The Metaverse: A Legal Introduction to the Hospitality Industry | Arent Fox ship


Seen by many as the next frontier in digital commerce, the Metaverse doesn’t, on the surface, appear to offer many benefits for an industry whose core mission is to provide guests with a physical space to use and occupy. However, there are many opportunities that the metaverse can offer hospitality owners, operators, licensors, managers and other participants that should not be ignored.

What is the metaverse?

The metaverse is a term used to describe a digital space that facilitates social interactions, often through the user’s use of a digital avatar. Built largely using decentralized blockchain technology rather than centralized servers, the Metaverse consists of immersive, three-dimensional experiences, persistent and traceable digital assets, and a strong social component. The Metaverse is still in its infancy, so many of the uses for the Metaverse remain ambitious; However, metaverse platforms have already seen a lot of activity and trading. Meanwhile, tech companies are working to create the next-generation consumer electronics they hope will make the metaverse a more common place to trade.

The business case for the hospitality industry

The hospitality industry may find the metaverse useful for improving marketing and guest experiences.

Immersive virtual tours of hotel properties and the surrounding area can allow potential customers to explore all aspects of the property and its surroundings before booking. Operators can also add additional booking options or promotions within the virtual tour to increase customer exposure.

Creating hybrid, in-person, and remote events such as conferences, weddings, or other celebrations is also possible through the Metaverse. This would allow onsite guests to interact with those not physically present at the property for an integrated experience and potential additional revenue streams.

Significantly, numerous outlets have identified the Metaverse as one of the key emerging technology trends. As its popularity increases, the Metaverse is becoming an important place for the hospitality industry to interact and market to their customer base.

Legal issues to consider

  1. Choose the right platform for you. There are several Metaverse platforms and they all have trade-offs. Some, including Roblox and Fortnite, offer more consumer access but generally give businesses less control over the content within the programs. Others, like Decentraland and the Sandbox, offer companies greater control but smaller audiences and higher barriers to entry. Every company should consider who their target audience is, what platform is best suited to reach that audience, and their long-term metaverse strategy before committing to any particular platform.
  2. Register your IP. Businesses should consider filing trademark applications for core metaverse goods or services and securing any available blockchain domains that can be used to facilitate metaverse payments and direct users to blockchain content such as websites and decentralized applications. With the accelerated adoption of blockchain domains and limited dispute resolution options, we strongly encourage businesses to consider securing intellectual property rights now.
  3. Establish a dedicated legal entity. Businesses should consider forming a new subsidiary or subsidiary to hold digital assets, protect other parts of their business from metaverse-related liability, and isolate the potential tax consequences.
  4. Safeguard digital assets. Due to their digital nature, digital assets such as cryptocurrencies, which may be the primary method of payment in the metaverse, are particularly vulnerable to loss and theft. Before acquiring cryptocurrency, businesses must set up a secure blockchain wallet and implement appropriate access and security controls.
  5. Protect and enforce your IP. The decentralized nature of the metaverse poses a major challenge for businesses and intellectual property owners. Ways to enforce intellectual property rights in the metaverse are constantly evolving and may require multiple tools to stop third-party infringement.
  6. Reserve metaverse rights. Every Companies that license their intellectual property, particularly those that do so on a geographic or territorial basis, should review existing license agreements to determine what rights their licensees have for Metaverse-related uses, if any. Going forward, each trademark owner is encouraged to expressly reserve rights for Metaverse-related uses and exercise caution before authorizing any third party to provide intellectual property to the Metaverse on behalf of an organization.
  7. tax matters. Attention must be paid to how tax law applies to metaverse transactions, although current tax law does not fully address the metaverse. This particularly applies to state and local sales and use, communications and lodging taxes.

Ready to enter?

As we move into the future, the metaverse seems poised to offer the hospitality industry a tremendous opportunity to engage directly with consumers in an interactive way that until recently was considered science fiction. But as with any new frontier, technological or not, there are legal and regulatory hurdles to consider and overcome. Some are familiar while others are new.

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