Immersions: Legal Realities In Nigeria’s Virtual And Augmented Reality Entertainment Sector – Media, Telecoms, IT, Entertainment

5


Introduction

Globally, the growing trend in immersive media has given rise to
research into Virtual and Augmented Reality (VAR) which promotes
near-life experience in entertainment – gaming, videos, etc.,
medicine, health, etc. Leading Technology Companies (TechCos) such
as  Alphabet, Microsoft, Facebook, Apple, etc. have
contributed immensely to the development of various VAR products.
After Facebook’s acquisition of Oculus for US$2.1 billion in
2016, the social media giant has proceeded with incremental
investment in more than eleven VAR entities.1 Whilst AR
allows digital content to be layered over the real world (for
example Pokémon GO!) using special glass; the image is
superimposed on the scene  to make it seem like the real
world. VR replaces the real world with a virtual environment
enabling the user manipulate same as though it were the real
world.   

According to MarketsandMarkets’ Report
2018,2 AR market is estimated to grow by 40.29% from
US$11.14 billion in 2018 to US$60.55 billion in 2023 whilst the VR
projected growth rate is 33.95%, from US$7.90 billion in 2018 to
US$ 34.08 billion in 2023. These projections were hinged on
increasing demand for AR devices in healthcare, retail and
e-commerce, and rising investments in the AR market. More so,
head-mounted displays in gaming and entertainment, advancement in
technology and digitization including incremental investment are
specks of a bourgeoning VR space. 

In Nigeria, there is an increasing demand for VAR products and
services in the entertainment industry especially in gaming and
videos. This has contributed to the growth of tech start-ups such
as Imisi 3D (VAR Studio), etc. providing VAR on-demand
services. These disruptive technologies have led to emerging legal
trends that could not have been envisaged under conventional legal
discourse. For instance, would VAR operators be liable for any
psychological trauma resulting from the use of their products?
During the development of VAR products, certain ‘protected’
marks are modelled to create the ‘near life’ experience for
users. This raises the question: are intellectual property rights
(IPRs) extended to VAR ‘world’?  

This article seeks to examine the legal issues i.e. regulatory
compliance, product liability, intellectual property, model etc.
pervasive in the set up and operation of a VAR business in
Nigeria.

Entry into the VAR Space – Regulatory Compliance

The emergence of VAR as a lucrative entertainment business in
Nigeria has attracted potential investors in the space. These
investors are rightly positioning themselves for the budding market
which is projected to hit US$2.8 billion by 2021.3 It is
pertinent for potential investors in the VAR entertainment
business, to consider all regulatory compliance issues and
adequately provide a response strategy during the feasibility
studies/business planning stage. One of the regulatory agencies
that may have a role to play is the National Film and Video Censors
Board (NFVCB) established under the NFVCB
Act
4 to licence a person to exhibit films
and video works; premises for the purpose of exhibiting films and
video works; amongst others. 

According to section 28(1), NFVCB Act
“…no person shall distribute or exhibit a film or video
work unless it is registered with the Board.”
Similarly,
a licence is expected to be obtained in respect of premises where
such work is exhibited as required under section 17
NFVCB Act.
It is therefore pertinent to ask whether
VAR falls within the category of ‘video work’ under the
Act. In defining the meaning of video work, section 64
NFVCB Act
provides that it “…means any
series of visual image (with or without work) – a) produced
electronically by the use of information contained on any disc or
magnetic tape; and shown as a moving picture.”
 
Thus, any form of series of visual image which immersive media
(VAR) represents are classified as video work subject to the
provisions of the NFVCB
Act
.  

However, sections 53 and 54 seems to
put things in the right perspective with regard to regulation of
VAR under exempted video or recording. Section
53(2)
posits that “a video work is for the
purpose of this Act an exempted work if taken as a whole it is – a)
designed to inform, educate, or instruct; or b) concerned with
sports; or c) a video game.”
Thus, VAR designed for
educational purposes, sports or video games are generally exempted
from the requirement of licence under the NFVCB
Act
.

Notwithstanding, it is important to note the provision of
section 53(3) which restricts exemption
of video works. It provides that: “a video work shall not
be classified as an exempted work for the purpose of this section
if, to any significant extent, it – a) depicts explicit sexual
activities or acts of force or restrain associated with such
activities; b) depicts mutilation or torture of, or other acts of
gross violence towards humans or animals; c) depicts human genital
organs or human urinary or excretory functions;…e) is religious
and contravenes ethnic prejudices either by word or
action.”
Thus, it is submitted that although video games
are generally exempted, games with ‘adult’ or violent
content will not fall under exempted work.  

Whilst setting up a VAR business, a key consideration should be
the nature of content to be produced and disseminated to the
public
. Where such content falls within the exempted video
work, there is no requirement for compliance under the
NFVCB Act. This provision also applies to
the supply of video recordings (defined as any disc or magnetic
tape containing information by the use of which the whole or part
of a video work may be produced) where same is neither a supply for
reward nor a supply in the course or furtherance of a business:
section 54(1). In all other instances,
the operators of video work or recordings, including VAR are
required to comply with the provision of the NFVCB
Act
failing which, convicted defaulters will be
liable to sanctions.5

Operation of VAR Entertainment Centres – Legal and
Commercial Considerations

Upon due consideration of the various regulatory compliance
issues, the focal point for potential investors thereafter will be
on the content (determinant on whether same will fall within the
regulatory purview of the NFVCB) and obtaining necessary
operational license from the Original Equipment Manufacturers
(OEMs) – gadgets or VAR software developers –  and
entertainment content creators. To this end, depending on the
viable commercial arrangement, the investor could decide to
leverage an existing/popular VAR entertainment brand such as VR
World
, Scene 75, Avatarico etc. by obtaining
a franchise to operate similar brands in Nigeria.

Generally, franchise arrangements between the franchisor and
franchisee are governed by a Franchise Agreement (FA). A typical FA
contains clauses such as: territory, fees, intellectual property
rights usage, regulation of the business, general standards,
amongst others. In Nigeria, FAs between non-resident licensors and
Nigerian companies are required to be registered by the National
Office for Technology Acquisition and Promotion (NOTAP) pursuant to
section 5(1) NOTAP Act.6NOTAP’s Revised Guidelines for the Registration and
Monitoring of Technology Transfer Agreements in Nigeria,
2011
made pursuant to the NOTAP
Act
prescribed fees chargeable by franchisors,
licensors, or other offshore service providers, etc. for their
services in Nigeria. Registration of contract which fails to take
cognisance of these requirements is denied. More so, repatriation
of funds under the contract requires evidence of NOTAP
registration. Alternatively, an entrant may acquire the rights to
use the VAR brand for a certain number of years subject to renewals
and payment of prescribed fees under a licensing
agreement.  

Whilst these two potential business arrangement is considered,
recourse should also be made to issues associated with further
research and development of the existing VAR products under
franchise or license. For instance, if upon obtaining a license to
operate a particular VAR brand, the licensee further develops the
product to suit its peculiar market, who retains the right to the
‘new invention’? This position might appear to have been
settled by section 1(1)(b), Patents and Designs Act
(PDA)
7 which stipulates patentable
inventions.8 It however behoves on parties to adequately
make provision for the ownership of rights on any improvement on
the product.  The Federal High Court in James
Agbonrofo v. Grain Haulage and Transport
Ltd
9 granted the plaintiff’s
application for patent on the ground that his invention was an
improvement on the existing invention having met the requirements
of the PDA.10

In the same vein, developing a VAR product entail obtaining
relevant license and releases from IP rights holders. For instance,
if a VAR studio intends to model the popular Broad Street in Lagos
Island, the studio will have to obtain license from IP rights
holders whose mark are visible on the street. This is equally
applicable to individuals with personality rights who are randomly
captured on the street. Usually, they are required to sign a
consent/release form granting the VAR studio the right to use their
image for such purposes. Where such consent/release is not
obtained, the VAR studio may be liable in breach of right to
publicity/personality rights. This also applies to modelling
popular celebrities as characters in a VAR environment without
their consent.

Breach of personality rights is often classified as passing off
under common law. In Talmax Property Limited v. Telstra
Corporation
Limited
11, the
unauthorized use of the photograph of Kieren Perkins a
distinguished sports personality was held to have diminished,
blurred or reduced the opportunity of the personality to exploit
his name, image and reputation. Similarly, in Athens v.
Canadian Adventure Camps Ltd et al
12 where
the Plaintiff, a professional water-skier brought an action against
the Defendant for unlawful appropriation of his personality. He had
made a distinctive photo of himself which he used commercially.
However, the Defendant’s advertising agency made a drawing copy
of the photo and it was used to promote the Defendant’s
product. Although the name of the Plaintiff was not mentioned, the
Ontario High Court nonetheless held that his personality had been
unlawfully appropriated.    

One other important consideration for operators in the VAR
entertainment sector is the potential exposure to personal injury
and product liability claims. The superimposing nature of VAR
content has been reported to have side effects such as loss of
spatial awareness, dizziness and disorientation, seizure, nausea,
and eye soreness13 on users.  Can an unwary user
institute personal injury claims against VAR operators in Nigeria?
The answer to this lies in the interpretation and application of
operator’s culpability under the tort of negligence,
particularly the egg-shell theory to ascertain the scope of
liability.

For operators to be liable in negligence, it must be established
that: there is a duty of care between operators and users (which
usage of the product presumes), breach of the duty and
damage.14 In Duliue v.
White,
15 espousing the ‘eggshell skull
principle’, the Court stated that: “it has for long
been the law that if a person is: ‘[N]egligently run over or
otherwise negligently injured in his body, it is no answer to the
sufferer’s claim for damages that he would have less injury [or
no injury at all] if he had not had an unusually thin skull or an
usually weak heart.”

However, the learned authors, Winfield & Jolowicz opined
that “…there must be a breach of duty owed to the
claimant and if no damage at all could have been foreseen to a
person of normal sensitivity and the claimant’s abnormal
sensitivity was unknown to the defendant, then he is not
liable.”
16 Nonetheless, under Nigerian
jurisprudence, a defendant is not liable in negligence where the
claimant was aware of the risk and failed to take
precautions.17

It is therefore prescient for operators to disclose potential
hazards to users. This could be in the form of an exemption clause
contained in the tickets issued to users. The general rule here
under contract is that such clause must be expressed clearly and
without ambiguity or they will be ineffective.18 This
would also give operators the right to claim the defence of
volenti non fit injuria19
where users institute any action in negligence against
them. 

On the commercial side, where an exclusion or exemption clause
is included in the tickets issued to users, how can operators
manage ‘the optics’ that such disclosure and exemption
would create in the mind of intending users? One way to manage the
perception of users is if such provisions is industry standard. As
a result, there would not be discriminatory patronage of
operators.

In the same vein, where a user sustains an injury as a result of
a defective VAR product, it could expose the operator to product
liability claims. Except an operator is also the OEM, it will be
prescient to have clauses in the product purchase agreement where
such liability could be legally passed to the OEM. This is because
under certain circumstances, the operator could be liable under
common law. In Langridge v.
Levy,
20 it was held that a right of action
lay outside contract to any person injured as a result of a defect
in a thing not dangerous in itself, where the transferor of the
thing knew it to be dangerous but concealed the danger.

The Supreme Court reiterating this position in
Okwejiminor v. Gbekeji21 that:
“the absence of privity of contract between a person who
suffered injury from the use or consumption of a product and the
person who made the product does not preclude an action in tort for
the injury; provided the former can prove that he purchased the
product made by the latter, and suffered injury from use of
consumption of the product.”

Conclusion

With the Federal Government’s inclusion of the entertainment
industry (motion picture, video and television program production,
distribution, exhibition and photography) as one of those eligible
for pioneer status incentive,22 no doubt, this would
spur investment in the sector. Whilst the potential for growth in
the VAR entertainment sector is high given Nigeria’s growing
youth population, increasing urbanisation potentially widening
middle class with related purchasing power implications; investment
in the sector requires due diligence and strategic considerations
by potential investors. It is therefore important to carry out a
full scale regulatory compliance scan of the sector as part of the
pre-investment appraisal process or entry strategy to nip any
potential risk exposure in the bud.

Footnotes

1 Corbin Ball & Co., ‘Nine Amazing
Meetings Technological Trends to Watch in 2016’,

https://www.corbinball.com/article/29-futurism/112-nine-amazing-meetings-technology-trends-to-watch-in-2016
(accessed 19 December 2018)

2 MarketandMarket’s Report, 2018,
‘Augmented Reality and Virtual Reality Market by
Offering (Hardware & Software), Device Type (HMD, HUD, Handheld
Device, Gesture Tracking), Application (Enterprise, Consumer,
Commercial, Healthcare, Automotive), and Geography – Global
Forecast to 2023’
https://www.marketsandmarkets.com/PressReleases/augmented-reality-virtual-reality.asp
(accessed 19 December 2018)

3 PwC’s Global Entertainment and Media Outlook
2017 – 2021
Report

4 Cap. N40 LFN,
2004

5 A fine of N2,500 or a term of imprisonment of three
months for individuals while directors, managers, or person
purporting to act in the capacity in the corporate body will be
liable in the case of a company amongst others.

6 Cap. N62 LFN,
2004.

7 Cap. P2 LFN, 2004

8 The provision is to the effect that: “Subject
to this section, an invention is patentable – if it constitutes an
improvement upon a patented invention and also is new, results from
inventive activity and is capable of industrial
application.”

9 (1998) F.H.C 1236

10 NOTAP also recognises the interest of Nigerian
companies in the improvement made on the product in line with Para.
2.2.3.1 (e), NOTAP Guidelines: “all agreements should
incorporate research activities to be carried out in-house and in
collaboration with the National Innovation
Systems…”

11 (1997) 2 Q.D.R
444

12 (1977), 80 DLR (3d)
583

13 Code Lewis, ‘The Negative Side Effect
of Virtual Realty’,
Resource, March 7,
2018,
http://resource
magonline.com/2018/03/the-negative-side-effects-of-virtual-reality/87052/
(accessed 23 August 2018)

14 See the locus classicus case of Donoghue v
Stevenson [1932] A.C. 562

15[1901] 2 K.B. 669 at 679,
Kennedy J.

16 W.E. Peel and J. Goudkamp, ‘Winfield
& Jolowicz on Tort’
(9th ed.) Sweet &
Maxwell, 2014 p.189
; see also, Bourhill v. Young
[1943] A.C. 92 at 109
; Cook v. Swinfen
[1967] 1 W.L.R. 457

17 The Sierra Leone Development Co. Ltd v.
Maria Taylor [1952] 14 WACA 137

18 Ailsa Craig Fishing Co. Ltd v. Malvern
Fishing Co. Ltd [1983] 1 W.L.R. 964, 966,
970

19 The principle that a defendant will escape liability
for the consequence of negligence if the claimant has, expressly or
impliedly, agreed to accept the legal risk associated with that
negligence

20 (1837) 2 M&W
519

21 [2008] 5 NWLR 114 at
222

22 Provided they meet the requirements under the
Industrial Development (Income Tax Relief) Act Cap. 17,
LFN, 2004

Originally published December, 2018.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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