Real Laws for Unreal Lands: Event Recap

On June 8, 2023, Paul Jurcys, one of the co-founders of Prifina, attended a panel discussion entitled "Real Laws for Unreal Lands" hosted at the HQ of Treasury. Two other panelists were Max Sills (General Counsel, Midjourney) and Barath  Chari (attorney, Wilson Sonsini), the event was moderated by John Manoochehri (CEO, Treasury).

The panel discussion revolved around three main topics: the ownership of legal assets, legal liability for personal virtual agents, and future directions in setting forth the legal framework for new digital interactions. 
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You can watch the entire discussion on YouTube... Or you can continue reading for some highlights of the discussion.

Do real laws apply to unreal worlds?

Barath emphasized the importance of recognizing that virtual worlds, despite being distinct from the physical realm, still have a significant impact on real-world individuals. He noted that there must be a way to establish responsibility and accountability within these digital environments.

​He further highlighted the need to navigate the gaps between current laws and emerging technologies, such as AI-generated content. For instance, the question arises of whether platforms creating virtual worlds can maintain their neutral platform status.

“There's always somebody ultimately responsible for what happened. The practical challenge is determining how that responsibility gets allocated under the law. ” - Barath Chari

Paul Jurcys from Prifina started by challenging the notion that real laws do not apply to unreal worlds. He emphasized that existing legal frameworks are indeed applicable to digital spaces. Although these laws may not be perfect or fully aligned with the unique aspects of virtual environments, they serve as a foundation for understanding the legal implications:

“If you are building a platform, a game, or some kind of a virtual environment, the first legal thing you have is to draft the terms of use and privacy policy - these foundational documents are rooted in real-world laws.” - Paul Jurcys 

Max Sills shared some insights from the law and economics perspective. First, the concept of transaction costs suggests that laws should be designed to minimize these costs for private parties within the digital realm. Second, the concept of the "cheapest cost avoider" doctrine suggests that the responsibility for preventing harm in the real world and also in virtual worlds should lie with the party that can most efficiently address the issue. Finally, Max Sills explained that intellectual property (IP) laws are primarily designed to facilitate creativity rather than benefiting only those who possess preexisting property.

The complex issue of owning digital assets

The event moderator, John Manoochehri, wondered who owns virtual lands and what happens when the server goes down: is that land no longer available? Is the law clear on who owns what and who is liable for lost digital assets? 

Barath suggested that when we think about the concept of virtual land ownership, we need to identify what exactly constitutes virtual land. Is it a collection of digital bytes residing on a server within a specific environment? In reality, it boils down to the ability to exclude others from accessing or profiting from objects in the virtual space. This access right is usually achieved through contractual agreements. He suggested that one way to look at ownership issue could be through the lens of responsibilities: who is responsible for what? 

Paul Jurcys offered an example of user-generated data (e.g., data individuals generate through the use of wearable devices or mobile apps). Historically, data has been viewed as a public good, not owned by anyone and freely accessible: “Information wants to be free.” 

Defining data as an asset proves challenging due to its intangible nature and the absence of clear boundaries. However, if we think about the data collected and stored in one secure locker (e.g., user A’s personal data cloud), such data becomes unique and clearly defined and could meet the legal requirements to be considered as a “thing”. Paul emphasized, that as we generate more data in our daily lives, it becomes crucial to explore the concept of ownership and the necessary conditions to claim it.

Max Sills noted that ownership of digital assets hinges on a stable legal and enforcement regime. In the absence of law, ownership becomes irrelevant as power dynamics prevail. To establish a meaningful concept of ownership for digital assets, competent and vested legal and enforcement systems are necessary to ensure stability between parties. 

“Look at a developing country where there is no stable government. It does not matter who owns a piece of property because if you come on someone's property, they'll kill you.” - Max Sills

Additionally, Max addressed one of the most remarkable recent development: Japan Copyright Law modification allowing to train AI on any data. In a global environment, the competition among legal regimes becomes more and more apparent. As we move forward, the existence and choice of legal frameworks play a crucial role in defining ownership.

The issue of ownership in the digital age involves complex considerations of excludability and rivalrousness. While private property traditionally relies on excluding others from its use, data poses challenges as it can be used simultaneously by multiple parties. The question arises: How can one retain ownership and prevent others from accessing their data? This issue remains unsolved in the data age, leading to resistance against traditional ownership premises. Japan's recent legal development allowing the use of copyrighted data for training datasets reflects the evolving nature of law in response to the value and accessibility of data. 
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The panelists agreed that conventional ownership frameworks struggle to encompass the characteristics of digital assets, which often escape excludability criteria while being beyond rivalrousness. This is quite an exciting domain to follow because new approaches are evolving fast.

Are new laws for avatars needed?

The next topic that the panelists were asked to discuss revolved around avatars: as avatars are becoming our agents in various real-life and virtual environments, who is responsible for their behavior? Is it the person whom the avatar is representing? Or is it the provider of the virtual platform for avatars to interact with one another? How about third parties who embed AI-powered features into avatars?

Paul Jurcys from Prifina noted that there are three categories of avatars that we can envision: (i) those that really act for the sole benefit of the individual herself (e.g., my own avatar that helps me better understand my sleep patterns); (ii) avatars that act as our agents (e.g., help my buy tickets to my favorite band’s concert); and (iii) avatars that interact with other agents in virtual words. Only the avatars in the latter category are likely to cause harm and lead to complex legal issues. 

“It is important to realize that avatars are not independent/autonomous entities; they are extensions of individuals' digital identities and act as human agents. The legal debate surrounding independent and autonomous avatars with legal personhood is mostly theoretical.” - Paul Jurcys 

Max Sills offered a very clear answer to this question of avatar liability: 
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“I think everything will become corporate law. Corporations already have rights of free speech, they can commit crimes. … Establishing LLCs (limited liability corporations) for avatars will be the market-oriented way to organize liability.” 

Charting Legal Frameworks for the Digital Frontier

As we are witnessing rapidly evolving digital technologies, many intricate questions remain unanswered: who owns virtual representations of the real world? Is it possible to flex the legal muscle of current laws and regulations or are these laws outdated? 

Barath noted that copyright and intellectual property laws are just one of the possible tools to address the issue of digital ownership. Paul suggested that creators and developers would benefit immensely from clear rules that define what are the rules of the game. In this regard, recently adopted amendments to the Japanese Copyright AI provide a valuable guidepost and increase regulatory competition between Europe, Japan and US. 

“As we're moving forward, we need to think about new regulations that would not be reactive (based on things that happened), but forward-looking. … What kind of framework could we build based on what we anticipate from the new technological revolution?” - Paul Jurcys

Max Sills made a great observation about financial incentives: For ownership to exist, there must be a financial system and a bustling market where transactions occur. 

“ Similarly to the “least cost avoider” approach which is applied for liability, rules defining the allocation of ownership should be based on the cost-benefit analysis: Who can utilize the assets in the most efficient way?” -- Paul Jurcys

The panelists agreed that current legal frameworks that exist to help navigate in real laws will evolve and be adapted to how humans interact with one another in digital environments. Forward-looking, incentive-based, transaction-cost-reducing rules are desirable and needed. 

Bottom-up approaches and standards are very likely to emerge. One good example of such bottom-up regulation is Creative Commons licenses that help people manage their own copyrights with regard to works published in the current internet-based environment. The panelists agreed that we will see similar solutions emerging for more complex digital assets such as data, or three-dimensional representations of the real world. 

“From a legal perspective, we're gonna see a really chaotic period (which is happening now), and then … it will be very exciting.” - Max Sills