Nike intends to sell you digital products in the Metaverse, which you will buy because Nike understands how to make you want them.
Take a look at your feet. Many of you (raises hand) are currently wearing Nikes. Nike reported a 19% increase in revenue to $44.5 billion for the fiscal year ending May 31, 2021. But that’s here. What about in the Metaverse?
What is Nike’s interest in the Metaverse?
For those who are unfamiliar with the concept, the simplest — albeit very incomplete — way to imagine the Metaverse is to imagine yourself as a player in a real-life video game. Nike makes an appearance and provides some very cool meta-stuff.
This isn’t a joke. Nike takes the Metaverse very seriously.
Patent filings dating back to the pre-Metaverse universe in 2018 show that Nike has been seriously stockpiling the tools it will need to conduct business in the Metaverse. Aside from sneakers, these digital tools will include avatars and other forms of virtual branding. Sure, Nike intends to sell you digital products (which you will buy because Nike understands how to make you want them), but the overarching strategy revolves around entire digital worlds.
Is this just Nike acting like Nike? Sure, but if we define that as creating net-new revenue streams, as it has done throughout its history, then so be it. Someone will own the Metaverse merchandise, and it might as well be Nike.
Nike will face new rules in the Metaverse.
Nike must be ready for the concept of destruction by duplication. Nike has recently been very litigious with its intellectual property in this temporal world (IP).However, in the Metaverse, duplication will go beyond our current notions of what is legal. The value of Nike’s meta-wares will undoubtedly be influenced by what the company considers to be pirates but which others refer to as artists.
In the real world, the Museum of Forgeries is a recent art project with significant commercial application. In short, the Brooklyn art collective Mschf paid $20,000 for an original Warhol and created 999 exact forgeries. It then mixed in the original and sold all 1,000 “possibly real” Warhols for $250 each, for a total of $250,000, of which $230,000 is profit.
In the Metaverse, the same thing will happen. Some rare Nike drops (what we sneakerheads call a new release of a shoe or even a colorway — known as a “colorway”) will be genuine, while others will be either knowingly or unknowingly fake.
For courts, the Metaverse is novel.
Samir Patel, a Miami attorney and member of the Miami-Dade Cryptocurrency Task Force, recently tweeted about how courts will eventually deal with these metaverse disputes:
I spoke with Patel about the realities of the new Metaverse and how judges will quickly realize that common law precedent will be more of a hindrance than a help in deciding Metaverse cases. As Patel put it:
“The relationships in the metaverse (MV) will be governed by legal doctrine such as real property rights, breach of wet contracts, and copyright infringement of human-derived work.”
“So, when Nike wants to participate in the MV, whether it’s with virtual storefronts, avatar gear, or creating new products exclusively for the MV, its lawyers need to build a nexus between the MV legal violation or claim and meatspace,” he continued.
The fact that few judges (and even fewer lawyers) have used or even heard the term “meatspace” is an issue in and of itself. The term refers to our physical world rather than cyberspace or a virtual environment such as the Metaverse.
So, yes, Metaverse claims will need to be dumbed down for judges, at least initially written in such mundane ways and using such traditional language that judges don’t get lost.
Can Nike assist in the establishment of a legal framework for the Metaverse?
Patel sees a significant opportunity here. “Nike has the resources to educate judges through trial because they can afford to pay their lawyers to prolong litigation,” he said. “However, other smaller petitioners would have a difficult time convincing a judge that they own virtual property that exists on a virtual land registry maintained by a decentralized blockchain.”
Patel explained to me that if he bought virtual land in the Metaverse, the judge would most likely view the transaction as a sale of goods rather than a transfer of real estate. Because statutory regulations do not include or entertain the concept of virtual real estate, this virtual land cannot be recorded in a virtual land registry, which is not governed by a municipality or sovereign.
“So, if Nike sells a pair of virtual sneakers but fails to deliver them to the buyer, that is a breach of contract in the sale of sneakers.” “However, the agreed-upon exchange of value must still be articulated and possibly recorded in meatspace,” Patel explained.
In practice, this creates a quandary for judges because there is no evidence of a contract being made in the Metaverse, such as a verbal contract entered into by two avatars. So, how can a judge award in favor of one party in this dispute? It’s exactly the same as a meatspace verbal contract. If an avatar can demonstrate reliance on a verbal contract in the Metaverse, as they might in meatspace, there may be evidence to support a plaintiff’s claims.
The Metaverse could be just as litigious as meatspace.
And there will be a slew of claims. Imagine the Metaverse if Nike has a problem with its creations being modified in meatspace without its permission, and defendants in Nike lawsuits boldly respond that modifications are art, not IP theft. Patel stated:
“If artificial intelligence is used to create landscapes or other virtual objects, IP laws will be tested in the MV.”
“That’s because AI-derived work isn’t protected by copyright laws in the United States,” he added. So, if I deploy AI in the MV and the AI creates something wonderful, I have no rights to the derived work, and anyone else can replicate it and claim copyright. Because the MV could be so vast and the infringer could be an AI-deployed entity, protecting one’s copyrights will be extremely difficult. Judges will rule on these issues in accordance with meatspace copyright laws.”
This leaves us with the only viable option for changing how judges view and decide cases in the Metaverse: amending our current laws to accommodate virtual reality. Without this change, everything is meatspace, and virtual reality does not exist as a legal reality, as seen through the eyes of judges.
According to Patel, the true legal reality is that “Nike would be prudent to hire attorneys who are well-versed, and I mean really well-versed, in real property, the Uniform Commercial Code, and experts in blockchain technology.”
It will be fascinating to watch through societal, commercial, and legal lenses as the Metaverse opens up a new virtual world of opportunities to create, sell, buy, and sue. The fact that Nike has been preparing to create, sell, and litigate in this new space suggests that you should also prepare for the reality of the Metaverse, which is coming soon to a computer or phone near you.