

automatically “expanded when personalities become infused in tangible or intangible

works” and still lacks “an argument justifying property rights.".

Notwithstanding, acknowledging ethical concerns of innovation, such as consent to

economic use and the reputation and community standing of the creator, extends the moral

string to the work meant by the proception of IP rights.210 Moreover, “the best way to protect

personality-based claims to intangible works is to adopt a more comprehensive system

designed to promote progress and social utility” .

III. Copyrights and Metaverse

A. Defining Metaverse

Metaverse, in its simplest definition, is a three-dimensional virtual space for interaction

among users on the internet. The term 'metaverse' comes from the fusion of the word 'meta',

which means transcending, and the word 'verse', which means world or universe.

Accordingly, the Metaverse has two categories depending on its connection with the real

world: the complete virtual world, which is established “independently from the physical

space we inhabit”, and the augmented virtual world, which “coexists with the real world”.

The first type is the most prevailing one in the virtual spaces.216 Examples of Metaverse are

various; Second Life, Meta Horizon, Fortnite, Decentraland, Nvidia Omniverse, Roblox,

Sandbox, and Otherside are the most highlighted ones and vary from games to marketplaces

and businesses.

In this regard, seven elements are identified to form the Metaverse:

1- “be permanent

2- be synchronous

3- Have an infinite number of concurrent users

4- The existence of a fully functioning economy. No revision is needed, as this is

already a natural sentence that a native English speaker would use in a business

setting.

5- Lack of physical barriers to the outside world.

6- be interoperable

7- Contributions from a wide range of people”218.

As such, the Metaverse can be an environment for new creations as well as invite the

existing creations to it.

B. Metaverse and Intellectual Property Rights

IPR and copyrights, in particular, acquire significant importance in the Metaverse as well as

in real life. Meanwhile, copyright laws are “commonly associated with protecting creative

expression in such fields as music, literature, and film” software as a type of creative

expression is also protected under these laws. In this regard, it is argued that, on the one

hand, “copyright and trademark law violations will be the most frequently litigated

[lawsuits] in virtual worlds and cause the greatest problems for players and platform

owners”. On the other hand, copyright laws are becoming precarious, coping with rapidly

progressive technology. One challenge is “reconciling software's utilitarian nature with its

copyrightability” in terms of “ensuring public access to software's uncopyrightable

functional elements”. Another challenge lies in the users’ interference with the software.

The virtual environment allows the users to interact within by creating an “interactive

audience”. For example, players can produce and modify items in video games. They can

create their avatars, which “express the emotions and thoughts of the users, by making use

of artificial intelligence (AI)”224. They may also “attributes of a cartoon character, adorn

themselves in virtual attire or branded accessories, or include preexisting works including

textual, music and artistic works into the background or provide the requisite context in the

virtual

environment”. The avatars “may be used for profit‐making by commercializing characters,

or they may be used as entertainment products”. Users can create their virtual avatars and

build, add, and move content in virtual spaces “which they can experience and allow others

to experience”227. In this context, “Some authors discuss the concept of “prosumer” which is

a hybrid concept combining a producer and a consumer, enabled by digital immersive

technology”229.

C. The legal implications of the Metaverse on copyrights

As a result of the progressive virtual worlds, the legal implications on copyright are also

growing. The following discusses copyright legal issues from the perspective of two

hypotheses: using copyrighted items from the real world within the virtual worlds and

copying software that one player created by another player.

1- The use of copyrighted items (fair use)

The first and straightforward case of copyright issues in the virtual world is the mere

copying of items protected under copyrights, no matter whether the copying process takes

the whole or substantial part of those items. This includes “transmission of the material to

others” and transforming the form of the work from 2D to 3D, for instance, as these cases

"would be a breach of the copyright owner’s right of reproduction or the right of

communication to the public."233 Similarly, copyright exceptions such as the freedom of

panorama, the non-expert defense, or the use of an 'industrially-applied' artistic work or its

designs also apply here.234

Id.

233

234

a. Sony Computer Entertainment America, Inc. v Bleem

In this case, the plaintiff is Sony Computer Entertainment America, Inc., and the defendant

is Bleem, LLC. While Sony created PlayStation videogames that can only be played via the

Sony console and its attachments, Bleem also developed software to enable them on PCs,

using screenshots of Sony's production in advertising. Bleem was sued for copyright

infringement and was asked to seize those screenshots until the case was decided. The court

held that the advertisement could not be enrolled under fair use. On the contrary, the appeal

court found that “the use of the screenshots for comparative advertising weighed in favor of

fair use because it provided information to the public and would likely encourage

innovation”. The court also found that although the “defendants' use of screenshots took an

insignificant portion of the work”, “there was not a market for the screenshots”.

Furthermore, added the court, “even if there were a market for screenshots, defendants' use

of "a handful" of screenshots would have no noticeable effect on the plaintiff's ability to "do

with its screenshots what it chooses" and “such uses represented a source of important

information to consumers by assisting them in making rational purchase decisions”.

b. United Feature Syndicate, Inc. v. Koons

In this case, the Plaintiff is Sony Computer Entertainment, Inc.. The defendant is Connectix

Corporation. Sony produced the PlayStation videogame console as well as the software

operating system for PlayStation, BIOS. At the same time, Connectix Corporation made and

sold a software program called "Virtual Game Station" that copied the function of the

PlayStation console on the computer to enable regular computer users to play PlayStation

video games on their PCs. Technically, this is called the ‘reverse engineered’ process in

which “Connectix made several intermediate copies of the BIOS program." Sony sued

Connectix for copyright infringement. The district court ruled in favor of Sony, holding that

“Connectix’s “intermediate copying” was not a protected fair use” and outlawed Connectix

for “selling the Virtual Game Station and copying or using Sony's BIOS program in

developing other Virtual Game Station products." Getting appealed, the circuit court, on the

contrary, found that “the intermediate copies Connectix made and used during the course of

its reverse engineering of the BIOS program were protected fair use”245 based on the

availability of three of four fair use factors: "the purpose and character of the use of the

copyrighted work, and the effect of the use upon the potential market for the work." 246

Despite copying the entire BIOS program, the court concluded that “this factor warranted

‘very little weight’ in cases of

245

246

Id.

‘intermediate infringement’ where the final product does not itself contain infringing

material."

c. Google, LC .v Oracle America Inc.

Google v. Oracle is one of the Supreme Court's leading cases, which was hailed as a "huge

win for developers and consumers." In this case, the court introduced the transformative use

as “virtually dispositive of fair use findings”.

The roots of this case go back to 2005, when the plaintiff, Google, LC, “acquired

Android, Inc., invading a new horizon of software development in the mobile device

market.” Being familiar with programming, the Java programming language was used by

Google, which “copied about 11,500 lines of code from the Java API”, which was

developed by Sun Microsystems”. In 2010, “Oracle acquired Sun and the copyright to the

Java computing platform, which includes the Java API”. Oracle sued Google for copyright

and patent infringement. The court found the copied part as a ‘declaring code’ and it held

that “the API portion it had copied was an unprotected method of operation under the

declaring code because “Google was not bound to the naming conventions and structure of

the Java API”256 and “could have written its own declaring code”257. Consequently, the court

excluded Google’s

Id.

256

257

use of the Java API from fair use as a matter of law. On the contrary, the Supreme Court

held that Google’s copying was fair use as a matter of law and “weighed in favor of fair

use” in four factors. Firstly, for “expository purposes”, the declaring code, unlike standalone

software, is encompassed under “uncopyrightable ideas and creative expression of users”

and derives its value from “the community of programmers taking the time to learn the

API”. Secondly, the purpose and character of the use, Google’s use of unauthorized

the API and, consequently, Android. Thirdly, regarding the amount and substantiality of the

use, Google's declaring code uses a preexisting “knowledge of the Java API to create new

programs for Android” and is considered the ‘key’ to unlock the programmers’ creative

energies”. Lastly, assessing the potential market harm from copying is not a matter of “the

potential loss of revenue”, rather, “the source of the loss” in addition to any “public benefits

the copying” would matter.

Commentators praise Google's decision on two points. First, the Google Court

“correctly adopted an expansive view of transformative use”, differentiating between

“Google's end goal of enabling future creative works by third-party developers” and “the

particular function for which Google reimplemented the Java API”271. Second, it held that

the fair use factors are applicable even if the copies “serv[e] the same purpose as the

original”272

Id.

271

272

and the fair uses “occur in sufficiently different contexts, in this case, a distinct and different

computing environment."

However, the Google case is “less helpful in evaluating the scope of copyright

protection in the metaverse context”. Although declaring code is considered an interface, it

“did not explicitly determine whether copyright protection extends to software

interfaces”275. Some276 finds the court decided based upon “the majority and dissent's

presumptions that copyright protection would apply to these interfaces”. Meanwhile, in “the

virtual worlds and metaverses, a ruling in favor of copyright protection could mean the

wholesale exclusion of certain languages, codes, and messages that programs use to

communicate with each other and to the hardware, at least for users and metaverse

companies who do not own the rights”277.

2- One player copies the software of another player (avatar suing avatar)

a. Second Life

With millions of users, Second Life is considered one of the most well-known virtual

worlds on the internet. 27 Because of its stance as a potential source of profit, Second Life

has become one of the most popular virtual worlds on the internet, encouraged by its policy

regarding intellectual property rights. It was first launched by Linden Lab in 2003 as “a

threedimensional Internet-based virtual world.". Second Life is an MMORPG that supplies

its players with the chance for a "second life" to their real one; its players can “bring to life

whatever they dream of being in their real life.” Its players, referred to as 'residents,' use

their 'avatars' to "maneuver through Second Life”. Avatars “can walk, chat, fly, have sex,

and buy and sell virtual stuff for real money”. As its products have started to have a real-

world-like marketplace, Second Life has grown into a complicated economy both virtually

and physically284. In November 2003, an unprecedented policy change was made in the

realm of online games, granting residents complete ownership rights over all of their virtual

creations.

This means users also retain intellectual property rights over their creations, which

induces them to create more creations in virtual worlds286. For this purpose, “Second Life

provides its residents with the equivalent of atoms - small elements of virtual matter called

'primitives' - so that they can build things from scratch”. Any resident of Second Life who

creates an object can opt to label it as 'no copy', preventing others from copying the object,

'no modification', preventing others from modifying the object's characteristics, or 'no

transfer', preventing the current owner from transferring the object to another. In this regard,

IPRs "have spawned chaos," determining who is the rightful owner of any virtual property

obtained in the game, as well as the ownership of software that is usually developed,

purchased, and sold during the game to change the themes of each avatar. Moreover, virtual

items and services can be traded for real money. This can be done by converting Linden

Dollars to real-world dollars. In short, it can be said that “Second Life has created a new

platform for business opportunities, spawning the creation of virtual business moguls”.

b. John Doe order

A John Doe order is an injunction requested against unidentified infringers in

anticipation of potential harm. As such, It is not required for this order to have been an

infringement beforehand. Since the infringement occurs after such an order is requested, it

is not feasible to foresee every potential infringer.

In the online context, internet service providers (ISPs), who will be responsible for

removing the infringing content, are also parties to these injunction applications. The

plaintiff must notify the ISP as soon as a link to a copyright infringement becomes active

and a John Doe order is granted. Thus, a John Doe order is an anti-infringement injunction

meant to safeguard the creators of creative works such as songs, movies, and other

intellectual property works. In the United Kingdom, the concept John Doe order had been

judicially developed by the Court of Queen's Bench as an “extraordinary equitable remedy

where an injunction order is issued against the unknown defendant” to prevent the loss of

the potential evidence of the infringement. Throughout history, the idea of the John Doe

order has changed to accommodate increasingly complex situations.

c. Eros v. John Doe

Eros v. John Doe is a case fully integrated within the virtual environment. It was the

first case of a player accusing another player of violating copyright and trademark

infringement for a product entirely made in and for the Second Life virtual world. This case

dates back to July 2007, when the plaintiff, Eros, LLC, produced adult-themed

entertainment products and traded them within the Second Life virtual platform for Linden

Dollars that can be exchanged for US Dollars. The defendants, Robert Leatherwood and

John Does, were sued for copyright and trademark violation “by the reproduction, sale,

marketing, distribution, or display of unauthorized, illegal copies of plaintiffs' motion

pictures” alleging that “an avatar named ‘Volkov Cattaneo’ made and sold unauthorized

copies of Eros’ Items”.

In order to obtain information about the identity of the anonymous defendant from

Linden Lab, the company that runs Second Life, and PayPal, the company that processed

the

Catteneo's payment, Eros filed an ex parte motion requesting permission to issue subpoenas.

In a Reuters interview, Avatar "Volkov Cattaneo" admitted selling copies of the

items. However, he asserted that Alderman, the CEO of Eros, LLC, would not be able to

reveal his real identity. Robert Leatherwood was identified as "Volkov Catteneo" based on

IP information obtained through subpoenas.

To establish its copyright infringement claim, Eros must demonstrate that it has the

copyrights of the allegedly infringed items and that Robert Leatherwood, the defendant,

violated at least one of the exclusive rights granted to Eros by the Copyright Act. However,

a copyright claim may collide with an ownership claim in the virtual worlds because most

virtual worlds retain the intellectual property rights of all items created by their players

through their terms of service agreements. So, Eros would have difficulty proving

ownership.

The Eros lawsuit may have significantly impacted virtual world platform providers,

with implications that went well beyond other participants. Due to its ‘online service

provider’ status, Linden Labs is protected from copyright and trademark infringements by

its player under the Digital Millennium Copyright Act (DMCA). However, suppose a court

does not consider online virtual world providers to be service providers. In that case, the

owners of Second Life and numerous other virtual world platforms may face a plethora of

lawsuits. As a result, players would be held liable for their infringement not only to one

another but also to Linden Labs, which might be held jointly or indirectly liable for the

infringements of its players.

Platform developers must consider several factors depending on the case's outcome,

such as “whether to continue to allow the retention of intellectual property rights, whether

they are, in fact, online service providers under the DMCA, and whether property rights

exist”.

D. Legal issues of copyright in virtual worlds

Only in virtual worlds one can imagine the following scenario: a subpoena is received in the

email inbox requesting a person to attend before the court and containing a URL for the

court's location; it contains a claim that his digital trees block his neighbor's virtual view of

the sea, and he is warned of terminating his virtual neighborhood because of the repeated

overgrowth of his trees. This is an oversight of the future of lawsuits in the Metaverse;

virtual laws and courts with virtual repercussions may be the future of Second Life, and best

for everyone involved.321

Similarly, virtual worlds are usually perceived as just games despite their unique

features and opportunities for one-of-a-kind interaction. Moreover, there is a binary

perception of the real and virtual worlds. This leads to a dichotomy and insulation between

them. On the contrary, although virtual worlds are stereotyped as game-featured, they

transcend mere gaming to a more sophisticated real-world-like environment. People reside

in virtual worlds and spend substantial amounts of their time, energy, and money every day,

not only exploring them but also developing and participating in the creation of the virtual

components of the emerging world. Virtual spaces are growing into a complementary social,

economic, and legal environment. Gradually, the gap between the real and virtual world

gets narrower, and more interaction happens between them. The integration between real

and virtual worlds leads to question the sufficiency of the current legal system to include the

emerging legal issues and disputes that may arise in virtual worlds, particularly the

applicability of copyright laws within the virtual realm. Even though copyright protection is

mainly discussed in-game component creativity, it gives an impression and prediction of

how the client-based creation would be recognized regarding copyrights.

Given that the ultimate goal of the utilitarian view of copyright laws is to promote

creativity and public welfare, authors are granted exclusive rights to profit from their works;

as such, they have incentives to produce more works. This process eventually results in the

progress of the society and public welfare. The scope of the protection of the creative works

extends to “original works of authorship fixed in any tangible medium of expression, now

known, or later developed, from which they can be perceived, reproduced, or otherwise

communicated, either directly or with the aid of a machine or device”. According to this

text, the authorship of a copyrightable work requires it to be original and fixed in a medium

of expression. Virtual works of authorship specifically involve both elements of copyright

protection.

In this regard, the arising “thorny issues of copyright law” , of authorship, fixation,

and ownership are discussed closely. These elements of copyright protection are

interrelated, intersected, and inseparable from each other.

1. Authorship

In the virtual realm, the author of the creative work is usually its copyright owner.

Accordingly, the author can only transfer his copyrights totally or partially to others by

licensing them to use his works.

In the first case, total transferring the copyright ownership, the platform's owners

effectively control all intellectual property created on it and maintain their right to decide

how it will be used in the end, both inside and outside the platform. The second scenario of

transferring copyright ownership is licensure; in this pattern, users mandate intellectual

property rights of their creation on the platform to its providers. Accordingly, the “users

retain full rights in their works and aim to secure nonexclusive rights to use those creations

as they appear in the virtual world”.

“Both options, transfer of ownership and licensure, offer protection for virtual-world

providers, and both have drawbacks that threaten to stifle in-world creativity”. They

jeopardize copyrights on two sides. On the one hand, users are deprived of the fiscal

benefits of their creation in the platform, and consequently, they lose the incentive for

creativity. On the other hand, it rules the potential disputes out of the courtyard of

intellectual property laws in favor of contract laws.

2. Joint authorship

An author is the creator of the work. According to the federal copyright law, “Creative

works can be singularly created, jointly created by two or more authors, or made for hire”.

In virtual worlds, joint authorship has been “seriously challenged by the

‘malleability of hypermedia’”. The interplay between the developers and the gamers

(players) is smooth, continuous, and has no rigid boundaries. While players are encouraged

to generate new content incorporated into the game environment, developers frequently

only create the framework of the virtual world, leaving a vast space for the players' creation.

In such an environment, neither the developer nor the player could solely claim exclusive

creative ownership of the new and developing elements produced by this collaborative

cycle. Other than the players' direct creation, virtual worlds also know the player's avatar

creation, which is comparable to the notion that copyright law has already been well

developed as animated characters.332 Nonetheless, the copyright laws require for a work to

be jointly authored by both participant parties: “(1) made the requisite creative contribution

and (2) intended to be joint authors”333. This means that the creative contributions in the

virtual world cannot always be copyrightable under joint authorship because the players do

not always intend to share their copyrights on

their avatars with the game developers. In this regard, a distinction between scripted and

unscripted virtual worlds is essential. While the players in the scripted world accept

beforehand the co-authorship by confining themselves to the developers' restrictions, they

have more space to create from scratch in an unscripted world with less oversight from the

developers. Thus, co-author intent is less likely to be achieved. The joint authorship

becomes more complicated, in terms of the intent, regarding the co-authorship among

multiple users.336

It becomes clear that collaborative authorship, common in virtual worlds, is

challenging to define and recognize under the current copyright laws. However,

incorporating issues with virtual-world authorship into the conventional definitions of

3. Fixation

According to the federal copyright law, “A work is "fixed" in a tangible medium of

expression when its embodiment in a copy or phonorecord, by or under the authority of the

author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or

otherwise communicated for a period of more than transitory duration. A work consisting of

sounds, images, or both that are being transmitted is "fixed" for purposes of this title if a

fixation of the work is being made simultaneously with its transmission”.

For virtual worlds, although the visual or aural data is received on screens, these

visual and auditory representations are merely fragments of code kept on the server

belonging to the game developer.338 The audiovisual work in the code is transmitted to the

player's computer by the server when the player logs in to his game.339 No matter what

external inputs players

Id.

339

traverse the game space, the developer's source code stays unchanged in the game

developer's server. This type of code, and the same for the memory and storage device,

satisfy the fixation and tangibility requirement of copyright law and hence are eligible to be

protected audiovisual works. However, the user's creative inputs are at stake because they

are “not actually fixed in the game”.

The fixation inquiry suggests that game designers should be granted broad copyright

attribution, effectively giving them credit for any part of the game. Conversely, the more

freedom a user has during gameplay, the more limits are imposed on the amount of

copyrighted contribution to the game, we refer to the intention of the authorship. For

example, some developers allow the users to complete the game and create their add-on; in

such cases, joint authorship may apply because both parties have mutual intent and consent

to create the virtual product. Furthermore, some developers give the players their own

separate space within the virtual world, leveling their work up to “writing a game rather

than playing it”.

According to the current law, the fixation requirement should be embedded in this

ingame creation to be eligible for the protection of copyright law. This is not always the

case for the user's creative participation in the virtual world. The relationship between the

developer and the user is usually regulated under the contractual basis of EULA or TOS. In

this regard, the developers prioritize their interests by stipulating that “intellectual property

rights to works created within the virtual world are licensed or wholly transferred to them

for royalty-free use”346. The apparent imbalance between the parties prevailing in the

interaction outside a regulatory system hinders the ultimate goal of copyright protection,

which is to promote creativity and public welfare.

Other issues are raised in the virtual world; the freedom of expression and the

author's moral rights are also at stake. Authors' moral rights may be violated when a legally

obtained work is presented differently, when a work is transposed from one medium to

another, or when even minor, reversible alterations are made to the way it is presented.

Architects may object to their buildings being replicated and altered for use in digital

environments, as well as to decorations such as stickers, lenses, filters, and other tools that

can be used to improve the appearance of digital objects in the Metaverse. In this regard, it

is essential to keep “a balance between the subjectively held moral rights of the author and

her genuine expressions of personality” from one side, and “the freedom of expression of

the adapters and the fact that adapters may infuse their own personality into the transformed

work”350 from the other side.

Id.

350

IV. Copyrights and NFTs

A. Defining NFTs

NFTs stand for non-fungible tokens. NFTs are “unique digital assets that are recorded on a

blockchain ledger”.

To define NFTs, we should first dismantle the word and define each term separately,

then mention the meaning of it. Fungible tokens mean items that have equal values and,

thus, can be exchanged with one another. These items are of the same quantity and type

when interchanged or traded.353 Similarly, non-fungible tokens mean items that do not have

equivalent values and cannot be exchanged with one another. 354 Items are non-fungible

because they are unique and cannot be interchanged. If cryptocurrencies are an example of

fungible tokens, unique cards are examples of non-fungible tokens. However, this should

not lead us to the dichotomy between cryptocurrencies and NFTs. They go parallelly in the

virtual world; people can buy and sell NFTs using cryptocurrencies, and both are encrypted

and verified on the blockchain. Items encoded to be published via blockchain are called

'tokens'. Thus, NFTs are unique digital assets that create ownership by a record on the

blockchain technology and cannot be copied, interchanged, or replaced directly. They can

be understood as “a digital certificate of ownership” of a myriad of things, such as any piece

of art, music, painting, and so on. Blockchain technology is used to store these items in a

“permanent record that cannot be tampered with” and facilitate their circulation. It can be

seen as “a distributed ledger” “to store and record data on the internet”364. It is also “a

database that keeps track of the transfer of virtual currency”.

Another definition of NFTs suggests that an NFT is “a cryptographic tool using a

suitable blockchain, most commonly Ethereum, to create a unique, non-fungible digital

asset”. The Ethereum protocol is a set of rules that governs a network of computers

worldwide.367 Communities, applications, organizations, and digital assets can be built and

used through the Ethereum network.368 Creating an Ethereum account is accessible anytime,

anywhere, in order to explore a world of apps or create one’s own.369 The blockchain is

different from other databases and registries in that it is decentralized, meaning no central

authority controls the information. This is a breakthrough because one can do all this

“without trusting a central authority that could change the rules or restrict your access”.

1. The significance of NFTs in both real and virtual worlds

The importance of NFTs lies in “its ability to prove ownership and authenticity of

the asset which it represents”372. They constitute a medium “for digital artists and other

creators to monetize their work”. Integrating the art industry with cryptocurrency

investments has caused NFTs to bloom. “NFTs are easy to buy and sell on an online

marketplace such as OpenSea”, Rareable, or SuperRare375. They “derive value primarily

from their uniqueness, scarcity, and demand”. It is essential to refer to the “misconception

that purchasing an NFT gives the buyer a proprietary right to every copy or version of the

underlying work”. Rather, it is “a cryptographically signed receipt that you own a unique

version of a work”.

NTFs are used to represent a myriad of items within both physical and virtual

worlds. In the physical realm, NFTs are used to ensure that physical assets are authentic.

They are also used “to prove ownership and originality, which are independent of how

many copies of an object exist in the world”. In the digital realm, NFTs are used to

represent “digital assets such as digital artworks, videogames, photos, and videos”. Both

physical or digital assets are “stored on a blockchain or off-chain, such as on a website” 383.

The difference between onchain and off-chain is that while on-chain NFTs “contain all the

Id.

instructions for viewing or accessing the item it represents”, off-chain NFTs use another

database to host the digital files and provide instructions to it.

In the Metaverse, NFTs provide a more secure method for asset ownership and

virtual trade. Employing blockchain, the transaction is wholly recorded to avoid fraud and

theft.387

Moreover, the use of NFTs helps create scarcity upon which the value of digital assets is

387

built. Those assets can be monetized, which induces developers and creators to invest their

creativity. As a consequence, virtual business streams could be created and sustained.

2. The creation of NFTs

The creation of NFTs goes through a process called 'minting'. Minting means to

publish an NFT on a blockchain to be traded. It needs to have a crypto wallet to pay ‘gas

fees’ and create an account. The wallet funds the required payments and fees for NFT

creation, and the account creates one's profile. After creating the account, the required files

are uploaded for the ‘minting’ of an NFT.394 Once created, it can be traded. NFTs can be

sold by the creators and bought by other users in a market where users are linked to the

creator on a blockchain “to keep track of transactions and ownership”; “the transaction

occurs with the use of a smart contract”. The smart contracts are only “certificates of

authenticity”, thus, they do not “transfer copyright ownership or control of the underlying

asset”.

A smart contract is a code created by the artist on the blockchain in a language

called ‘Solidity’. The function of the smart contract is to “follow the NFT as it transfers

ownership from one account to another” and “allow[] the blockchain to keep track of the

unique identification of each NFT. By a smart contract, an NFT owner can control its

transactions and transference and charge fees for these processes.

Id.

3. NFTs and ownership

The question of the owner of the right to create and commercially exploit virtual

digital assets constitutes a vital concern in the metaverse. Physical assets are tokenized

using blockchain technology to create NFTs, which are now a popular investment

option.Besides, the question of the intellectual property rights that branch from ownership

of NFTs has yet to be answered. The linking inquiry between both is this: does the owner of

an NFT also have I.P. rights on it?

The NFTs are items to be owned by themselves. However, “ownership of the NFT

does not equal ownership of the underlying item”. It creates “cryptographic records that are

enabled through blockchain technology and are connected or associated with a

corresponding digital file or asset”. Consequently, understanding the blockchain, the ledger

technology upon which NFTs are built, is a prerequisite to figuring out how NFTs create

ownership.

NFTs can be sold on the secondary market for a profit by their owners, no matter

whether they are the creators or purchasers. Multiple parties, the creator, the purchaser, and

the blockchain service, are involved in every NFT transaction due to the minting process,

including maintaining, selling, and reselling them. They all, in turn, benefit from the

transaction. Blockchain recording of the whole process facilitates tracking every single step

of NFT circulation.412

412

4. NFTs and blockchains

Blockchain is the technology that “offers the infrastructure for online platforms

which store information and digital assets.” It is “generally associated with virtual

currencies and the storage of information on distributed ledgers”. Nonetheless, its potential

“goes well beyond the mere storage of information”. Moreover, intellectual property rights

can also be protected via blockchains and artificial intelligence “by concluding licensing

agreements online for downloads and policing breaches”. It can be understood as “subsets

of distributed ledger technology where data are recorded and authenticated across multiple

stores”. The data are recorded, stored, and “maintained by an algorithm which ensures that

each computer participating in the network disposes of the same degree of verified

information”. The networks of the blockchain are joinable on “peer-to-peer structures”. The

data are stored in groups called 'blocks'; each has “an electronic ‘fingerprint’ and a time-

stamp”. Blockchain networks are credible because they use the participating computers

concurrently for storage on the basis of “the so-called consensus protocol which generates

the current status quo of the ledger”. A human interference-free process gains credibility to

generate smart contracts. Once created, “algorithms and artificial intelligence have

completely taken over”423.

Cryptocurrency transactions are possible due to the existence of NFTs in

Blockchain, a type of distributed ledger technology. The network of computers is called

nodes, and a ledger that records transactions is accessible to each node in the network of

computers. Algorithms link between transaction records or blocks and connect each block to

previous blocks “as timestamped “chains” through an encrypted ‘hash’”. The hash cannot

be changed without detection when a block has been verified and added to the blockchain.

Supra

Id.

Moreover, all members of the peer-to-peer network would be given access to the entire

ledger. There is also a link between cryptocurrencies and blockchains; cryptocurrencies, or

digital currencies, are used to run transactions conducted via blockchains, such as Bitcoin.

Although bitcoins do not have physical existence, they have the same value as the dollar

and can be interchanged and exchanged for other currencies. Consequently, a digital Bitcoin

wallet with an account and password can be created to finalize transactions recorded on the

blockchain.

B. NFTs and the first sale doctrine

A work's owner in the United States has the exclusive right to “reproduce the work, prepare

derivative works, distribute copies of the work by sale or other transfer of ownership, and

perform or display the work publicly”. Owners of copyrights may also assign their rights to

others. The first sale doctrine is another limitation for the exclusive right, just like the fair

use doctrine. While the fair use doctrine allows for the use in non-commercial purposes

such as education and scientific research, the first sale doctrine permits someone possessing

a previously sold copyrighted work to sell or exhibit it in public without the original

of right's transfer such as loan, lease, or rental.433 Most computer programs are distributed

and sold under

433

licensing without transferring ownership. Therefore, the first sale doctrine cannot be used to

defend a licensee's later sale of a copyrighted work. The cryptocurrency community also

raised the question of whether an NFT buyer obtains any exclusive rights to the underlying

work, which has become crucial, especially with the widespread use of NFTs. It is now well

accepted that the response is "no". Rather, just as before minting the NFT, the creator still

has the authority to regulate the distribution and duplication of the original work.

The copyright holder's exclusive right is thus maintained when someone purchases

an NFT copy of a work. Just like when someone purchases a physical piece of art, the artist

is still the only one with the exclusive right to copy, distribute, create derivative works, and

publicly display the artwork. According to the first sale doctrine, acquiring physical works

typically also grants the buyer the ability to “sell, distribute, and transfer” the physical work

to a later owner. Notwithstanding, in a valid NFT transaction, a creator usually has to

depend on the structure and language of the contract to safeguard and enforce copyrights.

Therefore, contract law is vital to NFT transactions for putting copyrights into force. In this

regard, blockchain allows for programming contracts made directly between the artist and

the buyer and suits the use of the purchased work. Maintaining their terms and conditions,

NFTs are open for purchases in third-party marketplaces. Various marketplaces can be

categorized under three main types. Online marketplace constitutes the first category, where

buyers and sellers are connected to form communities. However, it does not independently

vouch for the work's authorship attached to an NFT. The second category levels up with

verifying the works and their creators. The third kind, like NBA Top Shot, allows users to

purchase and trade digital collectibles of iconic NBA moments; it features work from a

single rights holder. Notably, marketplaces do not guarantee royalties, even though many

NFT marketplaces allow artists to receive royalties for upcoming sales. Further explanation:

the buyer might transfer the NFT to another market after purchasing an NFT from an artist

in one market. In this case, the original seller cannot redeem the royalties. Thus,

marketplaces are supposed to have cross-functional options. Smart contract standards have

to be considered to create a uniform code for programming royalties.

C. Copyright implications of NFTs

Creating NFTs is a complex process that combines creativity, technical experience, and

strategic design. Since the standards for deciding whether an NFT constitutes a copy of the

underlying work have yet to be established by case precedent, the cases about digital

technology and copyright could offer valuable insights and guidance for upcoming litigation

on NFTs and copyrights. The potential discussion on copyright implementations on NFTs

aims to find an answer to whether NFTs are copies of the underlying works or derived from

them. The answer will determine who has the right to mint NFTs.

1. Are NFTs reproduction of copyrighted works?

Given that determining whether copying a copyrighted item constitutes an infringement of

452

work is the action that constitutes an unauthorized "copy" in this context. Accordingly, the

illicit copy has to 'embody' the original work or at least “the copyrightable aspects of the

original work”. According to the American Copyright Law, copies are defined as “material

Id.

objects, other than phonorecords, in which a work is fixed by any method now known or

later developed, and from which the work can be perceived, reproduced, or otherwise

communicated, either directly or with the aid of a machine or device”457. Besides, “the term

"copies" includes the material object, other than a phonorecord, in which the work is first

fixed”. Thus, the term “machine” extends to include computer programs and hyperlinks, the

most relevant examples to NFTs for analogy.

In the case of NFTs, the digital ledger's encrypted data only serves to identify the

artwork's owner and certify its authenticity. They replicate only some of the work, even

with a machine's assistance. Rather, they record NFTs as assets on the blockchain, and

therefore, NFTs are not mere copies of material objects, though they represent the

underlying work. In other words, NFTs are neither copies nor copiable; therefore, they

derive their value from rarity, and this is what induces an NFT purchaser to buy it knowing

that this will not grant ownership of the underlying item. The process of minting NFT

results in developing a smart contract, which is a "unique digital file" and exists on the

blockchain.465 Once identified, “it

465

Supra

Id.

is too expensive to place and maintain anything larger than a string of code on the

blockchain”. This is how this argument concludes that “the underlying work (or any images

associated with it) is not the NFT itself”467. This drives the discussion to another face of

analogy: hyperlinking.

An NFT resembles hyperlinking in many aspects468; both can “associate letters,

numbers, and words, allows a consumer to find the underlying work on another platform”.

However, they differ in the existence of copying; hyperlinking does not invoke a copying

argument, as is the case of NFTs. Instead, they constitute a transfer tool to a particular web

page. So, the infringement can be envisaged on the web page rather than the hyperlink. On

the contrary, an NFT does not connect to the underlying work even though it represents it

and contains a link to the original work, which is insufficient to constitute a copyright

infringement.

As a result, the reproduction of work as an infringement of copyrights does not

apply to NFTs. In other words, “NFTs themselves are not “copies” and thus not subject to

2. Are NFTS derivative from copyrighted works?

There is a common convergence between the exclusive right to prepare derivative works

and the exclusive right to reproduce.475 According to the American Copyright Law, a

derivative work is defined as “a work based upon one or more preexisting works, such as a

translation, musical arrangement, dramatization, fictionalization, motion picture version,

sound recording,

Id.

475

art reproduction, abridgment, condensation, or any other form in which a work may be

recast, transformed, or adapted”. As such, there must be a preexisting work on which

variations are performed to produce the derivative work, whether digital or physical.

Derivation infringes the copyright of the underlying work when the derivative work

“contains a substantial amount of material from a preexisting work.” Therefore, a mere

connection between them cannot be considered a copyright infringement.

In the case of NFTs, the transaction between the purchaser and the seller “does not

incorporate or embody the underlying work”. Moreover, “the token itself is merely a set of

metadata validating the authenticity and ownership of a particular work”, and therefore, the

minting process cannot be perceived as “a translation of the work itself from representation

to computer code”. The underlying work cannot be recognized or described via the

metadata. Moreover, it “does not add, transform, or recast any of the underlying work”. For

that reason, the content that could be linked to the NFT, not the token on the blockchain, is

the only work that can be considered a 'derivative.'

3. Who has the right of minting copyrighted works into NFTs?

NFTs are rapidly expanding and opening a new market driven by cryptocurrencies and

blockchain technology applications. Concerns about NFTs' copyright implications regarding

the owner of digital assets have been raised. The preliminary question is who holds the

copyrights of NFTs in the market. A prima facie answer is that the copyright holder is the

original creator of the underlying digital work. Nonetheless, NFT proponents consider the

minting process in allocating the copyright holder of NFTs and contend that, even in cases

where NFTs are based on works of art, they are only ever created at the time of minting. As

such, they are copyrighted by their minter. Since the former interpretation is more in line

with the fundamental principles of copyright law, such as the exclusive rights in

copyrighted works and the First Sale Doctrine, lawmakers are likelier to adopt it than the

latter. This stance provides more protection for artistic work, but it will result in filing more

cases before the court. On the flip side, should the latter perspective be recognized, the

minter holding the copyright deprives the creators of their products, renders their artworks

unprotected drafts, and exposes them to illegal replication.

In addition, the question of who has the right to mint an asset protected by

copyrights as an NFT is also controversial. The general rule is that copyrights can be

exercised over the copyrighted items, whether physically or virtually. Creative work can be

minted into NFTs by owners who can also trade and reproduce their intellectual products.

Moreover, a third party can be granted a license to use their creations or assigned to use

specific rights. In the case of the licensed user, there are additional complications. Whether

or not the license permits the creator and user to mint the work into NFTs will depend on

the terms of their agreement that transfer the meant right as well as how the court interprets

its terms.498

The copyright underlying NFTs will have the chance to be defined in federal court

for the first time in a case between Quentin Tarantino and Miramax stating these issues.

However, NFTs will probably be covered by copyright laws, which means that the

buyers of NFTs will need to pay attention when entering the market and make sure they

give due care to avoid unintentionally violating the copyright of others.

D. The Miramax-Tarantino dispute

This dispute addresses the question of the stage when copyrights are assigned to NFTs on a

blockchain: before or after the creation of an NFT.

1. Tarantino v. Miramax

In Miramax v. Tarantino, Miramax alleged copyright and trademark infringement for

Tarantino's sale of scenes of Pulp Fiction movie as NFT and they asked for damages in

return. The parties of the dispute are the American filmmaker Quentin Tarantino ‘Tarantino,'

the defender, and entertainment studio Miramax, LLC ‘Miramax,' the plaintiff. Several

agreements concerning the creation and funding of the 1994 film PULP FICTION were

made in 1993 by Tarantino, Miramax, and Tarantino's production company Visiona

Romantica, Inc. 'Visiona’. These agreements granted Miramax “all rights in and to the Film

now or hereafter known including without limitation the right to distribute the Film in all

media now or hereafter known”. Meanwhile, Tarantino retained rights to “soundtrack

album, music publishing, live

performance, print publication, interactive media, theatrical and television sequel and

remake rights, and television series and spinoff rights”. Tarantino released a collection of

NFTs that included digital scans of handwritten screenplay excerpts from PULP FICTION

in conjunction with the NFT bloom in late 2021. It was not until NFTs were traded in an

auction called OpenSea when Miramax filed the case against Tarantino for “breach of

contract, copyright infringement, trademark infringement, and unfair competition”. The

plaintiff contended that the defendant exceeded his limited rights to the right to reproduce

derivative works of the film without permission, and hence, infringed on the exclusive

copyrights of the plaintiff.513 Miramax argued that according to their agreements, all

intellectual property rights related to the movie are preserved to the studio, and Tarantino

retains only a few limited rights, including the right to screenplay publication, that do not

license him to trade NFTs of Pulp Fiction. Accordingly, Tarantino's conduct relating to

NFTs, such as developing and selling them, infringes on Miramax's exclusive rights to the

film. Conversely, Tarantino sticks to his right to screenplay publications, including digital

ones. The parties declared that they “put the matter behind them and look forward to future

collaborations, including possible NFT projects”leaving the case pending. Unless the

parties' settlement happened, the court would have said its word, for the first time, about the

underlying assets behind NFTs and related transactions. The outcome would have been

enlightening regarding creating and trading NFTs. Meanwhile, it is significant to alert the

parties of NFT transactions to give careful consideration to avoid infringement on the

author's copyrights. Notwithstanding, this case opened the door for rich discussions on the

future of NFTs as to the copyrights.

2. Commentary on Miramax Tarantino's dispute

The Miramax disputes questions the exact time when copyrights are attached to NFTs. As

mentioned before, lawmakers advocate that “copyrights are not created until NFTs are

minted”. However, “apply existing copyright regulations to the underlying assets behind

NFTs” should be considered for many reasons. This stance shows that copyright constitutes

a safeguard for artists and the NFT marketplace. Besides, vulnerable artists and creators will

be shielded from fraud by implementing copyright laws surrounding NFTs. That is because

Fraudulent digital art reproduction is likely to happen due to a lack of legal clarity in this

emerging market.525 Thus, the owners of the original underlying asset own the copyright.

That asset can only be created with their consent through a license, according to legislators'

definition of copyright laws pertaining to NFTs. The fundamental goal of copyright law will

be reflected in this clarification: “to promote the progress of science and useful arts”. As a

result, copyrights will encourage innovators to create original works in a rapidly expanding

field with room for more innovation. There is also an economic rationale for this

interpretation of NFT copyright law. Given the uniqueness of NFTs, they can “create a

market of exclusivity”. Similarly, copyrights function by creating exclusivity around an

artist's creations. Copyrights are arguably more valuable to work than NFTs because NFTs

only record who "owns" the code on the blockchain; they do not prevent access to the

underlying work, unlike what copyrights do.

The court will most likely determine that Tarantino violated Miramax's copyrights if

the aforementioned policy argument is applied to the Tarantino lawsuit. Even though the

dispute may come down to how Tarantino and Miramax interpret their contract, the court

can classify this case under copyright law and offer guidelines for similar disputes involving

NFTs in the future. Should this happen, a flood of parties with comparable publication

rights will sell NFTs in case the court rules that Tarantino's reserved rights were retained in

selling the NFTs. However, this will not address the issue of who owns the NFT copyright

and will induce more fraud in the NFT market.

On the other hand, a decision in Miramax's favor will show that copyrights are

attached to the underlying assets of NFTs rather than at the time of NFT minting. When

engaging in NFT transactions, NFT creators and buyers must give due care to prevent

unintentional copyright violations. Though proponents of NFTs might object to ongoing

the long run. If artists believe their works are protected, they will be more inclined to

produce NFTs. Additionally, copyright laws will encourage the creation of more digital

assets as NFTs, which aligns with the overall goal of copyright laws.

In conclusion, NFTs are incompatible with current fictions of copyright laws; they

are neither copies nor derivatives of a preexisting work. Consequently, they cannot be

considered as unauthorized work. The fact that NFTs go “beyond the confines of copyright

law”become clearer. Thus, all possibilities of legal rationale ought to be investigated to

come up with an answer to the questioned matters. In addition, the court's interpretation of

the contract will determine whether minting NFTs is permissible under the terms of the

agreement. This could also determine whether the current copyright regulations are

sufficiently adaptable to handle new technologies. A comprehensive legal framework of

NFTs copyrights induces digital assets to thrive within the framework of the copyright law

objectives.

V. Virtual world implication on the Egyptian Copyright Law

A. The traditional notion of copyrights and the future challenges of the virtual world

The difference between the Civil law school and the Anglo-American one is reflected in the

emotions in copyright aspects and maintains a clear distinction between merchandise and

intellectual works, the Anglo-Saxon school pays great attention to the literary work itself

regardless of the spiritual and psychological impulses underpinning it. Further explanation,

the Latin school set out of the concept that the author has his creative work after exerting

intellectual effort, and thus, it is considered an extension of his personality. Accordingly, the

legal protection is more for the author's personality than the literary work. It recognizes the

fiscal right of an author over his work.

On the contrary, the Anglo-American School does not differentiate between material

and intellectual work so long as both aim at pecuniary profit. Accordingly, the literary work

is treated as good. This has led to attempts to reconcile the philosophical disparity between

the two primary law schools, with a lot of confusion and hesitation in determining the legal

nature of the copyright considering the current rapid technological changes. The digital

revolution has resulted in a significant development of the industrial part of copyright over

its intellectual and cultural parts, especially with the interference of artificial intelligence in

the intellectual industry.

In this regard, the legislative gap in the texts opens the door to various

interpretations of copyright principles, leaving uncertainty behind the implementation.

Thus, it is essential to analyze to what extent the current rules are applicable and then to

expand the general concepts of copyright to accommodate the emerging legal aspects of the

rapidly changing world or to take an alternative path in anticipation of comprehensive legal

processing for the legal issues of the emerging artificial intelligence applications. Over

time, technological changes have proved successful in creating legal changes. As previously

explained in chapter two, two major copyright principles were born in the cradle of

technological changes: the fair use doctrine and the first sale doctrine. In the same way, they

could upend the established copyright principles to cope with the virtual realm. In this

context, the heaviest burden lies on jurisdiction through the courts' trials to reconcile the

current legislation with the cases brought forward until the contours of a concrete opinion

juris forms that could be legislatively adopted.

Nonetheless, this lengthy process needs to cope with the vigorous technological

change. Therefore, we must be one step ahead by scrutinizing and examining the standing

texts to the potential cases. This allows for predicting the legal issues of the uprising worlds

and suggesting solutions for them.

In tackling the situation in Egyptian copyright law, one begins with the current

challenges, then the aspired suggestions for a future vision of copyright protection in virtual

worlds.

1. An author must be a natural person.

The Egyptian law presupposes the author to be a natural person to whom the literal

work is attributed. It defines the author as "the person who creates a workbook.". In

addition, the notion of originality is associated with the intellectual activity and personality

of the author.

The legal protection of artistic and literary works requires the human creativity element.

Moreover, Egyptian law acknowledges joint authorship by defining collaborative work as

“the work produced by more than an author, directed by natural or legal person…where

their work is combined so that any can be separated or distinguished”.

2. Originality

The Egyptian law defines innovation as “The creative characteristic that attributes

originality to the creative works”. Accordingly, Egyptian jurisprudence interprets innovation

as the personal thump of the author over the workbook, which is the outcome of intellectual

work and distinguishes it from the work of others. They usually associate originality with

modernism in introducing a particular notion or idea. In the same vein, the judicial rulings

went that an author should only obtain rights over his work if it is intellectually innovated

or a result of a personal effort that imbues it with innovation. The Court of Cassation

asserted that "the literary work is not enclosed to books only; rather, it includes innovation

in all forms of works. The terminological connotation of the term 'innovation' is capturing

the first fruits of the work, meaning the work to be the brainchild of oneself, personalized,

and characterized by modernity and creativity.".

B. The dilemma of non-human creativity

The stable and proven concepts of intellectual property rights are being confronted

by rapidly developing challenges imposed by the world entering its new era of

virtualization. Similarly, the traditional conception of literal and artistic property shall not

escape the virtual forms of creativity spreading widely in the digital world. This requires

full regulation and adaptation of the classic notions of copyrights in the virtual world. This

matter becomes crucial, considering that the process is more technical than legal and

considering the intersection between the different branches of law that revolve in the same

track.

In this regard, both law schools Civil and Anglo-American law schools agree on

excluding non-human creation from copyright protection despite the persistent attempts to

transcend the human nature of creativity recently. One example is the case known as Naruto

Slater. that dates back to 2011. When an English photographer, David Slater, traveled to

Indonesia to take wildlife photos, a monkey called Naruto took his camera, tampered with

it, and captured many portraits published on National Geographic Magazine's interface.

Afterward, in 2014, Wikimedia Commons published these photos with a sign of public

domain. Slater asked the site to remove the photos and claimed rights to them. Meanwhile,

in 2015, an association for animal protection came into the conflict and sought the monkey's

rights on the photos taken by 'him' and sued Slater for claiming them. The case was rejected

in 2016 on the basis that even though Naruto was the one who took the photos

independently, animals are not justiciable. Thus, they cannot claim property rights. In 2018,

the opinion was affirmed by the Ninth Circuit of Appeal. Since then, creativity produced by

nature, animals, or plants cannot be attributed to them.

In the same vein of human centralization, the European Parliament differentiates

between the AI quantitative processing innovation, such as algorithms and data mass, and

the qualitative processing innovation, such as innovation and emotions. It determines that

while AI can simulate human intelligence, it cannot simulate thinking, at least so far.

Accordingly,

AI should not be considered an innovator but rather an assistant to a human innovator.

Likewise, in 2012, the European Court of Justice confirmed that copyright law applies only

to original works that reflect their authors' creative contributions and personal

characteristics.

A more recent example is Thaler v. Comptroller-General of Patents, Designs and

Trademarks, known as the DABUS case. Although this case grapples with patents, it sheds

light on how non-human generated products are dealt with regarding intellectual property

rights. This case dates back to 2018, when Dr. Stephen, an AI researcher, invented an AI

machine that can perform inventions named DABUS (Device for the Autonomous

Bootstrapping of Unified Sentience). Stephen claimed the IP rights over the inventions of

his machine based on his ownership of it, and he applied for patents. The patents were

rejected because a machine could not be autonomously an inventor. In December 2023, the

patent office's decision was judicially affirmed according to the Patents Act, which required

an inventor to be a natural person.

The previous examples raise not only the question of whether non-human creativity

is protected under intellectual property rights regulation but also the intervention of the

machine in creating innovation. For example, in 2016, The New Rembrandt was reproduced

by artificial intelligence technology just in the same way that Rembrandt, the famous Dutch

painter, had painted the original one by analyzing a myriad of his works.554. In this example,

the machine has not yet been able to improvise or initiate creativity like humans. Rather, it

is still humancontrolled and prevailed. Nonetheless, human intervention has been

shorthanded to the extent that brings up the issue of machine autonomy in creating

innovation. In this context, the virtual worlds constitute a fertile breeding ground for the

legal issues around originality and the correlation between humans and creativity. Besides,

it raises the question of the copyrights of the produced works; the answer is not as

spontaneously clear as it seems, considering the long process of computing creativity. In

this regard, copyright protection is discussed on three levels: the copyrightability of the

computer programs and applications used for creativity, the copyrightability of the original

work from which the derivative work is derived, and the copyrightability of the final

resulting work.

1. The copyrightability of the computer programs

The question of the first proposition is almost settled. Copyright protection extends to the

computer programs that are used for innovation. The same applies to AI applications used

for creation in the virtual worlds. The notion of originality encompasses these programs,

considering that they are often the outcome of collaborative efforts, and hence, they are

classified as joint works.

2. The copyrightability of the original work from which the derivative work is

derived.

The second hypnosis is controversial. It tackles the copyright of the underpinning work. On

the one hand, a work created depending on a preexisting work is called a derivative work,

and it does not constitute an infringement of the original work's copyright. Rather, it lies

under the fair use criteria to determine its copyrightability. On the other hand, in the virtual

world, AI plays a significant role in this derivative process. The intelligent process of

creativity requires human interference with the creative action. Besides, the personal notion

of copyright is also achieved with human centralization of feeding the creating program or

machine with data; this presupposes preexisting creative works.

Moreover, it must include intellectual human participation in the produced work to

satisfy the originality criteria. Hence, the current regulation of copyrights is more suitable

for protecting the original work than the derivative work. This could be hazardous to

innovation and creativity in virtual worlds as long as the product would only be protected,

at its best, as an exception to the general rules of copyrights.

3. The copyrightability of the resulting work.

The third premise concerns the copyrightability of the produced work. As previously seen,

the creative process in virtual worlds is the product of cooperation among several actors.

For example, in the case of producing Beeple's "Everydays: The First 5000 days",

preexisting photos were used by a processing computer program and may be modified later

by its user to a new derivative work. In this regard, the question is, among all those, who

have the copyrights of this photo? The simple answer is that it is the author who has the

and the personal characteristics of authorship to determine the amount of the creative

participation of each actor, and consequently, authorship, that amounts to claiming

In this regard, and in light of the decline of human intervention, a suggestion of

granting juridical personality to the AI technology as a virtual artist or author depending on

the amount of the machine participation in the product. In the case of creating the work

using a medium in a limited causative relationship, this medium's designer should be

admitted as an author. On the contrary, if the relationship between the final creativity and

the initial design is less consistent, and the medium's user can intervene in the final product,

this user could claim authorship, too. Finally, if there is no connection between the first

designer of a deep AI system and the work it produces, we should admit that the system

itself, not the medium’s designer nor its user, is the author.

Applying the current legal regulation to copyright in the virtual world, as a part of

AI copyright discussion, contravenes the personal dimension of copyright in Egypt

according to the Latin school notion centralized around the author and considers him the

source of all granted copyrights. This stance seems unacceptable in the computational and

informational world in a technology era. The matter becomes crucial considering the

increasing AI creativity and the decreasing of human intervention in it. Meanwhile,

a lot of creative works would be marginalized concerning copyright. This works against the

ultimate goal of copyright protection, promoting creativity, and public welfare. Accordingly,

the calls for the copyrightability of the works designed by intelligent systems would be

multiplied. Therefore, the modern vision of copyright will impose itself. It will come out of

the reformulation of judicial decisions and by broadening the notions of originality,

innovation, and creativity.

The absence of legal basis that allows for stability of the juridical positions of AI

applications, with their specificity and unpretentiousness, reveals the incapacity of the

existing legislation to encompass the consequences of the AI usage, with the fear of the

uncontrolled use of it. Consequently, the need has become urgent to lay down a legal regime

that copes with the accompanying developments to the AI systems and is able to encounter

their legal implications. The mentioned legal regime must include a comprehensive legal

regulation that controls the usage of the different aspects of AI applications and considers

its uniqueness among the technological developments. This is to avoid the impact resulting

from the legal ambiguity in such a vital domain that covers all modern life aspects. In

addition to the legal system, a code of ethics of AI should be adopted. Both the legislative

body and ethical charter should connect the various legal specialties with the aim of

embedding the AI existence in the positive law. In the same vein, recognizing the

uniqueness of AI entities leads them to enjoying the legal personhood.

The mechanism of the juridical personality should be revisited. Given the AI

applications have the ability of independent self-thinking, conferring the virtual legal

personality to AI entities facilitates applying the legal rulings and provisions to these

uprising entities. This also allows for admitting independent financial assets for these

entities. Notably, the virtual legal personality that is call for is different from the moral

personality. While the moral person is a juridical person that is distinguished from the

people who operate or administrate it, the virtual personhood does not lead to a real person

in the end. That is because AI applications have the ability of self-thinking that works

independently from human thinking.

Also, a suggestion of a system designed for virtual creativity that is analogous to the

Databases Producer Protection Law is applauded. In this special system, a balance between

the public and private interests should be made in terms of the restricting conditions of

fiscal rights over creativity and obtaining the potential investment outcome. In this regard, it

is necessary to define the protection subject of creativity, whether it amounts to being totally

AI-created or just considered a helping work. Also, it is necessary to define the exclusive

right meant by the protection, the monetary exploitation right, the domain of the protection,

and the duration of the right. Broadly, it will also be important to pay attention to the other

branches of intellectual property rights considering virtual technology.

In conclusion, the legal nature of AI entities should be legally and ethically regulated

for the purpose of AI entrenchment in the positive law.

VI. Conclusion

The technological changes have thrown their shadows all over our modern life aspects.

They have been also reflected in the legal arena, especially the intellectual property laws. In

this regard, although AI is usually introduced as a revolutionary solution that makes our

lives simple, its application complicates intellectual property and, particularly, copyrights.

On the one hand, copyright, due to its nature, is not able to protect a non-human work. Even

if the creative work is human made, its application to non-humans seems to contradict the

spirit of the copyright. On the other hand, protecting the creative works under the common

fund renders them free transacted, which impacts their values. The peak of the tension

between the traditional view of copyrights and virtual creativity lies in the originality

criterion. At this point, the potential non-human creators constitute the breakout point of

the traditional mindset and soul of copyright. As a result of non-compatibility with the

current copyright legislation, the need for regulating creativity in virtual worlds requires

urgent attention to develop legislation for creativity in the virtual world.

Most legislation mentions the applications of virtual creativity, or generally, AI products,

avoiding a direct and detailed definition of them. Moreover, the copyrightability of

creativity in the virtual world finds its legal protection, mainly, in contracts. However, this

solution does not allow for the compensation of the innovation that is not covered by

copyrights. Due to the lack of originality, it can be limitlessly reproduced. Hence, the

contractual solution can only reduce the conflicts with the author, but it does not guarantee

intellectual property as well as materialistic property. In this situation, a comprehensive

legal mechanism is necessary for the protection of creativity.

The fact is that, everyday, AI reveals new horizons in the legal thinking and

comparative studies. It engages together the legalists and the technology developers in one

bowl to come to the best response for the dilemmas aroused by AI in the near future.

Moreover,

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