IP related to Metaverse & AI and Avatar issues Anderson Mori & Tomotsune TAKASHI NAKAZAKI 07/09/2023

１. Intellectual property issues related to Metaverse 1 ＜Another world, the Metaverse> ■ Does reproducing real-world objects in the metaverse infringe intellectual property rights? (Copyright, trademark, design right …) ■ Is anything created in the metaverse protected by intellectual property rights? (Copyright, trademark, design right …) ■ “MetaBirkins” NFTs Case

１. Intellectual property issues related to Metaverse 2 ＜Reproducing real-world objects in the metaverse> ■ Reproduction of the townscape: “Virtual Stockholm” ■ Reproduction of brand items such as IKEA furniture, Nike shoes and Birkin hand bags ■ Copyrightable? (Copyrightability of practical goods) ■ Copyright protection exemption? ■ Trademark classification? ■ Protection under the Unfair Competition Prevention Act

１. Intellectual property issues related to Metaverse 3 ＜Possible legal protection of virtual 3D objects created in the metaverse> ■ Copyrightable? Reproduction of the townscape: “Virtual Stockholm” ■ Reproduction of brand items such as IKEA furniture, Nike shoes and Birkin hand bags ■ Copyrightable? ■ Trademark registration?

１. Intellectual property issues related to Metaverse 4 ＜MetaBirkin case> ■ Under the name MetaBirkins, Rothschild’s company exhibited 100 different handbags with a fur-covered “ and silhouette reminiscent of the Birkin, Hermès' signature handbag in the real world. ■ On 14 January 2022, Hermes filed a lawsuit in the State of New York, seeking an injunction and damages for the sale of these handbags on the basis that the exhibition and sale of these handbags infringed the company's Birkin trademark rights in respect of the word trademark "BIRKIN" and the three- dimensional design (trade dress).

１. Intellectual property issues related to Metaverse 5 ＜MetaBirkin case> ■ In response, Rothschild moved to dismiss the action. On that basis, it argued that Metabirkins was virtual art, asserting a defence of Fair Use under the First Amendment to the US Constitution, and that it could be compared to Andy Warhol's painting of a Campbell's Soup can. ■ In June 2023, Jury found NFT art of Hermes bags violated trademark rights and Judge said the permanent injunction was justified because Rothschild's continued marketing of the NFTs would likely confuse consumers and irreparably harm Hermes.

Metaverse regulations in Japan 6 ＜MIC Report> ■ July 2023: The Ministry of Internal Affairs and Communication released the report focusing on legal issues related to avatar, establishing a digital twin world, data acquisition, interoperability of metaverse services, and UX & UI. ■ Digital twin world: intellectual property issues, privacy issues, misuse of 3D data, e.g. investigation of crime escape routes, and handling of qualifications and other matters relating to acts in virtual space.

Metaverse regulations in Japan 7 ＜Cabinet Office Report> ■ May 2023: The Cabinet Office of Japan released the report focusing on legal issues related to contents in the metaverse. ■ The topics include intellectual property, avatar’s portrait rights, avatar’s performance rights, and attack against avatar, troubles among avatars and jurisdiction issues.

Metaverse regulations in Japan 8 ＜Amendment to the Unfair Competition Prevention Act> ■ May 2023: Mimicry of a product violates the Unfair Competition Prevention Act. However, it is not clear whether mimicry in the metaverse is subject to the regulations. ■ The government amended the Act to cover mimicry in the metaverse May 2023.

2. Intellectual property issues related to Generative AI 9 ＜Machine learning paradise ? - Japan> ■ A 2018 amendment to Japanese copyright law stipulates that copyright is limited as a source for AI to learn from, meaning it can be used freely without the permission of the rights holder. ■ Copyright holder organisations believe that this provision, which restricts their rights, is a threat to them after the emergence of generative AI. ■ Copyright holder organisations are calling on the Japanese government to amend the Copyright Act to limit the extent to which rights are restricted.

3. Legal Issues related to Avatar 10 ＜Can avatars be legally protected?＞ ■ Relationship between the inside person and the avatar ■ Invasion of privacy of the avatar ■ Defamation of the avatar ■ Impersonation of the avatar ■ Unauthorised use of the avatar's 'likeness’ ■ Unauthorised taking photo of the avatar's 'likeness'.

3. Legal Issues related to Avatar 11 ＜Relationship between the inside person and the avatar＞ ■ Typology of correspondence between the person (inside) and the avatar: ■ One person wears one avatar (single, continuous) ■ One person wears several avatars simultaneously ■ Multiple persons wear one avatar (simultaneous, alternating)Revealing real information about the "inside man“. ,,c

3. Legal Issues related to Avatar 12 ＜Invasion of privacy of the avatar＞ ■ Revealing real information about the "inside man“. ■ Does collecting information regoards the avatar itself constitute an invasion of privacy?

 Professional Admissions: Japan (2001) Takashi Nakazaki advises on an extensive range of TMT matters, including telecom regulations, computers, software development, e-commerce, platform service, domain name disputes, and digital forensics. His experience also includes legal advice in several fields of intellectual property and licensing, including traditional copyright, digital copyright, trademark, open source, cross-border licensing and biochemicals. He has also assisted many start-up clients with general corporate advice. E-mail: [email protected] Tel: 81-3-6775-1086 Education  The University of Tokyo (LL.B., 1998)  Graduate study, Columbia University School of Law (LL.M., 2008)  Associated with Arnold & Porter LLP, September 2008 - June 2009 Professional and Academic Associations  Chair, Disputes and Rights Sub-Committee  Member, Task force on Drafting New AI Guidelines, for the Ministry of Economy, Trade and Industry (METI), Government of Japan  Member, Public-Private Partnership Council on Addressing New Legal Issues Concerning Content in the Metaverse, Cabinet Office, Government of Japan  Member, Expert Study Committee on the Rules of AI Governance and Management of the Study, for the Ministry of Economy, Trade and Industry (METI), Government of Japan  Member, Working Group on the Creation of a Safe and Secure Environment for the Use of Smartphones in the Smartphone Era, for the Ministry of Internal Affairs and Communications, Government of Japan  Member, Working Group on Omotenashi Platform to Promote Consumption by Foreign Tourists, for METI, Government of Japan  Member, Working Group to Promote the Dissemination of IoT (Internet of Things) Data, for METI, Government of Japan  Co-founder, IAPP (International Association of Privacy Professionals) Knowledge Net Tokyo  Editor, International Association for the Protection of Intellectual Property of Japan Takashi Nakazaki Special Counsel Thank you for your attention!