Metaverse: Open legal questions of the virtual world using the example of Art. 1004 BGB mutatis mutandis

According to various experts, the metaverse is one of the most important technology trends which is already spreading rapidly. Baker Tilly Director Andreas Metzner and legal trainee Maximilian Schmidt provide an overview of the new virtual world and its legal issues.

Simply put, the metaverse is a digital space where the Internet’s various existing action spaces can merge into one virtual world. It could also be described as further development of classic social media platforms whose often merely communicative level is expanded by various fields of action. In the metaverse, which is often depicted as a 3D space, people can meet, interact and, inter alia, conclude transactions, use educational programs and advisory services or attend sports courses in the form of an avatar. 

In short: The metaverse aims to transfer the analog world with all its diversity into a digital framework. There is not only one metaverse but various providers, each of which operates its own metaverse platform with its own main focus and optical characteristics. The platforms Decentraland or Sandbox are only two examples. 

Legal issues related to the metaverse

Previous experience from the Internet and social media shows that this is at least as sensitive a space as the analog world. Wherever people meet – whether in analog or digital form – there will be disputes and need for regulation. It is therefore inevitable that legal issues will arise also in the metaverse: Are virtually concluded contracts valid, by which country’s laws will they be governed and who is liable in case of subsequent problems? What labor law-related requirements apply to virtual employments? Who has supervisory authority for banking transactions in the metaverse, for example, transfers of cryptocurrencies such as Bitcoin? Do copyright and trademark laws also apply in the virtual world? What rights and obligations have tenants of a virtual building? Such list can be continued almost infinitely and only presents a small selection of questions regarding the relationship between the analog and digital worlds that will need to be answered in the coming years. 

The actual differences between both worlds are often quite small. The legal side, however, regularly gives rise to problems, as can be illustrated by a practical example: A operates a shop or a retail trade in a virtual metaverse building. His neighbor, B, causes a disturbance, for example, through noise or business-damaging activities. 

In the analog world, A would in this case presumably have a claim against neighbor B pursuant to Art. 1004 BGB (German Civil Code), applied mutatis mutandis, which grants affected parties whose rights and legal interests are interfered with the right to demand removal or to cease and desist. In addition, there may be a claim for compensation.

Is Art. 1004 BGB also applicable mutatis mutandis in the metaverse?

Jurisdiction has recently made clear that the real world’s principles may also apply to the digital world. If someone posts defamatory statements online, the affected party is entitled to request such person to cease and desist from posting such statements and to demand compensation. However, the principles developed by the legislature and the courts over many decades are, with few exceptions, exclusively tailored to the analog world, which is simply due to the fact that the rapid developments and today’s technical means were not and will hardly be foreseeable in the future. This small example of a disturbance in, around or next to (virtual) real estate vividly illustrates the quite concurrent needs, in virtual and real life.

It needs to be further clarified if and to what extent a legal claim for defense might also exist in the metaverse. In order to solve this issue, it might be a reasonable approach to refer to the recognized legal concept pursuant to Art. 1004 BGB (mutatis mutandis) also in virtual cases – provided German law is applicable. Due to the metaverse’s rapid spread, it will presumably not be long before the legislature and the courts adopt the first principles.

What can clearly be expected, however, is that in the foreseeable future we can, and in many cases certainly will, perform a significant proportion of our everyday transactions and actions not (only) in the analog world, but also in the virtual world.