From the metaverse boom to AI euphoria – a tech lawyer in the hype cycle

As a lawyer who moves between e-sports, blockchain contracts and SaaS business models, I’ve seen a few tech hypes come and go in recent years. But rarely has the change been as rapid as in the transition from the metaverse buzz to the current AI euphoria. In 2021, we had barely gotten used to the idea of trading real estate in virtual worlds and attending meetings as an avatar when the next sow knocked on the door of the village: artificial intelligence. And I was right in the middle of it – with one foot in the virtual world and the other in the machine learning algorithm.

Metaverse hype: boom, buzz and hangover mood

Let’s remember: In 2021, Facebook renamed itself Meta in order to focus fully on the metaverse – it was supposed to be the next digital revolution, “the successor to the mobile internet” according to Mark Zuckerberg. Suddenly everyone wanted to do something in the metaverse. Large companies opened virtual branches: A major bank set up a lounge in Decentraland, electronics giants organized product launches in VR and even the country of Barbados planned a diplomatic embassy in the metaverse. Luxury brands sold virtual sneakers and designer handbags as NFTs, and the metaverse was hailed in the media as an El Dorado for business models.

As a tech lawyer, this meant new contractual clauses for virtual properties, license terms for avatar skins and countless questions about digital property. Clients wanted to know how to legally secure virtual property purchases or who is liable if the server crashes during a Metaverse wedding. The enthusiasm was great – but the disillusionment was not long in coming. While we lawyers were still trying to negotiate contracts with avatars, the first reality checks began to appear: Where were the users actually? Many Metaverse platforms looked like ghost towns. Initial visitor numbers dropped dramatically, virtual shopping malls remained empty and some CEOs secretly wondered why they should put on clunky VR glasses for meetings just to sit in a cartoon conference.

2022 was probably the year of the metaverse hype – and the metaverse hangover followed in 2023. I noticed this clearly in my day-to-day work: projects that had been sold as the “future in VR” just a year before suddenly ended up on ice. Major players pulled the plug: Disney and Microsoft scrapped their metaverse plans, and even industry leader Meta cut back on investments. Mark Zuckerberg, of all people, who wanted to make the brave new Horizon Worlds world palatable to us, suddenly spoke more about AI than the metaverse in his speeches. The hype cycle clock had ticked on relentlessly.

Of course, the metaverse has not disappeared – but it will be a niche phenomenon in 2024. The vision of an all-encompassing virtual parallel world is on hold for the time being. And many companies are looking somewhat sheepishly at their digital ghost towns and unused VR headsets. For us lawyers, the lesson remains: hype is fleeting, contracts are patient. But don’t worry – the next boom was already waiting in the wings.

AI trend 2023: Euphoria with a question mark

Enter ChatGPT! At the end of 2022, OpenAI opened Pandora’s box – or the magic box, depending on your perspective. Suddenly everyone could experience what generative AI can do: Writing texts, developing code, even composing poems in the style of Goethe. In no time at all, artificial intelligence became the new center of the tech world. In 2023, even those who were still shouting “Blockchain!” or “Metaverse!” yesterday are now breathlessly talking about machine learning, deep learning and the next AGI (general AI).

For me as a technology-savvy lawyer, the AI wave once again meant familiarizing myself with a new field – and quickly. Clients came to me with shining eyes: “We want to pimp our SaaS product with AI – what do we need to consider legally?” or “Can we have draft contracts created by an AI? Does that save us a lawyer?” (quick tip: mostly no, at least not yet 😉). Everyone suddenly wanted “AI inside” in the pitch deck. A start-up that wanted to build a blockchain platform yesterday is proudly presenting its pivot to an AI start-up today. The hype cycle continues.

The euphoria surrounding AI is palpable – and quite understandable. Unlike some virtual worlds, AI delivers immediate, tangible results. ChatGPT & Co. increase productivity, automate customer service and create marketing texts at the touch of a button. Investors sense the next big thing, founders swap “Web3 enthusiast” for “AI Entrepreneur” in their LinkedIn profile. But, as always, there are two sides to the coin: Where there is rapid innovation, legal uncertainties lurk in the use of AI.

Need an example? When an AI model learns from vast amounts of Internet data, it is often unclear whether copyrights are being infringed. Who is liable if the smart software makes complete nonsense or – worse – makes discriminatory decisions? What about data protection if trade secrets are inadvertently entered into a cloud AI? Suddenly we lawyers are discussing algorithm audits, liability issues for autonomous systems and whether code written by AI can be patented or protected by copyright at all. The legal landscape is being shaken up by the AI trend at least as much as it was by the internet itself. For clients, this means great new opportunities, but also a whole host of new legal risks.

Contractual adjustments for the technology shift

So what do you do as a founder or entrepreneur who has to navigate between all these trends? From my legal perspective, an important keyword is: contractual adaptation in the event of a technology shift. Specifically, contracts should be flexible enough to ensure that a change in the underlying technology does not immediately paralyze the entire business model. If you signed a multi-year development contract in 2021 just for a VR project, you might face a problem in 2023 when the company suddenly wanted to switch to AI. Ideally, change clauses should be built into contracts – such as options to incorporate new technologies or at least fair exit clauses if a project is discontinued due to a change in trend. In this way, expensive conflicts or even investment ruins can be avoided if the hype changes course.

I have advised clients to keep a cool head despite all the trend enthusiasm: Today metaverse, tomorrow AI, and who knows – the day after tomorrow perhaps quantum computing or Web4.0. It is important to formulate contracts and general terms and conditions in such a way that core services and obligations still make sense even if the technology changes. A little technological agnosticism in contracts does no harm. After all, the contract should support the business model and not be tied to a buzzword. This forward-thinking may not sound as exciting as the latest tech demo, but it will save you from legal belly flops later on.

Legal uncertainties with AI – the new Wild West?

As fascinating as AI applications are, many legal issues are still unclear. When the AI trend took off at the beginning of 2023, it felt a bit like the digital Wild West: anything seemed possible and there were hardly any rules. Legal uncertainties surrounding the use of AI have become an ongoing issue. A few examples from my practice:

• Copyright and personal rights: AI systems generate images, texts and music. But who owns the result? The user, the AI or nobody at all? And what if the AI “remixes” protected material without anyone noticing? This is where we find ourselves in gray areas that courts and legislators still have to sort out. The first cases on AI art and data theft during training are already pending – the legal developments remain exciting.
• Liability and responsibility: An AI-supported chatbot gives a customer incorrect information that leads to financial loss. Who is liable? The manufacturer of the AI, the provider of the service or the user who uses it? There are currently no clear legal liability rules for such constellations. As a lawyer, I therefore advise my clients to contractually define exactly who bears which risk and how to deal with AI errors – for example, through limitations of liability or clear references to the experimental nature of the AI.
• Data protection and compliance: The use of AI raises sensitive data protection issues. If a company feeds personal data into an AI platform (whether for analysis or training), this can quickly come into conflict with the GDPR. Privacy by design suddenly becomes practically relevant: You have to ensure that no sensitive data ends up uncontrolled in any AI models. In addition, supervisory authorities are issuing initial guidelines for the use of AI and the EU is working on an AI regulation that aims to regulate certain applications. This means that companies need to keep a close eye on developments and take compliance measures at an early stage.

For lawyers with an affinity for technology, this mixed situation is challenging on the one hand – you are often moving into uncharted territory with no fixed railings – but on the other hand it is incredibly exciting. Every day brings new questions to which there are (still) no clear answers. Our job is to help shape the legal framework, weigh up the risks and pave a safe path through innovation for our clients. It feels a bit like piloting a spaceship through unknown territory: you have navigational know-how (laws, contracts, experience), but the stars in the sky are constantly changing their position.

Conclusion: hypes come and go, pragmatic madness remains

Whether metaverse, blockchain, esports or AI – the tech industry loves its hype cycles. For founders and companies, this means enormous opportunities on the one hand, but also the risk of chasing the trend and stumbling in the process. Technological business models therefore need both: the visionary energy to try out new things and the sober view of a lawyer to avoid pitfalls. As a lawyer in this field, I experience first-hand how enthusiasm and disillusionment alternate.

With a twinkle in my eye, I can say: it never gets boring! Today I might be negotiating a contract for virtual real estate in the metaverse, tomorrow I might be discussing the terms of use of an AI platform. These trends keep my working world exciting and challenging at the same time. It is important not to be driven crazy by buzzword bingo, but to accompany every hype with common sense and solid legal knowledge. In this way, innovations can be enjoyed without immediately falling into the legal trap.

At the end of the day, it’s clear: hype or no hype – what’s needed are flexible contracts, foresight and the ability to learn quickly. Then the next trend can come. In any case, my VR glasses are ready to hand next to the pile of new AI contracts on my desk – you never know what technological fad will come along next. 😉

Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.