Manatt Digital and Technology

In this newsletter, we take a detailed look at the world of virtual reality with an emphasis on the potential legal issues that exist in this area of media that is still in its infancy.

Legal Issues in VR

By Naader Banki and Jordan Pritchett

This year's Sundance Film Festival, held annually in Park City, Utah, was discernibly different from previous iterations. Virtual Reality (VR) played its most prominent role to date. With over 40 VR experiences on hand, it pervaded the festival's hallways, panel rooms and branded displays. It was a genuine focal point for the event and will likely continue to play an increasingly central role in the years to come. Yet, while the significance of VR as an industry cannot be fully encompassed by the microcosm that is this annual film festival, it is anecdotally valid nonetheless and provides evidence for the progression of VR's implementation upon the mainstream. What was once considered a far-fetched and distant idea is now a mounting reality. However, embedded within this technological progress is an entirely new frontier in terms of the legal backdrop. As such, the potential for exposure to unforeseen risk associated with legal liability is a subject that is pertinent to examine.

The activity this space has witnessed in recent years has been explosive, to say the least, and stems from a growing list of critical financial commitments. Since 2010, VR companies have seen over $4 billion in investments, across 350+ deals, and there is no sign of this momentum slowing any time soon. Goldman Sachs recently forecast that they expect overall revenue from VR hardware to eclipse $110 billion by 2025 and estimate that roughly 1.8 million HMDs would be sold before the end of 2016. Clearly, the demand for these products and the subsequent pace of adoption will continue to accelerate moving forward. However, as an entirely new medium, it is currently unclear what the exact legal ramifications will ultimately come to entail in relation to these products. The lack of existing precedent in this upcoming virtual world means that disputes will largely be handled on an ad hoc basis (at least during the initial go to market phase). Because of this, it is important to envision where issues may arise in order to minimize liability from a strategic perspective.

We envision several potential legal claims that could arise from this increased proliferation of VR technology. Consumer safety, products liability, and torts/negligence appear to be the most glaring issues; however, other considerations such as privacy related to enhanced data capture capabilities will also likely become a point of contention. As mentioned previously, because VR technology is so new, there are almost no cases involving these issues that apply directly to VR. There are, however, cases from comparable mediums, such as films, music, video games, board games, and amusement parks, that can serve as a proxy for VR and provide directional insight.

VR's unmatched level of "interactivity"—its unique ability to fully surround and engulf the user in an experience—far surpasses that of any medium before it. As such, it is expected that litigants will center their claims around the principle that certain virtual worlds can affect, and ultimately alter, an individual's behavior in the physical world, leading to the death or injury of the individual or of an unrelated third party. Usually these cases are defeated, as the content is protected by the First Amendment of the Constitution. However, the long-term effects of immersion in VR, which are still relatively unknown and unstudied, could provide for circumstances that overcome the logic underlying much of U.S. case law related to violence stemming from video games. More specifically, there is case law in existence that suggests so-called "instructive speech," as applied to violent and illegal acts, may not be protected speech.

In Rice v. Paladin Enterprises, Inc., the Fourth Circuit Court of Appeals held that the defendant publisher's book, which provided readers with detailed instructions on how to commit murder, was not entitled to protection under the First Amendment. The court held that the book's methodical approach towards preparing its readers for specific criminal conduct, "through exhaustively detailed instructions on the planning, commission, and concealment of criminal conduct," disqualified the book from classification as an expression of the "abstract advocacy of lawlessness." The language in this ruling is of particular interest and carries with it certain implications for the future of content that exists under the umbrella of VR. The immersive experience is unique and wholly different specifically for its ability to engross a user completely within a given reality. Should that reality exist in tandem with a theme that supports the use of extreme violence, it is possible that the threshold for "advocacy of lawlessness" may be more easily breached.

The U.S. Supreme Court's holding in Brown v. Entertainment Merchants Ass'n that despite the increasing degree of interactivity in video games, such works are considered creative expressions entitled to First Amendment protection, could analogously insulate VR content manufacturers from this type of liability. Furthermore, case law related to most tort negligence claims, including products liability and intentional/negligent infliction of emotional distress, in comparable industries clearly demonstrates a pattern of these cases being resolved in favor of defendants involved in the creation and dissemination of the creative works. Still, it is imperative that companies involved in the VR industry—ranging from those who create hardware, content and software—take proactive steps to further shield themselves from liability as the process of litigation is obviously a costly and a time-consuming endeavor. It is vital that these organizations working in this space be particularly cognizant and wary of treading into the territory of "instructive speech," which, as demonstrated in Rice, may not be a form of protected speech under the First Amendment, particularly in a medium as dynamic as virtual reality. While interactivity does not, in and of itself, exclude a medium from being designated as a "creative work," the combination of increased interactivity of VR, along with a finding of "instructive speech," could become a legal barrier for certain forms of content in the VR ecosystem moving forward.



pursuant to New York DR 2-101(f)

© 2024 Manatt, Phelps & Phillips, LLP.

All rights reserved