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The Metaverse: A Legal Primer for the Health Care Industry

The metaverse is widely regarded as the next frontier in digital commerce, with businesses across all industries spending millions of dollars to acquire a digital presence for positioning as market leaders. While it offers transformational opportunities, the metaverse also presents unique legal challenges. This Alert highlights a few key legal issues stakeholders in the health care industry should consider before entering the marketplace.
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Overview of the Metaverse

At its core, the metaverse is the next generation of the internet, promising immersive, three-dimensional experiences with vibrant digital marketplaces and a strong social component. In these marketplaces, businesses and consumers typically transact using cryptocurrencies—digital forms of exchange that are distributed within a decentralized system using secure cryptographic methods—and non-fungible tokens (NFTs)—unique digital properties that are created, or “minted,” from real-world objects or creations, such as art and music, in exchange for cryptocurrency or other NFTs. Facilitating these transactions are blockchains—digital ledgers that record transactions between two parties efficiently and in a verifiable and permanent way. While some elements of the metaverse remain aspirational, businesses and consumers have begun flocking to metaverse platforms and spending significant sums on the acquisition of digital assets.

The Business Case for the Health Care Industry

Health care providers are well-positioned to establish a foothold in the metaverse, building from the technological advances that are already evident across the health care sector. Artificial intelligence (AI), for example, is facilitating a more rapid and accurate review and translation of mammograms, minimizing unnecessary biopsies to detect breast cancer. Virtual reality (VR) is providing surgeons with three-dimensional imagery to plan and perform surgeries, and is giving physical therapists access to game-based therapies to engage and speed up recovery for stroke patients. For their part, patients are becoming increasingly accustomed to wearable devices, apps, and other technologies that provide real-time analytics and recommendations to promote informed health decision-making.

During the COVID-19 pandemic, the health care industry made tremendous advances in growing its digital footprint, as usage of telehealth and other virtual modalities of care significantly expanded among providers and patients. A 2021 report by McKinsey & Company found that telehealth utilization has increased to stable levels that are 38 times higher than pre-pandemic levels, with utilization rates now ranging from 13% to 17% across medical specialties. Meanwhile, the entry of tech companies, venture capital firms, and other non-traditional industry actors into the health care sector has contributed to substantial growth in virtual care investments. As the McKinsey report noted, total venture capital investment in the digital health space in the first half of 2021 was $14.7 billion — more than all such investments in 2020 and nearly doubled the total investments in 2019.

The metaverse could massively accelerate these trends, offering a much more immersive and interactive experience than traditional telehealth has afforded. With the combined power of ever more sophisticated AI, VR, and other innovations, including augmented reality, the Internet of Things (IoT), quantum computing, and robotics, the metaverse could potentially enable:

  • A physician to conduct a consultation through the projection of a three-dimensional hologram of the physician to a patient or physician at another location.
  • A digital “twin” of a patient to be created and mapped, using genetic and other data about the patient, to predict the potential short-term and long-term complications the patient may experience from surgery or other treatments.
  • Students and trainees to participate in an educational environment in which they are virtually embedded in an operating room to observe surgical procedures.
  • The use of blockchains to break down barriers across electronic health record systems and enable rapid, secure sharing of health information between providers and patients.

To these ends, the metaverse could potentially improve the quality of care and, in turn, the health outcomes of individual patients. It could also potentially create efficiencies that decrease the costs and expand access to care.

Despite the many uncertainties that exist, for now, some health care industry stakeholders are preparing for their future in the metaverse. Earlier this year, for example, CVS was noted as the first pharmacy to file for a trademark for the sale of goods and services in the metaverse. The filing described the company’s ambitions to provide downloadable prescription drugs for use in online virtual worlds and various types of health care services, such as non-emergency medical treatment services and nutrition counseling, in virtual reality and augmented reality environments.

Legal Considerations

Before entering a metaverse platform, health care providers and professionals should consider the following:

  1. Custody of digital assets. Because of their digital character, digital assets such as cryptocurrency and NFTs are uniquely vulnerable to loss and theft. Before acquiring cryptocurrency or NFTs, providers should set up a secure blockchain wallet and adopt appropriate access and security controls.
  1. Dedicated legal entity. Providers should consider creating a subsidiary or affiliate to hold digital assets, shield other parts of their business from metaverse-related liability, and address potential taxation issues.
  1. Selecting a platform. Each metaverse platform has its advantages and disadvantages. Some, including Roblox and Fortnite, offer access to a greater population of users but generally give businesses less control over content within the platforms. Others, such as Decentraland and the Sandbox, provide businesses with greater control but smaller audiences and higher barriers to entry. No dominant platform has yet emerged that is specifically designed for interactions involving health care providers. As current platforms compete for new entrants from various industries and occupations, providers should consider the optimal amount of control and visibility they wish to maintain when committing to a particular platform.
  1. IP registration. CVS’s recent trademark filing underscores that providers should consider filing trademark applications covering core metaverse goods or services and securing any available blockchain domains in order to facilitate metaverse payments. Trademark protection should also extend to providers’ individualized metaverse presence. Given the accelerating adoption of blockchain domains along with limited dispute resolution recourse available, providers should consider securing intellectual property rights now.
  1. IP protection and enforcement. The decentralized nature of the metaverse poses a significant challenge to businesses and intellectual property owners that are used to having predictable enforcement mechanisms to protect their legal interests. Before proceeding with blockchain-based transactions, including purchasing or minting NFTs, providers need to understand that content recorded on a blockchain is there permanently and cannot be deleted. Restrictions on the use and resale of an NFT must be carefully considered and implemented prior to minting because once the content is on the blockchain, there is little recourse.
  1. Reserving metaverse rights. Businesses 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, if any, their licensees maintain for metaverse-related uses. Moving forward, brand owners should expressly reserve their rights for metaverse-related uses and exercise caution before authorizing any third party to deploy the brand owner’s intellectual property on the brand owner’s behalf.

In addition to these considerations, health care providers will face unique legal issues in the metaverse as they navigate the complex health care regulatory framework. Questions that will likely arise include:

  • How will traditional state-based licensure requirements apply to providers in their metaverse interactions with patients and other providers who are physically located in other states and countries?
  • Is blockchain technology conducive to the sharing of health data with patients and other providers in the metaverse in a manner that complies with federal and state data privacy and security requirements?
  • Will governmental and commercial payor programs cover products and services in the metaverse, and how will fraud and abuse laws and other regulatory requirements apply to providers in the metaverse who are enrolled in those programs?

Variations of these questions emerged during the COVID-19 pandemic as providers pivoted quickly to telehealth in their efforts to maintain continuity of care while mitigating transmission of the virus. This pivot was enabled in large part by regulatory waivers and relaxed enforcement of federal and state legal requirements that otherwise could have hindered such a quick scaling of the virtual care infrastructure in the United States. Even as COVID-19 appears to be evolving from a pandemic to an endemic phase, many of these regulatory flexibilities remain in place, raising concerns about whether the gains in digital health will be eroded if and when these flexibilities terminate. How policymakers, regulators, and industry stakeholders address these concerns in the long term is important not only to current telehealth and digital health trends that accelerated during the pandemic but also to the regulatory paradigm that could develop in the metaverse.

Key Takeaways

The metaverse poses a tremendous opportunity for health care providers to connect with patients and other providers and businesses in an interactive way that was considered science fiction just a few years ago. But like every new frontier, technological or otherwise, there are legal and regulatory hurdles to consider and overcome. Some are familiar, while others are novel. ArentFox Schiff’s attorneys provide a multi-disciplinary approach to advising industry stakeholders in the development of practical strategies that maximize the value of the metaverse’s opportunities.

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