NEED FOR A LEGISLATIVE FRAMEWORK FOR VIRTUAL GOODS AND PROPERTIES BROUGHT IN INDIA THROUGH THE METAVERSE By- Nihal Govind T
NEED
FOR A LEGISLATIVE FRAMEWORK FOR VIRTUAL GOODS AND PROPERTIES BROUGHT IN INDIA
THROUGH THE METAVERSE
Authored
By- Nihal Govind T
INTRODUCTION
Metaverse
is a concept of persistent, online 3D Universe that combines multiple virtual
spaces. Metaverse allows the users to meet, gather, and socialize through a
virtual 3-dimensional medium[1].
Metaverse is a growing area in the information technological industry and
already many corporations and establishments have shown significant interest in
incorporating a part of their activities in the Metaverse. However, an
ambiguity persists in regard to the regulation of such virtual spaces.
Metaverse
or virtual space is a growing area under Information technology that is
regarded as a virtual asset or space in technological sense. Section 5 of the
TP act, section 2(7) of sales of Goods Act, and the provisions in RERA Act,
creates an ambiguity in defining and understanding whether virtual property or
metaverse would fit into the specific regulatory framework dealing with
property in India. Section 5 of the TP act defines the transfer of property as
the conveyance of property from one person to another, provided that such
transfer is not prohibited by law. However, section 5 of the TP act does not
explicitly provide the medium for the conveyance of property and hence, a
virtual medium of conveyance of property cannot be held invalid. The paper
contends that metaverse of virtual asset under the would come within the scope
and ambit of section 5 of the TP act.
The
objective of the research is to determine the scope of legislation regulating
the protection and transfer of assets in regulating virtual space and property
like ‘Metaverse’.
In order to analyze the research objective and research problem in depth, the
author seeks to adopt doctrinal based research. The method of data collection
is qualitative, and the data on which the author rely is taken from secondary
source and mainly involves the use of texts. The author being a passive
observer relied on the ‘existing data’ in form of statutes, case laws, and
other research articles. The author sourced his data from prominent data bases
which include the official government websites for statutes, SCC Online and
West law for case laws, and Jstor, Heine Online, for research articles. By
virtue of content analysis, the paper seeks to analyze and interpret the
relevant provision that deals with the appointment of guardian for disabled
person with an intention protect their life and property. It further seeks to
understand the rule of interpretation that shall be applied in deciding the
applicability of those section with respect to the appointment of guardian for
comatose patient in regard to their life and property.
SCOPE
OF REGULATION OF METAVERSE/VIRTUAL PROPERTY IN INDIA
Virtual
Property in a Metaverse is an area of technological emergence and advancement
under the radar of legal consideration and enforcement. Hence, there has always
been confusion and ambiguity about its legal status and position. A virtual
Property is a property right in a virtual product[2].
Both virtual and intellectual property rights protect interests in
non-corporeal things. However, virtual property rights apply to rivalrous goods
whereas, intellectual property rights apply to non-rivalrous goods[3].
Although, virtual property rights raise a concern pertaining to ownership. It
is unclear on whether a virtual property right is owned by the creator or does
it belong to the users? Under this section the author intends to analyze the
scope of virtual property rights in regard to the Indian legal framework.
Scope
of Virtual Property under the Transfer of Property Act, 1882
Section
5 of the Transfer Property Act, 1882 provides the ‘transfer of property’ as an
act by which a person conveys a property in present or future to one or more
person or to himself[4].
By mere reading of section 5 of the Transfer of Property Act, it is evident
that the said section does not prescribe a mandatory medium for the conveyance
of a property. Further, section 5 also does not invalidate the transfer of a
virtual property. However, it is difficult to presume that the legislative and
intention of the further amendments to the act would have foreseen the
development of virtual assets so as to incorporate them under the TP Act.
Furthermore, there is an ambiguity in understanding the nature of a virtual
property with respect to the TP Act. Even though, a virtual property will not
come under the excluded items under the meaning of immoveable property as
provided under section 3 of the TP Act; on further reading and wider
understanding it is evident that virtual property cannot be considered as an
immoveable property, as there is no scope for its registration under the TP
Act. TP Act provides for compulsory registration of transfer of property
valuing more than 50 rupees of things that are ‘attached to Earth’[5].
Hence, there is no scope for incorporating virtual property as an immoveable
property for its regulation under the Transfer of Property Act.
The
Scope of Virtual Property under the Sales of Goods Act
In the Previous
sub-section, the author claimed that a virtual property cannot be considered as
an immoveable property for the purpose of being regulated by the Transfer of
Property Act. In this section, the author intends to look in depth at the scope
of considering virtual property in a metaverse as a good for the purpose of
being regulated by the Sale of Goods Act, 1930. Section 2(7) of the Sales of
Goods Act provides that a ‘good’ means every kind of moveable property other
than actionable claim and money, and includes stocks, shares, growing crops,
grass, and things attached to the earth which are agreed to be severed before
the sale or under the contract of sale[6].
It is well known that the Sale of Goods Act does not stand as an exception for
the regulation of digital assets. Presently, all the shares that are in digital
form are considered as a good for the purpose of being regulated by the Sale of
Goods Act, 1930. Therefore, it could be presumed that the scope of this act
could be extended to the regulation of the virtual property which is also a
digital asset. Moreover, in the case TATA Consultancy Services v. State of
Andhra Pradesh, the honorable Supreme Court held that the transaction sale
of a computer software is clearly a sale of good within the definitIon as
provides under the act[7].
The decision of the SC paves the way for recognition of sale of virtual of
property within the meaning of good as provided under the Sale of Goods Act,
1930[8].
Regulation
of Virtual Property in Metaverse under the Indian Contracts Act, 1872
Section
10 of the Indian Contract Act 1872, provides that all agreements are contracts
if they are made with free consent for a lawful consideration and for the
attainment of a lawful object[9].
Virtual Property Transaction in a Metaverse can be brought under the ambit of
section 10 with respect to its enforcement since the relevant section does not
explicitly prohibit the development of contract pertaining to virtual property
transactions. Lawful consideration is one of the essentials in forming a
contract. Since the transactions involving virtual property are carried out
using money, it seems possible to squeeze them into the existing contract law
framework[10].
Even if it is claimed that the transactions pertaining to the sale and purchase
of virtual property is done using cryptocurrencies, such transaction would be
still considered valid under Indian Contracts Act. Supreme Court in the case, Internet and Mobile Association of India v. Reserve Bank of
India, held that cryptocurrencies such as
"Bitcoin clearly qualifies as money or funds under the plain meaning
definitions. Bitcoin can be easily purchased in exchange for ordinary currency,
acts as a denominator of value and is used to conduct financial transactions" [11]. After the judgment, it can be concluded that cryptocurrency is
deemed to be a valid consideration and no liability can be raised against a
person for the usage of cryptos as a consideration for the enforceability of a
contract.
Limitation in regulating the transactions pertaining to Virtual
Properties
In the above sections, it was evident that the sale of virtual
property can be regulated by the Sale of Goods, 1930, and Indian Contracts Act,
1872, and the limitation of the same with respect to the transfer of property
Act, 1882. However, one of the fundamental questions that arises in regulating
the transfer and sale of such properties is in regard to its jurisdiction. The
objective of the study undertaken by the author is to study and analyze the
scope and regulation of virtual properties in a three-Dimensional Universe
that combines multiple virtual spaces. The primary concern that arises in
regard to such regulation is with respect to its jurisdiction. Metaverse is a
virtual 3-D platform that is centralized and governed by the companies such as
Meta. In such cases it is hard to determine whether the virtual spaces that are
given for sale can be considered as a property or should such allotment of
virtual spaces be considered as a service rendered by the centralized platform.
In such instance, should the regulation of a virtual property under Metaverse
be regulated by the Consumer Protection Act, 2019 along with the Sale of Good
of Act? In other scenario, if we consider the allotment of virtual space as
separate property in the same sense as a physical property, a concern arises in
regard to the jurisdiction of such virtual property.
In
case of a virtual space, the concerns regarding jurisdiction are less
complicated as companies like Meta has been registered in India and can be made
liable for any fault in their service under Consumer Protection Act, 2019.
However, if such spaces are considered as a separate and independent property,
then it is very difficult to determine the territorial jurisdiction and it also
raises a new jurisprudential issue regarding the recognition of ‘virtual territories.
The
scope of considering virtual property as an intellectual property
In
the previous sections the author analyzed the scope of considering virtual
asset as an immovable property under the transfer of property act and as a
moveable asset under the sales of good act. In this section the author would
looking in depth at the scope of considering virtual asset under the realm of
intellectual property and the legal implications of the same.
The
copyright act defines the author of a computer generated literary, dramatic, or
artistic work as the person who causes the work to be created[12].
Applying the literal rule of interpretation, the intellectual property right of
a virtual asset would be vested upon the person who created such an asset or
platform. In such case, it would be the company (in our case ‘meta’) who would
be owning all the copyrights concerning the virtual asset. However, the
significant issue arises in regard to the transfer of the virtual asset to the
users for a consideration. Meta offers a platform wherein the users can enjoy
their asset in a virtual world. Hence, eventually it just offers a medium for
the users to enjoy, possess, or transfer their property like a third-party
government. Hence, there is an ambiguity in determining the owner of the
copyright. Even if it is asserted that the initial copyright is being vested on
the creator of the platform and subsequently, they sell it to the users, the
concern arises in regard to the registration of such transfer in the Registrar
of Copyrights since there is a major issue in determining the jurisdiction of
such transfer.
Another
important question that arises is regarding trademarks and how could the brands
protect their trademark in the virtual world. Trademark infringement is defined
as a trademark which is identical or confusingly similar to a registered
trademark owned by another person, in relation to products or services which
are identical or similar to the products or services which the registration
covers[13].
Currently, the existing legislations creates an ambiguity in regard to the
protection of these trademark in the virtual world as it is very convenient to
make a virtual copy without proper regulation. Many international companies
such as adidas have decides to offer their service through the virtual spaces.
Thus, it becomes very essential to protect the trademark of such companies in
the virtual world.
Conclusion
The
paper's main objective was to determine the scope of the existing legislations
pertaining to the virtual properties and goods bought in the Metaverse. To
establish and analyse the objective, the author initially analyzed the scope of
what all constitute as a Property under the various legislations concerned with
property and goods in India. Through the initial analysis, the author came to
the conclusion that virtual Properties and goods brought in. Virtual world
(Metaverse) can be brought under the definition of property under the Transfer
of Property Act 1881 through the lens of Psychological and Metaphysical theory
of property in jurisprudence. Further, he author examined various related case
laws in other countries pertaining to this topic in context ignorer to analyse
whether virtual properties and goods can be brought under the purview of
respective Indian legislations and it was understood that by interpreting the
definition of property in a utilitarian way can enable such an inclusion. It
has also been understood that the need
and relevance of legislations of virtual properties in meta verse and other
virtual worlds has been required to be
distinct in its form even when perceived through the lens of Intellectual
Property rights. But it is to be understood that doing so comes with certain
limitations addressed earlier which can be overcome with much more deeper
analysis and studies.
[1]
What is Metaverse, Binance Academy (Sep.21, 2021),
https://academy.binance.com/en/articles/what-is-the-metaverse?
[2]
Steven J. Horowitz, Competing Lockean Claims to Virtual Property, 20 HARV. J.L.
& TECH. 443 (2007)
[8] Peter
Brown and Richard Raysman, Property Rights in Cyber Space Games and Other Novel
Legal Issues in Virtual Property, 2
Ind. J. L. & Tech. 88 (2006)
[12]Selvam
and Selvam, Breaking the fourth wall-Virtual Property and Intellectual Property
Rights in India, May 6, 2016
https://selvams.com/blog/breaking-fourth-wall-virtual-property-intellectual-property-rights-india/