By Jan Mulligan

The word “meta” is Greek for beyond. With historic roots in science fiction, meta was first defined in a 1999 book called Snow Crash by Neal Stephenson as a virtual universe controlled and owned by a “global information monopoly that users can access via personal VR goggles.” Still now in its infancy, there is currently no truly such united place for “the” metaverse to be experienced. Numerous virtual worlds do exist and technology is beginning to bring together virtual content which never before existed and with it, it is creating legal challenges never before imagined.

The goal is for the metaverse to embody the evolution of the Internet into “a single, universal and immersive virtual world that is facilitated by the use of virtual reality (VR) and augmented reality (AR) head sets.”ⁱ Interfaces can also include body armor (hapatic feedback suits) and nunchucks which will help one feel totally immersed in the experience.

The metaverse promises to bring the virtual world to life! In a proprietary virtual 3D space, a person will take the form of an avatar and move freely to do much of what one does in the “real” world including shop, take classes, attend meetings and concerts, exercise, compete in sporting events, own assets and make creative and financial investments that the individual can own, control and sell.

Metaverse is big business. Corporations seeks to maximize the monetary transactions for the hugh tech companies. For example, Facebook renamed its parent corporation “Meta” and committed US$180 billion dollars to develop the metaverse. Mark Zuckerberg said it is a “reasonable construct” for the metaverse to be a time, not a place. Some have pondered if the metaverse is a moment when our lives will become more digital than physical. Zuckerberg opined that this will likely happen once the masses need the metaverse to do their jobs.ⁱⁱ Not to be locked out of the market, Microsoft acquired Activision for US$69 billion. According to Satya Nadella, chairman and CEO at Microsoft, the purchase of Activision “provide[s] building blocks for the metaverse….”Gaming… will play a key role in the development of metaverse platforms.”ⁱⁱⁱ

Corporate tech giants are not the only ones staking out turf in the metaverse. A different, decentralized crypto metaverse is also marching towards the future. Companies using this business model include Decentraland and Sandbox. Key features of such systems have the following characteristics: The ownership of the metaverse is shared by its users through the implementation of blockchain technology. Decentralized autonomous organizations (DAOs) put users in control of the game’s future. These metaverses hope to grow into entire societies with economies and democratic leadership. Nonfungible tokens (NFTs) are digital objects on a blockchain. Because every NFT is unique, tokens are coded to prove ownership of user generated content and NFT assets. These tokens have real-world economic value. Holders of crypto tokens, avatar skins, and digital real estate can trade them.^iv

With the power grab for this burgeoning new field accelerating, a critical question is who will regulate this unsettled field in the United States? Will it be government regulators, courts, or corporate self-governance rising to the occasion?

Existing U.S. federal laws likely to play a role include intellectual property, tax, securities/banking, gambling/lottery, currency, antitrust, unfair trade practices, cybersecurity, employment, disabilities act and statutes for the protection of children. One of the problems with these existing laws is that they are inadequate for novel issues raised by the metaverse, such as the scope of the right to use content held by an NFT owner.

New laws are needed, but U.S. regulators are too slow, preferring to take a “wait and see” attitude. Additionally, U.S. law often defers to individual state laws, which are fractured and inconsistent. For example, with no existing body of federal privacy laws, California has become the gold standard in the United States, even though such laws have no force or effect outside this state.

While the metaverse industry may be in its infancy, there is already a growing body of litigation, including:

Hérmes“MetaBirkens”: Cease and desist order filed in U. S. Dist. Ct NYC against artist who made NFT version of Birken bag claiming misappropriation of intellectual property rights.^v

Kardashian/EMAX Class Action: Sued in California under state consumer protection laws arising from social media endorsement without disclosure that NFT is a volatile investment product. Suit claims “pump and dump” of NFT causing value to plummet.^vi

Tarantino/Miramax: Tarantino minted NFTs from Pulp Fiction screenplay. Film studio sued in California for breach of trademark and copyright arising from 1993 contract reserving both parties’ property rights but silent on NFTs.^vii

Jay-Z (Roc-A-Fella Records)/Damon Dash: Intellectual property suit filed in federal court in NYC against record company’s co-founder Dash seeking to enjoin him from auctioning a NFT of Jay-Z’s album cover.^viii

Coinbase/Dogecoin Sweepstakes California Class Action: Dogecoin And 78 Other Crypto Tokens are allegedly “unlicensed securities”. The lawsuit seeks to distinguish Crypto Tokens from Bitcoin and Ethereum because of the latter’s decentralized nature. The return of all investors’ money is claimed damages.^ix

Coinbase/Dogecoin False Advertising California Class Action: Sweepstakes rules must offer a free form of entry. Class representative claims he wouldn’t have paid to enter the contest if Coinbase had clearly disclosed there was a free way to enter the contest.

Enforcement of any such state and federal laws are hampered by the lack of borders in the Metaverse. Fortunately, a new U.S. Supreme Court decision will make it easier, at least in the short run, for corporate self-governance. With a 5-4 split decision in Netchoice v. Paxton 595 US __ (2022), the Court stayed a Texas law from going into effect which would have prohibited social media companies from banning users over their viewpoints, even if their rhetoric was offensive or erroneous. The Court also refused to enforce a statutory clause which would have required corporations to explain and disclose reasons for any individual to be banned from the website. Unfortunately, this is only a temporary ruling protecting the status quo until the Court publishes its final ruling on the issue of how the first amendment applies to social media. Absent the U.S. Supreme Court stripping corporations from self-governance over participants’ speech, these companies are in a superior position to use technology to police the metaverse.

For example, while beta-testing a Meta product in virtual reality, a female reported her avatar was verbally and sexually harassed with sexual innuendos and other avatars “touched and groped” her avatar while yet other avatars took selfie photos. With a quick response to this problem, Meta used technology to create a two-foot personal boundary around all avatars by default, thus blocking wayward hands from drawing too close. The forcefield style safety mechanism was then rolled out across all Meta platforms, limiting interactions between avatars to fist bumps and high fives.

Another technological solution to help regulate the metaverse is with the use of “smart contracts”. These are programmed digital codes that run on the blockchain, automate operations and ensure that trading and transactions are done according to predetermined rules. They can be programmed to automatically pay royalties, buy and sell NFTs, make donations and much more. Benefits include speed and efficiency, with no paperwork to process. Smart contracts are also hard to hack and cannot be altered. On the downside, their name is misleading because they are not actually legally binding contracts, but rather a set of rules that control the use of specific NFTs. Subsequent purchasers may also be mislead because a smart contract does not necessarily provide the same benefits to them as it did to the original owner.

Crypto tokens are a novel mechanism for corporate governance. Crypto tokens (such as ERC-20) are built into existing blockchains. Some crypto tokens represent tangible assets such as real estate or art, while others represent intangible assets, including governance voting rights on the platform. In decentralized platforms such as Sandbox, crypto tokens can be used as a method of decision making to guide the future direction of varius blockchain projects. While decentralized governance is still evolving, key processes are being standardized and implemented so that protocols can be equitably enforced.

In an attempt to be afforded “extra” protection under existing intellectual property laws, some companies, including Nike, are filing multiple applications seeking U.S. trademark protection for virtual goods. Such applications are on an intent-to-use-basis, so they won’t be finalized until they are in commercial use.

As we dive deeper into the metaverse, it promises to expand and evolve beyond our wildest dreams, and with it so will the novel legal and regulatory issues. Creative and innovative solutions must be found if the metaverse is to meet its full potential.

ⁱ Wikipedia, https://en.wikipedia.org/wiki/Metaverse#cite_note-O’Brian-Chan-1 Citing O’Brian, Matt; Chan, Kelvin (28 October 2021). “EXPLAINER: What is the metaverse and how will it work?”. ABC News. Associated Press..
ⁱⁱ Podcast Mark in the Metaverse Facebook’s CEO on why the social network is becoming a metaverse company” Newton, Casey July 22, 2021. https://www.theverge.com/22588022/mark-zuckerberg-facebook-ceo-metaverse-interview.
ⁱⁱⁱ Microsoft’s metaverse plans are getting clearer with its $68.7 billion Activision acquisition, Huddleston, Tom January 21, 2021 https://www.cnbc.com/2022/01/19/microsoft-activision-what-satya-nadella-has-said-about-the-metaverse.html
^iv Cryptopedia, https://www.gemini.com/cryptopedia/what-is-metaverse-crypto-nft-game-blockchain
^v Hermes International v. Mason Rothschild, Case no. 1:2022cv00384 US District Court for the Southern District of New York. https://dockets.justia.com/docket/new-york/nysdce/1:2022cv00384/573363
^vi Huegerich v. Gentile et. al, et al, Case 2:22-cv-00163, U.S. District Court for the Central District of California https://dockets.justia.com/docket/california/cacdce/2:2022cv00163/840865
^vii Miramax, LLC v. Tarantino Case 2:21-cv-08979-FMO-JC U.S. District Court for the Central District of California https://casetext.com/case/miramax-llc-v-tarantino
^viii Roc-A-Fella Records, Inc. v. Dash 1:2021cv05411, US District Court for the Southern District of New York, https://dockets.justia.com/docket/new-york/nysdce/1:2021cv05411/562168
^ix Suski v. Marden-Kane, Inc., 2022 WL 103541 (U.S. District Court Northern District of California)

The case of the first ransomware death has been reported and it raises serious questions. Why were patients still being admitted to Springhill Medical Center in Alabama nearly eight days after computers were disabled on every floor and the nurses’ stations were cut off from key patient monitoring? A wireless tracker used to locate medical staff was also down. Electronic medical records were inaccessible. Yet patients weren’t told about this cyber-crisis and they weren’t given the option to be transferred to another hospital. In fact, for over a week, even laboring women continued to be admitted to this hospital day after day, without any knowledge that the hospital’s ability to function was severely crippled.

Wasn’t it reasonably foreseeable that computer outages from a cyberattack could cause health care providers to miss critical readouts on fetal heart monitoring equipment? The very purpose of this monitoring equipment is to alert staff when the unborn child is in severe distress and requires an immediate emergency delivery.

The stage was set for disaster when pregnant Teiranni Kidd was admitted to this facility to deliver her baby. Unfortunately, the umbilical cord became wrapped around her unborn child’s neck, cutting off the blood flow and oxygen to her brain. Absent a hack, this is the very type of condition that should have triggered alarms on the heart monitor and resulted in an emergency C-section. During the ransom attack, this child’s severe distress apparently slipped through the cracks and no doctor was summoned until it was too late. The next day, a text from the attending obstetrician to the nurse manager questioned why the doctor was never notified of the fetal distress so she could emergently deliver the baby. After an hour-long delay in delivery, the child was born profoundly brain injured, and she died months later.

A lawsuit is pending. The Wall Street Journal reports that in a court filing, the hospital argues that it had no obligation to inform the pregnant Ms. Kidd about the cyberattack and that it was appropriate to continue to admit patients during the hack. Really?

With increasing frequency, cyber-meltdowns are crippling our nation’s hospitals. While this may have been the first reported ransomware death reported, it won’t be the last. Standards must be set as to under what circumstances patients should be informed of a cyberattack, and when the hospital’s census should be reduced until necessary equipment and digital records can be restored. If not now, when? #healthcare #cyber #ransomware

Pedestrian Deaths Up By 35%

Recently, Smart Growth America released Dangerous By Design 2019, a report containing the results of their investigation of traffic accident data across the United States.  Smart Growth America is a non-profit organization that works with local and national governments and leaders to encourage safe development.

The report finds that pedestrian deaths on and around American roads increased 35% from 2008-2017. Pedestrian travel increased less than 1% during the same period.  Why are pedestrian deaths rising at such an alarming level, while the number of people walking is remaining essentially flat?

Why Is It Getting More Dangerous to Walk?

The Smart Growth report points the finger squarely at poor road design:

“Our federal policies, standards, and funding mechanisms that have been in place for decades produce dangerous roads that prioritize high speeds for cars over safety for all people.”

So where are the most dangerous places in America to talk a walk? Florida tops the list with a whopping 7 communities landing in the top 10 most deadly.  Our own Bakersfield, California is listed as the 7th most dangerous community overall.  Smart Growth reports that communities of older Americans, people of color, and low-income residents are the most affected by unsafe road design.

What Can We Do?

What can be done to push back against road designs that put pedestrians at risk?  Lawsuits against governments that design or approve unsafe road plans can be powerful tools.  But government immunities from criticism by lawsuits, such as “design immunity” in California, put up steep obstacles to such claims.  Design immunity prevents a government from being held liable for many discretionary decisions made by government officials.

It is recommended that if you or a loved one have been injured in a way that might suggest road design is even partially to blame, that you consult with a Pedestrian Injury Attorney, or Defective Road Design Attorney immediately, such as the attorneys at our law firm.

See the full report for a complete listing of the most dangerous communities in America for pedestrians, the most vulnerable populations, and an interactive map of the data collected by Smart Growth.

Federal Tort Claims Act and the Feres Doctrine

Suing the Federal Government for negligence can be a daunting task. There are very strict requirements that you must follow in order for your rights to be protected. Our experienced attorneys are here to help.

Under the Federal Tort Claims Act, an individual may file a lawsuit against the federal government for injuries incurred as a result of the negligence of a government employee. In Feres v. United States, the Supreme Court concluded that members of the United States armed forces could not bring a claim under the FTCA for injuries related to their military service. (Feres v. United States, 340 U.S. 135, 138 (1950).) It is important to note that the Feres Doctrine only applies to active duty military members. It does not apply to claims brought by military spouses, dependents, or retired military personnel for injuries suffered as a result of the negligence of a government employee. Several cases have applied the Feres Doctrine to expand its scope and further limit the rights of active duty armed forces personnel when they have been injured by the negligence of government employees at military hospitals.

A lawsuit filed on behalf of an active-duty nurse who died after giving birth at a naval hospital intends to change that. In 2015, Walter Daniel filed a wrongful death lawsuit on behalf of his wife, Rebekah Daniel. In the lawsuit, Mr. Daniel alleges that the medical staff at Bremerton Naval Hospital were negligent in caring for his wife when she began experiencing significant post-partum hemorrhaging. The Western District Court of Washington dismissed the lawsuit citing the Feres Doctrine. Mr. Daniel appealed the decision to the Ninth Circuit Court of Appeals. The Ninth Circuit affirmed the District Court’s ruling concluding that the “case was barred by the Feres Doctrine” because the injury was “incident to [her] service.” (Daniels v. United States, 889 F.3d 978, 982 (2018).) The Court further stated “[i]f ever there were a case to carve out an exception to the Feres doctrine, this is it. But only the Supreme Court has the tools to do so.” (Id.)

After a rehearing in front of the Ninth Circuit was denied, Mr. Daniel set out to determine if the Supreme Court would do just that – carve out an exception to the Feres Doctrine and allow him to pursue justice for his deceased wife. Mr. Daniel has filed a petition to have the Supreme Court of the United States review his wrongful death lawsuit.  It remains to be seen if Supreme Court of the United States will grant the petition and reconsider this archaic judicial doctrine. You can follow the Supreme Court and read its opinions at https://www.supremecourt.gov/opinions/slipopinion/18.

Our attorneys have successfully litigated multimillion dollar Federal tort cases against the United States government under the FTCA. If you are a military spouse, dependent, retired military personnel, or your child was injured at birth in a government hospital, you may be entitled to compensation. Please contact Mulligan, Banham, and Findley to speak with a lawyer about your rights.