Imagine a Hyper-Reality scenario, where boundaries between our physical and virtual realities are extremely blurry. A world where immersive technologies like virtual reality (VR) and augmented reality (AR) have taken over every aspect of our daily lives.[i] A world with endless possibilities, where users are constantly interacting with pop-up ads, suggestions, and virtual objects presenting a customized version of their ‘reality’. Though not yet a reality, it it isn’t too far-fetched to imagine a future where a user looking at a Macy’s building finds a digitally rendered Nike ad superimposed on the building. All this Hyper-Reality future requires is a device like AR-enabled glasses, or a smartphone with AR applications which record the user’s location and preferences.
In 2014, Oculus CEO Brendan Iribe described virtual reality (VR) as the ‘final computer platform.’ This year, Facebook endeavored to aggressively integrate augmented reality (AR) effects with its camera app. Mark Zuckerberg announced that Facebook’s end vision for AR is ‘lightweight glasses that display virtual objects in the real world.’ The world witnessed in awe as Apple showed off incredible AR demos of its new ARKit platform. AR and VR technology is clearly a current battleground for tech giants to establish their supremacy. There is a parallel trend in the advertising industry to catch up with the latest technological advances. An increasing number of advertisers, marketers, and brands are experimenting with emerging forms of immersive reality to prepare for the AR and VR headsets of the future.[ii]
Until recently, AR technology was seen as a nascent and immature technology with significant future potential.[iii] However, Pokémon Go—a location-based mobile game which allowed users to locate and capture virtual Pokémon creatures and exposed many users to AR technology for the first time—proved to be a smashing success in its initial days. It sent millions of players across the world hunting for virtual Pokémon, and engaged daily active users like never before, if only temporarily. The short-lived ‘Gotta Catch ‘Em all’ fantasy presented remarkable marketing opportunities for sales promotions, sponsorships, and location-based advertising. Aside from express partnership and sponsorship arrangements in the game itself, many small businesses used built-in features of the game to ‘lure’ customers to their establishments. Pokémon Go’s unique features include a mechanism to buy and set ‘lures’ and Pokéstops.[iv] Pokéstops are typically important locations where players can collect useful gameplay resources. At these locations, users can pay to set ‘lures’ for a limited time window, during which the game produces more Pokémon for capture.[v] A number of establishments utilized this as an opportunity to increase their foot traffic. As much as these developments announced the arrival of next-generation marketing strategies, they also exposed the legal system’s limited ability to deal with the complex challenges presented by the merger of physical and digital realities. In addition to distraction-related deaths and accidents attributed to the game, the issue of ‘virtual trespass’ came to the fore. Users, completely immersed and engaged, often did not hesitate to trespass on private property or restricted areas in order to catch the ever-elusive Pokémon.
From an advertising perspective, the rise of AR and VR technologies might complement the shift towards native advertising, a paid media strategy which integrates ads into the form and content of the platform where they appear. Online advertising today relies largely on pop-up ads, retargeting customers based on their past purchases, and spamming search engine feeds with clickbait articles.[vi] Immersive reality could make such advertising even more potent by increasing user engagement. For instance, AR ads could not only generate curiosity, but respond to physical motion and promote interaction with users, as well. The Federal Trade Commission (FTC) has already begun to address VR in the context of ‘in-game advertising.’[vii] Here, the rule of thumb is to let users know when they are viewing an advertisement. The real-world disclosure requirements should arguably apply to the virtual world as well.[viii] However, what happens when the distinction between advertising content and editorial content is difficult to draw? Typically, if a game format integrates traditional advertising tools—like billboards in the virtual world—disclosure requirements do not apply. But what if a gamer interacts with these elements and is redirected to a brand’s website? As discussed above, brands are already luring AR gamers to physical stores in order to complete in-game tasks. In response, the FTC should release a clear set of guidelines addressing location-based advertising through AR media.
VR technologies sometimes mimic real-world situations, recreating famous buildings or landmark locations. This compels the legal system to consider IP issues like trademark and trade dress infringement. Case law on these matters indicates that this use or modification of an existing trademark may qualify for First Amendment protection. For example, In the case of Sherwood 48 Associates v. Sony Corp. of America[ix], Sony took a number of digital pictures of Times Square, which included some of the plaintiffs’ buildings for use in its motion picture, “Spiderman”. It used these photos to create a modified version of Times Square, in which Plaintiffs’ buildings were briefly visible in the background.
The building owners sued, with claims of trademark and trade dress infringement. The court dismissed these claims, granting First Amendment protection to Sony’s artistic work, and holding that there was no likelihood of confusion. The scene in question, the court held, served the artistic purpose of orienting the audience within a particular location. Similarly, E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc.[x] dealt with the modification of a trademarked entity; this time in a video game context. The video game aimed to recreate a version of East Los Angeles, and in doing so depicted Plaintiff’s real-world strip club ‘Play Pen’ as ’Pig Pen’. The plaintiff sued for trademark infringement, alleging that use of Play Pen’s distinctive logo and trade dress without authorization insinuated that Play Pen had endorsed the game, creating a likelihood of confusion. The court held that the modification of Play Pen’s mark was not explicitly misleading, and granted First Amendment protection to the game’s makers, noting that a realistic depiction of East Los Angeles was central to their artistic goal. From this jurisprudence arises the question of whether all immersive reality ads should receive similar protection. As we have seen, brand placements and location-based advertising are enormously effective. We are moving towards an era in which virtual spaces will become increasingly valuable and relevant, much like internet domain names in the era of the “Dotcom boom”. Around this time, an activity called “cybersquatting” emerged, wherein “squatters” deliberately registered known brand names as domain names with the intent of selling them to the brand owners.[xi] The legal community should consider looking at these apps not through the lens of regulating entertainment or gaming, but as very real and significant marketing channels.
Consider the hypothetical scenario above, in which a user looking at Macy’s is prompted with an ad superimposed on the building. This could be similar to the trademark infringement question addressed in the ‘keyword advertising’ cases, in which advertisers were sued for bidding for potentially trademarked keywords in online ad auctions. Could there be a contributory infringement claim against the platforms hosting AR or VR apps that facilitate immersive advertising? The general understanding is that a purely algorithmic suggestion to an advertiser does not amount to active inducement[xii], but the Fourth Circuit’s position in the Rosetta Stone case, which inquired whether Google’s sale of other companies’ potentially trademarked keywords could lead to trademark infringement liability, leaves some ambiguity in trademark law.[xiii] Although the District Court granted Google’s motion to dismiss, the Fourth Circuit reinstated claims for direct infringement, contributory infringement, and trademark dilution.[xiv] The undisclosed terms of settlement have led to further ambiguity.[xv]
Professor Joshua Fairfield, a law and technology scholar specializing in digital property and virtual communities, argues that virtual worlds should not be deemed legally separate from the real world.[xvi] As he sees it, “the world may be virtual, but the economic, artistic, and even romantic lives of the participants are quite real.”[xvii] Immersive technologies, though still developing, could potentially lead to difficulty in distinguishing the real from the virtual, rendering the lens of analysis used for previous technologies inadequate. Any regulation must be able to take into account any psycho-social implications of a virtual or immersive environment that can be used to induce particular emotions into its users. Some women, for example, have experienced sexual assault within virtual environments, resulting in significant real world trauma. How we regulate the AR/VR advertising today will have a significant influence on how law will treat virtual spaces for extremely important issues of privacy and trespass in the future.
[i] Hyper-Reality is a concept film by Keiichi Matsuda. It represents a kaleidoscopic peak into the future where it is hard to distinguish between actual and artificial and/or augmented reality. Available at: www.hyper-reality.co
[ii] Jay Samit, Augmented Reality: Marketing’s Trillion-Dollar Opportunity, available at: http://adage.com/article/deloitte-digital/augmented-reality-marketing-s-trillion-dollar-opportunity/309678/.
[iii] P. Connolly et al, Augmented Reality Effectiveness in Advertising, available at: https://pdfs.semanticscholar.org/cfb2/abc559461ce6182fed1cc0129e851a368ab8.pdf.
[iv] Jordan Frith, The Digital “Lure”: Small Businesses and Pokémon Go, available at: http://journals.sagepub.com/doi/pdf/10.1177/2050157916677861.
[ix] 213 F. Supp. 2d 376 (S.D.N.Y. 2002)
[x] 444 F. Supp. 2d 1012 (C.D. Cal. 2006)
[xii] Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531, 539 (E.D. Va. 2010).
[xiii] Joel Zand, Rosetta Stone and Google Settle Trademark Lawsuit, available at: https://lawblog.justia.com/2012/11/05/rosetta-stone-and-google-settle-trademark-lawsuit/.
[xvi] Joshua A.T. Fairfield, Mixed Reality: How the Laws of Virtual Worlds Govern Everyday Life, 27 Berkeley Tech. L.J. (2014). Available at: http://scholarship.law.berkeley.edu/btlj/vol27/iss1/3