“New movies coming soon to the Metaverse near you” – Copyright issues with films in the metaverse

Will we slip into avatars to see new movie releases in the metaverse in future? Film events have already made their way into today's metaverses and enjoy great popularity. They hold enormous economic potential - but also raise some relevant copyright issues.

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Why should people watch movies in the metaverse at all?

At first glance, it is surprising that people would choose to watch films in the metaverse. The cinema or streaming services seem more natural choices. The answer lies in the interactive event character of metaverse events. For instance, people can:

  • spontaneously watch movies with friends/family members from another country/continent;
  • meet and interact with countless new people; and
  • get deeper into the atmosphere of the film, since the players’ avatars can dress up like characters from the movie.

For companies, this new trend offers enormous advantages. Metaverse providers can use film events to differentiate themselves from other providers and to offer users further exclusive content. The film industry can reach younger audiences in the metaverse and tap into new revenue streams. Films can be screened to a theoretically unlimited number of people in one event (depending on server performance). In addition, event organisers can sell digital items to generate further revenues (e. g. digital costumes for avatars in the style of the movie).

How does watching movies in the metaverse work?

The metaverse provider names a time and a specific location in the metaverse (e. g. city “A” on island “B”) where the movie will be shown. The users join the metaverse with their avatar and meet up at the announced time and place. Typically, a digital screen is set up there so that avatars can watch the movie. During the film, avatars can move freely, interact, dance or chat with other players. The player’s own VR glasses can, but do not necessarily have to be in use – the metaverse can also be viewed via the screen of the laptop or mobile phone.

What are the legal issues involved?

From a copyright perspective, a film event in a metaverse/game raises exciting questions:

  • Licensing. A metaverse provider needs all relevant rights of use to a film to present it in the metaverse. Film distributors will typically license these in a package. However, a careful look into the chain of title may be nevertheless required when showing films in the metaverse. Some licence agreements between film distributors and authors (e. g. screenwriter, director, musician, etc.) do not transfer the right to show the film in games, metaverses or digital worlds at all. If this is the case, the license agreement must at least effectively grant rights for unknown types of use under German copyright law (cf. Sec. 31a German Copyright Act, Urheberrechtsgesetz, “UrhG”). Otherwise, the authors of the film could prevent metaverse platforms from playing their works in the metaverse, as this use is not licensed, or claim damages based on hypothetical licensing. If licence agreements do not contain adequate provisions for the transfer of rights of (unknown types of) use in video games, amendments or additional agreements will be required.
  • In addition, territorially unlimited rights of use may be required, as the film can potentially be seen worldwide in the metaverse. If such rights of use are not available, the metaverse must exclude users from the event if no territorial licence exists for their country of origin.
  • Best-seller clause. The best-seller clause provides for a statutory claim to further remuneration for the author, if the licence paid is disproportionate to the benefit derived from the work (cf. Sec. 32 et seq UrhG). This clause is now applicable throughout the EU, since it had to be implemented in national law as a provision of the EU Copyright Directive. In the metaverse, however, depending on server performance, many thousands of people can watch a film at the same time. These audience numbers can lead to significantly greater usage benefits than originally considered when the licence fee was agreed. Therefore, if the licence fee does not take these viewer numbers into account, the authors may assert claims against their contractual partner (Sec. 32a(1) UrhG), but also against third parties such as the Metaverse platform (Sec. 32a(2) UrhG). This depends on which party realises the disproportionate benefits compared to the licence paid. Typically, this would be the film distributor, who potentially generates high revenues by licensing the film to a metaverse provider.
  • Right to adapt. Avatars can ultimately interact with the film. If a movie shows a story in ancient Rome and then avatars in space gear run, jump, or fly with a paraglider in front of the screen picture, this may change the overall impression of the work substantially. Subject to German case law, German courts may consider this to be an adaptation of the work itself. For instance, say some footage of that event shows an alien-avatar jumping through a medieval movie. Such adaptations would always require the author’s consent (see Sec. 23(1) UrhG) – otherwise there is a risk of cease-and-desist claims. In Germany, authors also have the moral right to prevent distortion of the work (Sec. 14 UrhG). For example, an author of a pacifist work may seek to prevent his film from being shown in a metaverse that contains mostly war games.
  • Just as in physical cinemas, it is generally important to ensure that no pirated copies are made in the digital space. Of course, this is far more difficult to check when there are potentially thousands of viewers filming the movie in front of their home laptops with their mobile phones. In this respect, contracts should precisely define which technical precautions the metaverse platform can take and which it cannot.
  • Further problems arise if a movie theatre for user-generated content in the metaverse shows copyright-protected works in the metaverse without the author’s consent. This will entail the liability of the metaverse operator under the Digital Single Market Directive.

What VR experience could be next?

Apart from film events, any kind of entertainment can enter the metaverse. There are already pop concerts with audiences of millions (Ariana Grande sang in the game “Fortnite” in front of 20 million viewers). Opera concerts, ballet, theatre, galleries, and readings can also find their way into the metaverse. The copyright problems described above may also apply for those events in principle – but with legal nuances relating to the respective type of work (e. g. image rights for exhibitions).

What needs to be done?

The following steps are important for those involved:

  • The licence agreements in the chain of title must be examined to ensure that the licences cover the planned film event in the metaverse.
  • Licence agreements must consider interaction and context risks with avatars and the metaverse itself: adaptions of the work or possible distortion of a work could be an issue.
  • The agreed remuneration for a work must consider the possible mass consumption of the work (“bestseller clause”).
  • The parties must agree on which protective measures can and must be taken against piracy.
Niels is a partner in our International Commercial Group, based in Frankfurt. His practice focuses on clients in the life sciences sector and in the media and communcations industries. Niels advises on unfair competition, copyright and media law, and covers regulatory issues relevant to the highly-regulated life science and media industries, including under EU and constitutional law.
Simon is a lawyer for IP, copyright and media-specific regulation - with a key focus on games, advertising and digital entertainment.

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