Virtual legality Virtual Reality and Augmented Reality - Legal Issues - Dentons
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Virtual legality Virtual Reality and Augmented Reality – Legal Issues
2 • dentons.com
With predictions that the impact of Virtual Reality (VR)
and Augmented Reality (AR) is comparable to the impact
of the internet1 Dentons, as part of its on-going TechTalk
series, thought it was timely to examine the legal issues
associated with this relatively new technology. The hype
is real at least. There are predictions of the AR and VR
sectors generating $90 billion by 2023.2
This article aims to get you Are VR and AR the AR
comprehensively up to speed and
up to date. It will be of particular same thing? By contrast, Augmented Reality
interest to anyone in sectors such (AR) supplements the real world.
First – some definitions.
as media, retail, hotels, education, The user sees the real world but
manufacturing, finance and with the addition of computer
VR generated images which are
healthcare.
Virtual Reality (VR) uses software overlaid onto various real objects.
Read on if you need a “VR and Augmentations can be sound,
and devices to show (usually
AR 101” session which gives you video, graphics or data.
realistic) images, sounds and
an overview and covers the legal
other sensations (such as scent)3
issues. This article provides you AR achieves this by adding
to replicate real or imaginary
with what you need to know computer vision and object
environments and to map the
right now about: recognition to data about the real
user’s physical presence in them.
environment surrounding the user.
1. What are VR and AR? VR’s aim is to be realistic and
AR presents that content overlaid
immersive, and to simulate a
2. How does the VR/AR onto the user’s real world view.
three dimensional environment
technology work? The AR information itself can be
and experience. VR does this
either virtual or real data.
3. Who is who in the world by interactive software and
of VR and AR? hardware which is controlled and AR devices range from
experienced by movement of the smartphones and tablets (say,
4. Key legal issues associated
human body, head or eyes. A VR for playing games like Pokémon
with VR and AR.
user can move or look around Go) to windscreens in vehicles
5. he future of VR and AR. and interact with the technology (for example, to display satnav
via a screen or headset/goggles information) or HMDs worn
(called a head-mounted display by the user (such as a harness,
or HMD). helmet or eyeglasses).
1. See “Digital Trends: Why 2017 Will Be Shaped By VR, AR, AI and Personalized Digital Assistants” published by Newsweek.com
3 January 2017 at http://europe.newsweek.com/virtual-reality-virtual-reality-sets-phones-technology-537969?rm=eu
2. According to “Augmented And Virtual Reality To Hit $150 Billion, Disrupting Mobile By 2020” dated 6 April 2015 by Tim Merel
from @DigiCapitalist at https://techcrunch.com/2015/04/06/augmented-and-virtual-reality-to-hit-150-billion-by-2020/
3. Both scent and taste are current developments. See, for example, the VR experiment to taste virtual sushi and donuts which is
described in the article “We Sampled The Gastronomic Frontier Of Virtual Reality” dated 29 January 2016 at http://www.npr.org/
sections/thesalt/2016/01/29/464885833/we-sampled-the-gastronomic-frontier-of-virtual-reality
dentons.com • 3
The AR device displays the a three dimensional space).
AR content by projecting through 6DoF systems plot the user’s
or by reflecting off the surfaces movements along x, y and z axes
of the device. to measure in every direction.
In short, the main differences VR systems use a few mechanisms
are that AR enhances reality to plot movement. These range
whereas VR replaces reality with from light emitting diodes (LEDs)
a simulated one. In doing so, Image of Sony PlayStation and cameras, to infrared sensors,
there is a difference in the level of VR © 2016 Sony Interactive magnetometers, gyroscopes
immersion of the user experience. Entertainment LLC or accelerometers. The aim
is to minimise lag between
How do AR and VR The experience of immersion user physical movements and
depends on how wide the display image changes. The process of
actually work? view is. A 360 degree display converting a user’s motion into
VR and AR technology works in would be more immersive than commands in the VR computer
slightly different ways. What they the 100 or 110 degree displays software is vital to the sense of
generally have in common is the which are currently most common immersion. A low latency in terms
need for a user to buy a device in VR HMDs. of lag is crucial to the quality
and to download an app to it of the VR experience. Latency
The headsets refresh the views as is usually measured usually in
to get started.
the user moves around. Users will milliseconds.
feel disoriented and sick however
VR if the field of view does not refresh VR systems mainly use one of two
In VR, getting the maximum sense often enough. Companies such methods to track body motion.
of immersion is key to a good as Sony impose standards on These are either optical tracking
experience. its game developers to meet (using imaging devices to track
certain frame rate per second body motion) or non-optical
VR works by feeding video from (fps) requirements or they will not tracking (using other sensors
a computer to the HMD or be certified on the PlayStation attached to the body such as
smartphone/tablet —either by system.4 At least 60 frames per magnetic fields or sound waves).
cable or wirelessly. The headsets second is needed to avoid user
take the video feeds and send Optical:
disorientation.
them to a single display or to two
A user will wear optical markers
displays (one for each eye). How is motion tracked? (such as dots of highly reflective
Sometimes the lenses in an HMD
material) on parts of their body,
are adjustable to match the VR devices track the user’s head
the HMD or handheld controller
distance between a user’s eyes. or arm/hand/body movements
and a camera maps their
This helps the image to be as and through the software shift
movement to three dimensional
focused and shaped as possible the picture in the headset display
space.
and facilitates a “stereoscopic” as the user moves around. VR
three dimensional image (created devices constantly trace and Non-optical:
by angling the two separate two retrace the real world movements
dimensional images to simulate through a process called spatial A user will wear equipment
how human eyes have small mapping. Tracking is measured (such as an exoskeleton motion
differences in the way each one according to a “six degrees capture suit system or HMD) or
views images). of freedom” (6DoF) system (a use a handheld controller which
reference to the freedom of contains micro-electromechanical
movement of a rigid body in sensors (such as accelerometers,
4. See Charlie Hall’s article for Polygon, “Sony to devs: If you drop below 60 fps in VR we will not certify your game. You
cannot drop below 60 fps. Period. Ever.” dated 17 March 2016 at http://www.polygon.com/2016/3/17/11256142/sony-framer-
ate-60fps-vr-certification
4 • dentons.comgyroscopes and magnetometers). through a camera, webcam
These sensors convert movement or phone.
into electrical signals and so track
There are two main types of AR:
motion. Some newer technology
AR that is marker-based or AR that
interpret electrical impulses
is marker-less or location-based.
directly from muscles to enable
gesture-based control of the Marker-based AR:
VR software.
• This type uses a camera and a
How are eyes tracked? visual marker to determine the
centre, orientation and range of
Eye tracking is a newer VR frontier its spherical coordinate system.
and involves use of an infrared The AR device is activated when
sensor to monitor eyes and where an item (the marker) is placed
the user is looking inside the in front of a webcam (which is
HMD. This allows more precise connected to or embedded in
reactions in VR imagery and a the AR device). The webcam
depth of field that is more realistic. captures a video feed (by
For example, the VR display might taking lots of photos in quick
blur the foreground slightly if the succession) and processing or
user is looking into the distance. recognising the information and
– which is what naturally would patterns in the photos (such
occur when eyes are looking into as a barcode or symbol). The
the distance in the real world. This AR computer then recognises Image of Spyglass Compass and
feels more natural to the user as that information and overlays GPS navigation app for iPhone and
it replicates the way the human the marker with an image or iPad © 2016 Happy Magenta UAB
brain works and so a user is less animation. A classic example
likely to feel disoriented or dizzy. is the world record line which Who is in on the act?
is dynamically added across
Other senses:
the lanes to show the current There are a number of key players
VR devices are now aiming to world record in a broadcast of in the VR and AR sectors – either
increase the sense of immersion a sports race. When a camera exploiting it, producing content
by adding aural/video technology points at the marker, the digital or producing the hardware and
and apps that give the user the image is overlaid at that point software.
sense that sound or scent is onto the AR device’s screen.
AR/VR Exploiters
coming from all around them and
Marker-less or location-based
near and far away. In 2016, the game, Pokémon Go,
AR:
was such a craze that Nintendo’s
AR • Marker-less or location- value doubled in a two-week
based AR actively tracks and period.5 It worked by showing on
AR, being VR’s real world cousin, recognises the real environment a user’s phone or tablet where
works by a computer analysing without using markers. The Pokémon characters could be
what is being viewed and the AR device records its position “found” and then “caught”. The
position of it. AR applications in the real world and then gamer had to visit the physical
superimpose two or three provides the data relevant location of the character to catch
dimensional generated computer to that location (such as the the character, which was seen on
imagery or descriptive information names of landmarks being a device screen via the Pokémon
over real time images obtained viewed around a user). Go app when it was pointing in the
5. See “Thanks to Pokémon Go, Nintendo’s Market Cap Just Doubled to $42 Billion” by Fortune dated 19 July 2016 at
http://fortune.com/2016/07/19/thanks-to-pokemon-go-nintendos-market-cap-just-doubled-to-42-billion/
dentons.com • 5right direction using AR. At various • Marriott uses VR (Oculus Rift Card to reveal special offers
“Poke Stops”, players checked in headsets) to showcase its hotels using AR. Lacoste has a virtual
and could gather items useful to to potential guests. try-on experience using AR
the game. Post peak-Pokémon-Go, where users can share their
Shopping Centres:
it is clear that the game exposed experience with their social
millions around the world to AR. • London’s Covent Garden used network via their phone.
AR for visitors to meet Santa Children:
The game has sustained its
in an interactive grotto and
popularity, grossing US$176 million
embark on an AR treasure hunt • BiCKids has released a
in August 2019, Pokemon Go’s
to catch reindeer hidden in the colouring book which uses
highest grossing month since
area. A giant Christmas tree was an AR app to enable kids to
2016.6
also digitally decorated with interact with the pages.
This has caught the attention special offers.
• The British Museum uses AR
of brands who have started • The Galeries Lafayette store in to help children understand the
to capitalise on AR and VR. Paris uses AR to animate a polar Parthenon gallery by enabling
Some notable examples are the bear wandering through virtual statues from the museum’s
following. snow in a 360 degree view collection to tell stories.
in the store.
Retail and Leisure: Other:
• The Australian Pacific Fair
• McDonald’s launched an • Google developed Word Lens
beachside shopping centre
AR app that showed the as part of Google Translate.
provided an AR ‘12 Days of
production process of its food. It enables a user to aim at
Christmas’ experience featuring
a foreign sign and have the
• Coca Cola and Spotify three sleeping koalas and
text translated into their own
partnered to let users listen eight shimmering seashells
language.
to the most popular songs by which came to life as shoppers
holding their phone up to AR- shopped. • Siemens uses AR to showcase
enabled Coca Cola cans. its range of magnetic valves.
Beauty:
• Häagen-Dazs uses AR to For now, consumers are not
• A number of beauty brands
entertain consumers while generally paying for their initial
have created AR apps to enable
they wait for their icecream to AR and VR experiences other
virtual sampling and try-on,
become soft enough to scoop. than through the download of
including Covergirl’s BeautyU,
A virtual violin concerto is apps or the purchase of games
Sally Hansen’s ManiMatch, and
projected onto the top of a tub – as is often the case with new
L’Oreal’s Makeup Genius app
of icecream. consumer-appealing technology.
which uses facial recognition
New technology is often
• Tesco uses AR so that technology to allow people to
sponsored so that experiences
customers can visualise sofas in virtually apply products.
drive demand as consumers are
their own home.
Fashion: exposed to it. This may change in
• Yelp uses AR with a feature the future — Gartner’s research
called Yelp Monocle to • Rebecca Minkoff and Neiman analyst, Brian Blau, thinks that
gives information about Marcus have AR powered consumers will be willing to
local establishments when a interactive mirrors in their fitting pay more for quality VR and AR
smartphone is pointed at them. rooms. New Look enables experiences in the future.7
users to use their phones to
scan their New Look Student
6. See “People Still Play That? ‘Pokémon GO’ Just Made $176 Million In August, #1 In The World“by Paul Tassi September 21 2019 at
https://www.forbes.com/sites/paultassi/2019/09/21/people-still-play-that-pokmon-go-just-made-176-million-in-August-1-in-the-world/
7. See the article on AR Blog Augmented Reality marketing resources, trends, videos and case studies: “5 top Virtual Reality
& Augmented Reality technology trends for 2016” by Joe Bardi on 22 April 2016
6 • dentons.comAR/VR hardware • Magic Leap is another images and other information
significant player who makes using AR. There is also speculation
producers HMD virtual retinal displays that Apple will augment Maps
which superimposes imagery for iPhones.
Top VR and AR hardware
over real world objects by
producers are Google Glass, the
Facebook-owned Oculus Rift, HTC
projecting a digital light field AR/VR content
into the user’s eyes.
Vive, Samsung Gear VR, Microsoft producers
HoloLens, Google Daydream • AMD has launched Sulon Q,
View. Another key category is the a spatially aware headset that VR content and applications are
branded headsets which pair with combines VR and AR. being released as consumer grade
Sony PlayStation VR and Microsoft VR and AR products come down
• Samsung produces the in price and mobile phone-based
Xbox One.
relatively affordable Samsung VR platforms bring greater ease of
There is a wide range of devices GearVR headset which retails use, lower cost and a wide range
and price points. More affordable around $50. of apps. VR and AR are expected
devices are now proliferating • Google is another key innovator to rapidly expand to become
although HMDs can still range – it has released a three a primary tool to interface with
from as little as ten to thousands dimensional visual tracking social media and the internet.
of dollars. device for mobile phones Originally content production
and a VR HMD called Google for VR and AR was led by video
• Oculus Rift VR is one of the
Daydream View which retails games but that is broadening.
leaders at present as they were
for around $80. Google also Sony PlayStation VR is a smash
early innovators with major
produces the Google Cardboard hit but newer content is coming
game developers. The headsets
– an extremely low cost item through now also from marketers
retail around $500.
which is a headset that pairs and other corporate creators.
• HTC Vive retails for around with a smartphone and uses
twice the price of Oculus. Some notable content producers
the phone as its screen.
are listed below:
• Microsoft HoloLens is a
wireless Windows 10 device • YouTube – which has a 360 VR
with holographic capability video channel with a rapidly
which integrates data from the growing catalogue of videos to
sensors, handling tasks such watch.
as spatial mapping, gesture • Sports organisations – this
recognition and voice and sector was one of the first to
speech recognition. enter with the use of AR during
live broadcasts. NextVR has
partnered with FOX Sports,
The Google Cardboard headset Live Nation, NBC Sports, HBO/
Golden Boy, Turner Sports,
Cardboard is designed specifically
and CNN to provide scheduled
for using VR apps on Android
programmes and highlights
smartphones and Google
in VR (using either a Google
encourages developers to make
Daydream View or Samsung
and sell VR apps for Google Play.
Gear VR). A user can now
Apple is said to be working on move to the action – such as to
developing several prototype VR behind the goal posts or onto
headsets and they are rumoured the basketball court and game
to be developing a set of smart statistics can be displayed live
glasses that would connect on their devices.
wirelessly to the iPhone like the • The New York Times and other
The Oculus HMD Apple Watch. These would display companies such as Vrse and
dentons.com • 7RYOT (which is owned by The new that laws may struggle a favourite brand’s logo on it
Huffington Post) are producing to keep up. which is created by the user for
VR films, documentaries and their avatar to wear online? The
news. Vrse produces VR music Intellectual Property owner of the logo would consider
videos, films, documentaries that it owned the copyright and
and comedy. NYT VR produces
issues trade mark rights in the logo
VR reports where, for example, With the market for AR and VR on the virtual T-shirt. The usual
viewers can be taken to the growing, the stakes are high – as intellectual property protection
surface of Pluto. indicated by numerous court laws would be expected to apply
proceedings dealing with the in the VR world. In that case,
• Google’s TiltBrush (for HTC
intellectual property rights in AR VR system providers would act
Vive) is a very popular VR art
and VR technology. In February as facilitators to allow users to
creation app which enables
2017 for example, Facebook virtually import or incorporate
virtual painting with light.
was ordered by a US court to music, photographs, and brand
• Jaunt is a VR app which mixes pay $500m to a US video game names or logos into their virtual
films and videos from live company called ZeniMax after experiences. Both the VR platform
concert performances. Facebook’s Oculus VR headset was and its users would need the
• Pornhub needs a mention too found to have infringed ZeniMax’s permission of the brand owner
– it launched a VR category intellectual property rights.9 to use the logo virtually.
in 2016 and this has since IP legal issues get trickier,
After this figure was later reduced
experienced growth in views however, when no such
on appeal, Facebook and
of 302%.8 permission has been obtained.
Zenimax reached a settlement for
One development to watch will an undisclosed amount.10 In this case, the rightful intellectual
be the streaming of VR content. property rights owner will want to
Away from the litigation dealing enforce its rights against the VR
Oculus for instance, has tested
with the rights in the underlying platform and its users.
a VR streaming site.
technological developments, the
legal issues relating to intellectual A practical problem is that VR users
Key legal issues with VR log in from all over the world. They
property in VR and AR can be
and AR categorised into two main areas: are hard to identify and pursue.
The growth in VR and AR is i. those relating to real world Another legal problem also
welcome and exciting but there intellectual property rights surfaces because of the inherent
are a variety of legal issues and and their role in the virtual difference between virtual world
ethical challenges ahead. The or augmented world; and goods and the trade mark owner’s
legal issues include those that real world goods. Virtual world
ii. those relating to virtual world
relate to intellectual property, goods are intangible. Real world
intellectual property and their
privacy, product liability, tax and goods are tangible. A trade mark
role in the real world.
crime – as well as issues which owner may well find the scope of
come about simply because of Real world IP rights in the virtual its trade mark rights covers only
the inherent nature of the new world: real goods. Could the trade mark
technology and its ability to owner still sue for infringement for
influence user behaviours while it Consider, for example, who might the virtual T-shirt despite no actual
immerses them completely in the own the intellectual property T-shirts being produced when its
experience. The technology is so rights in a virtual T-shirt with rights relate to actual T-shirts only?
8. According to “2016 VR Porn Statistics Say VR Is Hot “ dated 30 January 2017 by Steven Paterson at 360-Degree Movies at
http://www.vrcircle.com/post/2016-vr-porn-statistics-say-vr-is-hot
9. See “Facebook ordered to pay $500m in Oculus virtual reality dispute” by James Titcomb dated 2 February 2017 at
http://www.telegraph.co.uk/technology/2017/02/01/facebook-ordered-pay-500m-oculus-virtual-reality-dispute/
10. See “Facebook settles virtual reality lawsuit with ZeniMax over alleged theft of company secrets” by Mishelle Castillo dated
12 December 2018 at https://www.cnbc.com/2018/12/12/facebook-settles-virtual-reality-lawsuit-with-zenimax.html
8 • dentons.comA hurdle to the brand owner their rights to the intellectual has gone so far as to question
obtaining damages for property created by them to the whether VR experiences may ever
infringement also presents itself VR platform. In a few cases, the be “safe” from an ethical point
where sales of real goods are not VR system will agree that users will of view.11 Madary calls for further
impacted by the virtual goods. own their VR creations but grant research into the psychological
How is damage to be proved? back to the VR platform a wide effects of long-term immersion
It may be easier to rely on the licence to be able to exploit the in VR experiences and the way
common law principles of passing user’s intellectual property created avatars can be used. Madary
off claiming consumer confusion through the VR platform. It should has concerns about individuals
about the association of the trade be borne in mind however that who strongly identify with their
mark for the real goods with the users log in to VR platforms from own avatar and the “powerful
virtual world goods. all over the world – and their local unconscious influence” of VR
jurisdiction may have laws that on user behaviour. VR does and
Virtual IP rights in the real override the agreement between can induce particular kinds of
world: the VR platform and the user and emotions and can cause suffering
Generally, under intellectual govern the ownership and use of as users will experience VR as real
property laws, a creator of content the intellectual property. even if they know they are in a
owns the intellectual property in virtual environment.
As VR facilitates the creation of
it. There are some exceptions, but very personal virtual worlds by the It is these inherent qualities of
this is the usual position unless the user –users’ creations of different VR that causes a reconsideration
creator has, by written agreement, identities and an alternate world of the traditional approaches to
varied from it and assigned his or have the potential to be really crime in the VR world. There are
her intellectual property rights in novel. Clarity about the ownership numerous notorious examples.12
their creation to someone else. of virtual assets in terms of use
agreements with users is critical. A female player called Jordan
A legal issue arising from AR
Because of the deeply personal Belamire playing a VR game called
relates to who owns the rights to
nature of virtual experiences and QuiVr had her avatar’s virtual
geo-tag real world locations. An
the capacity of users to identify crotch grabbed by another player
owner of a famous landmark may
with their virtual worlds, there named BigBro442 while shooting
well want to claim rights as to how
may be pressure in the future for zombies.13 For Ms Belamire, the
that landmark is to be identified
intellectual property laws which virtual groping was the same as
or have a grievance if false
rebalance the standard allocation being groped in real life due to the
information is given about it.
of the respective VR platforms’ or psychological trauma inflicted.
There is no doubt however that users’ intellectual property rights. The criminal code would not treat
VR, rather than AR, has excited virtual assaults in the same way as
real life assaults involving actual
more comment about the Virtual crimes
complex intellectual property physical contact. This may change
issues as VR allows users greater The inherent nature of VR is said in the future as the VR technology
scope to create images, virtual to lead to ethical challenges which develops in sophistication. Body
property or other content by in turn an create fresh legal issues suit technology is developing
through the VR system. when it comes to assessing to the point where the user may
virtual crime. feel a kick or punch. VR content
Most VR platforms will have terms providers are already considering
of use where users agree to assign A blogger for the European whether to provide in their
Commission, Michael Madary,
11. See “Are Virtual Reality experiences safe from an ethical point of view?” by Michael Madary dated 9 March 2016 at
https://ec.europa.eu/digital-single-market/en/blog/are-virtual-reality-experiences-safe-ethical-point-view
12. See “Sexual harassment in virtual reality feels all too real – ‘it’s creepy beyond creepy’” by Julia Carrie Wong dated 26 October 2016
writing for The Guardian at https://www.theguardian.com/technology/2016/oct/26/virtual-reality-sexual-harassment-online-groping-quivr
13. See, for example, “My first virtual reality groping” by Jordan Belamire dated 21 October 2016 at https://mic.com/articles/157415/
my-first-virtual-reality-groping-sexual-assault-in-vr-harassment-in-tech-jordan-belamire#.3x4yl7Kt5
dentons.com • 9software code solutions against of thefts of virtual currency and expect to see more regulation in
virtual harassment. Possibilities digital assets. Popular games such this area in the future.
include virtual shields, expanded as Second Life and RuneScape
super powers or extended allow ‘residents’ to buy and sell Taxing the virtual
personal safe havens to prevent new virtual land, run businesses
cyber assault. and trade with virtual currency Although virtual assets are difficult
that can be converted to and from to deal with under traditional
In 2013, an English game player real currency. criminal laws, that does not stop
named Steven Burrell was governments looking to tax them.
convicted after he “stole” virtual The European Union Agency The United States of America’s
property.14 Burrell stole virtual for Network and Information tax authority (the IRS) has issued
items (such as swords, capes, Security (ENISA) which is the guidance on the treatment of
gold and armour) which were centre of network and information digital currencies in 201417 which
virtually valuable in a game called security expertise for the EU has clarified that the IRS treats digital
RuneScape after he hacked into called for regulation following currencies as capital assets which
gamers’ profiles.He then sold the proliferation of “crypto- are subject to capital gains taxes.
these virtual assets for money currencies” — that is digital virtual Similarly, Russian authorities
in fan forums for the game. He currencies such as Litecoin, have also produced guidance
was convicted, however, for Dogecoin, Ripple and Bitcoin. relating to digital currencies18
hacking rather than theft as the Bitcoin is a decentralised peer- as has Japan.19 Other countries
items he stole only existed in the to-peer payment system from are grappling with the issues of
virtual world of the game. The Hong Kong-based “crypto- virtual transactions too - such as
virtual victims lost their gaming currency” exchange Bitfinex Australia who recently ended sales
resources but had no redress. where electronic payments tax on digital currencies following
are performed by generating a policy decision to encourage
In 2017,15 two men pleaded guilty transactions that transfer Bitcoin investment by treating Bitcoins as
to running an illegal betting coins (BTCs) among Bitcoin peers. a form of barter arrangement.
website connected to a FIFA The regulatory environment is still
VR game called FUT Galaxy. grappling with how and whether The popularity of Pokémon Go has
They let players transfer virtual these crypto-currencies are to be led to growing calls for AR and VR
currency out of the game and recognised as a form of money.16 transactions to be taxed although
use that to bet on real-life football some thorny legal issues remain to
As illustrated by the Burrell case
games. Winnings would then be be worked through:
discussed above, they are not a
transferred back in the gamers’ form of real property which can
accounts in the FIFA game – so • How should AR/VR content
be stolen – the issues are complex
the FIFA virtual currency ended up and transactions characterised
when they are not legal tender
having real world value. for the purpose of tax – as
of any government or generally software, a digital product,
The ability to purchase digital issued or controlled by centralised a service or intangible or
assets that might have real world bodies. As existing criminal laws something else?
value that has led to a growth do not cope well with VR, we
14. See “Computer hacker stole virtual property from online fantasy gamers to pay off REAL gambling debts” by Dan Bloom of Mail
Online dated 6 December 2013 at http://www.dailymail.co.uk/news/article-2519425/Computer-hacker-stole-virtual-property-online-fan-
tasy-gamers-pay-REAL-gambling-debts.html#ixzz4Xed19tYh
15. BBC News Online “YouTuber admits Fifa gambling offences” dated 6 February 2017 at http://www.bbc.co.uk/news/technology-38879969
16. As noted in “What The Heck Is Bitcoin? The Law Struggles For An Answer” by Daniel Fisher of Forbes dated 26 August 2016 at
http://www.forbes.com/sites/danielfisher/2016/08/26/what-the-heck-is-bitcoin-the-law-struggles/#1902544bafaf
17. At https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance
18. As reported in “Bitcoin legal by default in Russia, confirms new federal tax document” by Cryptocoins News on 1 December 2016 at
http://www.ewdn.com/2016/12/01/bitcoin-legal-by-default-in-russia-confirms-new-federal-tax-document/
19. See “To tax or not to tax? Japan debates how to handle bitcoin” by Toshihisa Kinouchi dated 1 March 2016 at
http://asia.nikkei.com/Politics-Economy/Economy/To-tax-or-not-to-tax-Japan-debates-how-to-handle-bitcoin
10 • dentons.com• What exactly is being exchange of Bitcoins as a pure At the same time as there are
purchased and how in the payment instrument was sales more stringent privacy laws,
virtual world e.g. software, tax exempt.21 the advertising and business
virtual currency, digital assets models of many companies are
Digital activities are growing.
or something else? increasingly relying on obtaining
Additionally intellectual property a unified profile of a user. VR
• Where precisely do transactions owning entities in the VR and AR platforms store and process
take place for tax purposes space have attracted negative substantial amounts of personal
when the identity or location publicity for shifting revenues into data about individual users. Some
of the user, owner of the low tax jurisdictions. It seems likely data may be more sensitive than
intellectual property is not that there will be a reassessment others. Consider, for example,
clear or where the user may of the tax rules for VR and AR. if a user’s reaction times or ease
download in one jurisdiction but Future taxing authorities may well of movement could be sensitive
transact virtually in another? take the position that an extensive health data or if facial recognition
It is still unclear how the European collection of personal data in data could be sensitive personal
Union will progress matters of tax a country triggers a taxable nexus data under data privacy laws.
of the digital world. In 2014, the in that country — irrespective Eye tracking would be considered
European Commission established of whether digital products, more intrusive than click
a High Level Expert Group on streamed content, virtual currency tracking or cookies.
Taxation of the Digital Economy or other types of virtual assets
to examine ways of taxing the are involved. VR and AR providers will need
digital economy in the EU.20 One to assess if they are excessively
of the legal issues considered was Virtual privacy collecting, using, and sharing
whether the collection, processing a wide range of users’ personal
With the coming of reform of the information without the
and monetising of data should
privacy laws in the European Union,22 appropriate consents in place.
be reflected in the definition
the legal consequences of data Many VR games and applications
of a taxable nexus. By way of
collection and sharing practices, focus on shared experiences
background, a taxable nexus
user location tracking and privacy – which means that users may
means that there is a taxable
practices and policies associated be sharing their details, such
presence to which profits could
with AR and VR are significant. It as location, with other users.
be attributed and so taxes
is important to get this area right Can a user’s VR footprint be
could be levied.
– the new General Data Protection linked to their real identification?
The Group’s report recommended Regulation in the European Union
no change to the current tax rules imposes significant fines and Difficult choices are ahead.
because they then considered the penalties for breach. Hardware, Insufficient or excessive
VAT systems would adequately software and content providers will restrictions on VR and AR users
address revenue concerns of need to assess the impact of VR can lead to backlash. Witness how
countries where digital services and AR on the privacy of users and Facebook has needed to adjust
and products are consumed. ensure that adequate safeguards its privacy settings for users many
However, that assessment was are put into place for the type of times in recent times. In 2016,
made before the 2015 Court of personal data being processed so The Independent newspaper
Justice of the European Union that they are compliant with the claimed that Oculus Rift’s terms
decision which held that the relevant privacy laws. and conditions allowed Facebook
to monitor users’ movements and
20. See http://ec.europa.eu/taxation_customs/business/company-tax/tax-good-governance/expert-group-taxation-digital-economy_en
21. In case C-264/14 Skatteverket v David Hedqvist (22 October 2015) where the CJEU held that the purchase and sale of Bitcoin units
were exempt transactions.
22. See the Dentons article “EU Data Protection Reform: Political Agreement” by Nick Graham on 16 December 2015 at http://www.
dentons.com/en/insights/alerts/2015/december/16/eu-data-protection-reform-political-agreement and his accompanying blog at http://
www.privacyandcybersecuritylaw.com/
dentons.com • 11use it for advertising.23 Oculus VR platform developer or provider? standard for VR despite the fact
responded at the time that it didn’t VR or AR system providers usually that violent and sexual content
share any information with its ensure that their licences do not can have a greater impact on
owner, Facebook, but expressed permit users to break the law the VR user than other modes of
that it may have a desire in the and they usually disclaim the content such as ordinary video.
future to do so. platform’s own liability if users do The VR industry has some self-
so. It remains to be seen if more regulation. For example, Oculus
We expect sensitivity about this would need to be done by the AR pre-approves VR apps and gives
issue will continue to grow and providers to avoid liability. There experiences a “comfort” rating
the issues will be more complex have been reports of distracted in its app store according to how
because of VR and AR. It is not gamers walking in front of vehicles terrifying or sickening the content
hard to imagine a situation where to catch Pokémon characters or will make a user feel.
a house is geo-tagged by an AR mobile phones being stolen while
user in a global database without gamers were in unsafe locations
We would not be surprised to
the home owner’s permission. which they were encouraged to
see extensions of the current
Imagine if the house was travel to when playing the game.
classification standards regime
previously occupied by a criminal to deal with the inherent nature
AR users playing at sensitive
and the geo-tagger was reckless of VR experiences and to ensure
sites (such as churches or war
or malicious in applying the old memorials) have also attracted
that this is taken into account
information about it being the negative publicity.
when content is rated. The
home of a criminal to it? Current addictive nature of VR may also
data protection in the European VR and AR systems should in cause regulators in the future to
Union provides data subjects the meantime, at the minimum, consider regimes, such as those
with a right to rectification of or incorporate appropriate warnings established for the gambling
erasure of their incorrect personal and health and safety notices. industry, to require VR and AR
data – but could that extend to Policing of virtual locations and companies to identify and help
processing data about a location acting on trouble spots may be problem users.
itself which is only coincidentally also necessary – or VR providers
associated with an individual? may risk claims being made What does the future hold?
Current privacy legislation does against them for negligence.
not expressly deal adequately For VR and AR, two clear
with these issues. Classification of VR megatrends are emerging.
content 1. Mobile phone based VR
Virtual liability platforms will continue to grow
VR and AR are no different to as they are easier to use, lower
An interesting aspect of AR is
the real world insofar as their cost and there is a proliferation
that the virtual and the real are
potential for products with of applications.
linked which raises the legal issue
sexual or violent uses. VR has
of who is responsible for injuries 2. More users will use AR to
embraced teledildonics — a
or trespass associated with the access existing content and
method for communicating touch
use of the technology. This is a services such as email or
electronically. The sex content
more significant issue if users can checking the best route to a
provider, PornHub, recently
interact with each other. Could location —and enjoy having
announced a VR product which
they threaten or hurt each other? dynamic AR data delivered
is a “twerking butt” which creates
the illusion of sex for a user. directly to their device.
Pokémon Go was criticised for its
potential to encourage trespass Below we list the top five forces
Such developments serve to
onto private land. Could a user’s that we think will shape events
highlight that, at least in the UK,
trespass incur liability for the VR in the VR and AR sectors in the
there is no separate classification
near term.
23. See The Independent’s article “Oculus Rift terms and conditions allow Facebook to monitor users’ movements and use it for adver-
tising” dated 4 April 2016 by Andrew Griffin at http://www.independent.co.uk/life-style/gadgets-and-tech/news/oculus-rift-terms-and-
conditions-allow-company-to-monitor-users-movements-and-use-it-for-advertising-a6967216.html
12 • dentons.comI. Bandwidth demand: The In part, the move to 5G may humans who are capable of 120
coming of the VR and AR era assist to grow VR as this will pixel per degree, 230-degree
requires responsive media involve speeds that will be up field of view and a variable
which changes content to 100 times faster than most focus.29 The future will involve
dynamically to fit a user’s existing 4G networks, although better lenses, less distortion
situation and engagement. there remain some concerns and a marked increase in eye
Because of this, it is relatively about how far the signals tracking and focus to take into
easy to predict that there can travel or propagate. Fibre account the way the human eye
will be significant issues with networks may continue to changes shape to focus when
bandwidth requirements. deliver content. However, it is looking at different distances.
traffic management solutions, Current research is focusing
Without moving your head, your compression algorithms and on “foveated rendering” which
eyes can move across a field investment in low latency, high mimics human vision by only
of view of at least 150 degrees throughput networks28 that are focusing on a small part of an
horizontally and 120 degrees likely to come into their own as image. In the same way future
vertically within 100 milliseconds. the key for “last-mile” networks VR will render pixels in the area
This means the ultimate display to cope with the demands of of focus only.
will need around 720 million VR and AR.
pixels for full coverage. Adding At present, streaming data to
II. Wireless: Wireless is the next
head and body movement headsets wirelessly in high
big thing. Today’s premium VR
exponentially increases the pixel resolution video through
HMDs, such as the Oculus Rift
requirement – even for a static existing wireless systems such
and HTC Vive, use cables to
image.24 A Forbes blogger, Bo as Wi-Fi is problematic as
send high definition video to a
Begole,25 calculates there will there is a need to compress
user which limits movement.
be a need for 5.2 gigabits per data to fit into the available
VR users are demanding free
second of network throughput bandwidth to ensure there
hands, bodies and heads to
soon to deal with VR.26 Begole is is no lag. Constraints with
use as manipulators of the
not alone raising flags about VR bandwidth cause lag and that
technology.
being the next major bandwidth kills the immersive effect. There
issue.27 This need also comes is some research however into
This will happen at the same
at a time when competition the application of a different
time as improvements in field
for bandwidth is intensifying wireless technology (called
of view, resolution and pixel
because of the internet of millimetre wave or mm Wave)
density. At present, most HMDs
things (IOT) and the number of which is in a higher band of the
deliver around 15 pixels per
connected devices and general frequency spectrum than that
degree, a 90-degree field of
move to streaming. Demands used by Wi-Fi.30
view and a fixed 2m depth
will continue to grow for more
of focus – which is inferior to
bandwidth at faster speeds.
24. See “Why The Internet Pipes Will Burst When Virtual Reality Takes Off” dated 9 February 2016 by Bo Begole at Forbes at
http://www.forbes.com/sites/valleyvoices/2016/02/09/why-the-internet-pipes-will-burst-if-virtual-reality-takes-off/#f73560464e8c
25. Bo Begole is Vice President and global head of Huawei Technologies’ Media Lab.
26. As per footnote 22 above.
27. See “ARRIS Gives Us a Hint of the Bandwidth Requirements for VR” at The Online Reporter dated 17 June 2016 at
http://www.onlinereporter.com/2016/06/17/arris-gives-us-hint-bandwidth-requirements-vr/
28. See “Virtual Reality Is A Good News, But Telecom Operators Still Have A Road Long To Travel” dated 16 February 2016 by Alexandre
Pelletier (Head of innovation at Tata Communications) at Gizmodo India at http://www.gizmodo.in/indiamodo/Virtual-Reality-Is-A-Good-
News-But-Telecom-Operators-Still-Have-A-Road-Long-To-Travel/articleshow/51011186.cms
29. See “This is what virtual reality will (probably) look like in 2021” 7 October 2016 by Hugh Langley at Wareable at
https://www.wareable.com/vr/michael-abrash-what-vr-will-look-like-in-2021
30. See “How high-end virtual reality headsets could lose the cables” by the New Scientist author, Hal Hodson, dated 14 November
2016 at https://www.newscientist.com/article/2112622-how-high-end-virtual-reality-headsets-could-lose-the-cables/
dentons.com • 13III. VR and AR for the enterprise: simulated movement in three range of the sensation-inducing
As VR and AR are concepts that dimensions. Simply, humans can nozzles and their face is blasted
many people get excited about, interpret the available data in VR with hot air when near a virtual
they will become common in more easily. fire or with water if near a
the corporate setting.31 AR and virtual waterfall. FEELREAL has
VR are no longer just for gamers All this means headaches and removable smell cartridges in
and consumers. Layering greater investment for the seven basic odours: Jungle,
contextual information over average Chief Technology Burning Rubber, Flowers,
a physical environment for a Officer – not just in dealing with Ocean, Fire, Gunpowder and
presentation is an attractive an explosion of online learning. Aphrodisiacs or FEELREAL will
business proposition. AR CTOs need to be thinking now custom make a smell for you.
is relatively low cost and about their organisations’ future
being used in a lot of training needs for VR and AR content The potential is mind boggling.
applications. VR will become an creation, bandwidth needs and In 2011, the University of Tokyo
aid to collaboration and analysis integration with legacy systems. conducted an experiment and
in companies. Imagine people found that a VR scent system
IV. Integration of VR and AR –
remotely joining a meeting by fooled the flavour sense.36 The
“Mixed Reality”: The future
virtually including their avatar to University concluded that what
will also mean Augmented VR
exchange information and ideas. you see and smell is what you
(sometimes called Mixed VR or
taste. The experiment involved
Hybrid VR) – where virtual and
Ford Motor Company is using a VR system which was able to
real are mixed. Mixed VR will
VR for designing vehicles at trick people eating a plain biscuit
enable the virtual world and the
the company’s Immersion Lab. into thinking the biscuit was of
real world to combine so that an
VR’s business applications another flavour. Similarly another
artificially generated world will
will accelerate with “Big Data” VR experiment, called Project
be superimposed on the real
initiatives.32 NewVantage Nourished, fooled people into
environment. Imagine remote
Partners’ 2016 Big Data thinking they were eating sushi
colleagues joining your real
Executive Survey of Fortune although it was only gelatine
meeting as an avatar and that
1000 companies,33 noting the cubes – because a smell
they appear solid in front of you.
push in large companies for atomiser misted scent while they
Or if you could pin, move, hold,
more analytic tools, predicted were eating and looking at the
shrink or enlarge or flip or flop
that VR will have an impact. “sushi” with their VR headset on.
virtual items in a real room in
This is because there are
front of the group.”
inherent limitations in the VR may well be the next big
amount of data that humans V. Senses: Finally, VR hardware will thing for dieters and gourmet
can absorbed through a flat allows you to “feel” or “smell” experiences. VR could dispose
computer screen. That can be in the VR world.34 One gadget, of unwanted side effects from
overcome by immersing a user called “FEELREAL”,35 attaches foods – such as allergens or
in a digitally created space with to a HMD. The user then puts kilojoules – yet still allow them to
a 360-degree field of vision and his or her nose or mouth within be enjoyed to the full.
31. See “Augmented and virtual reality make a play for the enterprise” by Nicole Laskowski at TechTarget dated February 2016 at
http://searchcio.techtarget.com/opinion/Augmented-and-virtual-reality-make-a-play-for-the-enterprise
32. According to “Beyond Entertainment: Enterprise Big Data Modeling with Virtual Reality” dated 20 May 2016 by Meg Cater’ a blogger
with Signiant at http://www.signiant.com/blog/beyond-entertainment-enterprise-big-data-modeling-with-virtual-reality/
33. See NewVantage Partners “Big Data Executive Survey - An Update on the Adoption of Big Data in the Fortune 1000” at
http://newvantage.com/wp-content/uploads/2016/01/Big-Data-Executive-Survey-2016-Findings-FINAL.pdf
34. See “FeelReal Is An Oculus Rift Add-On That Lets You Smell Virtual Reality” by Josh Engen dated February 2016 at
http://www.cinemablend.com/games/
35. See http://feelreal.com/
36. See “Virtual-Reality Scent System Fools Flavor Sense” by John Boyd dated 18 April 2011 at
http://spectrum.ieee.org/computing/embedded-systems/virtualreality-scent-system-fools-flavor-sense
14 • dentons.comConclusion
In summary, the future for AR and VR looks bright
and interesting although there are a number of legal
issues to overcome. We will continue to update this
article and suggest you bookmark the Dentons web
page for updates.
Contacts
If you have any queries or need advice or assistance in understanding the legal issues
associated with VR or AR or any other technology, please contact:
Robyn Chatwood
Partner
D +61 3 9194 8330
robyn.chatwood@dentons.com
dentons.com • 15ABOUT DENTONS Dentons is the world's largest law firm, delivering quality and value to clients around the globe. Dentons is a leader on the Acritas Global Elite Brand Index, a BTI Client Service 30 Award winner and recognized by prominent business and legal publications for its innovations in client service, including founding Nextlaw Labs and the Nextlaw Global Referral Network. Dentons' polycentric approach and world-class talent challenge the status quo to advance client interests in the communities in which we live and work. dentons.com © 2019 Dentons. Dentons is a global legal practice providing client services worldwide through its member firms and affiliates. This publication is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. Please see dentons.com for Legal Notices. CSBrand-1856-VR-AR brochure_09 — 08/10/2019
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