4 April 2025
In the third part of this series, we are jumping straight into a practical case study, by looking at copyright infringement in the game, VRChat.
Virtual reality gaming has revolutionized online interactions, with platforms like VRChat leading the way in creating immersive social experiences. Unlike most traditional games, where players assume pre-designed roles and characters, VRChat allows users to create and import their own avatars, fostering unparalleled self-expression. Needless to say, affording users the capability to import their own avatars has led to widespread copyright infringement.
But before we delve into this, let’s quickly explain what VRChat is. Although VRChat can broadly be described as a “game”, it is arguably more accurately described as a social VR platform that enables users to engage with one another in fully immersive, user-generated worlds. In simple terms, VRChat is an online, virtual reality chatroom where users can choose however they look, and the “rooms” are custom worlds created by users.
One of its defining features is the ability to create and use custom avatars. These avatars are central to the user experience, allowing for deep personalisation and identity formation within the virtual space. The platform supports user-generated content, making it possible for individuals to upload their own 3D models and animations. While this freedom enhances creativity and community engagement, it also opens the door to rampant IP infringement.
Copyrighted Characters in VRChat
A significant portion of VRChat’s user base uploads avatars based on copyrighted material, ranging from Marvel superheroes like Iron Man, to real-world figures such as Lionel Messi, to world famous mascots such as Mickey Mouse (as seen below). This practice raises complex legal issues. While some users may believe that their use of such avatars falls under “fair use” or non-commercial use, the unauthorised reproduction and distribution of copyrighted characters infringe on the rights of IP holders. The sheer scale at which these avatars appear in VRChat complicates enforcement, making it difficult for rights holders to monitor and take action against every instance of infringement.
VRChat’s Terms of Service and Copyright Policy
VRChat attempts to address these concerns through its Terms of Service and Copyright Policy (see www.vrchat.com/legal and https://hello.vrchat.com/copyright). The platform explicitly prohibits the use of copyrighted content without permission and outlines a Digital Millennium Copyright Act (DMCA) takedown process for rights holders to request removal of infringing material. Importantly, VRChat exempts themselves from liability in their Terms of Service and specifically states “We are under no obligation to edit or control User Content that you or other Users may Post and will not be in any way responsible or liable for User Content.”
The effectiveness of their Copyright Policy is thus questionable, as enforcement largely depends on rights holders actively reporting violations. Given the sheer volume of content in VRChat, proactive enforcement remains a challenge, and many infringing avatars persist despite the platform’s policies.
The Gaming Industry’s Sensitivity to Consumer Backlash
Notwithstanding all of the above, rights holders may sometimes be fully aware of their copyright being infringed and actively not take action against such infringement. One of the defining characteristics of the gaming industry is how quickly consumer sentiment can turn against developers or rights holders. Essentially, rights holders in this space are acutely aware that even though they are suffering actual harm through copyright infringement, allowing such harm to persist is commercially better than the potential reputational harm they may suffer should they take action against the copyright infringement.
A prime example to illustrate how quickly consumer sentiment can turn is the recent backlash faced by Helldivers 2, where players engaged in mass review bombing of the game in response to “perceived” missteps by the developer, Arrowhead Game Studios, and the publisher, Sony Interactive Entertainment.
After an overwhelmingly positive launch, Sony and Arrowhead announced that PC players will be mandated to create and sign in with PlayStation Network (PSN) accounts going forward, despite this not being a requirement on launch and when consumers bought the game.
Why was this a big issue? Besides the tedious task of creating and having another sign-in requiring players’ personal information, there are actually 177 territories where PSN is not available – which effectively meant that people living in one of those territories were not able to play the game, and players who already bought the game would not be able to play the game any further.
The response by the gaming community was harsh and immediate. Overnight, Helldivers 2 was review bombed, receiving 336,341 negative reviews. The very next day, Sony acknowledged their mistake and rescinded the PSN account requirement.
Data by SteamDB.info showcasing the number of negative reviews received overnight, and the positive reviews received once Sony rescinded the PSN account requirement.
While this example does not deal with infringement specifically, it does showcase that gaming developers and rights holders attach great weight to their reputation and the opinion of the consumer – as they should. Although this should ring true for all industries, the way in which the gaming community can rally together, as with the collective review bombing of Helldivers 2, makes this a unique characteristic to the gaming industry.
A further example, specific to VRChat, lies in the Ugandan Knuckles meme.
Credit: SEGA; Gregzilla
One of the most well-known avatar-based memes to emerge from VRChat was the Ugandan Knuckles meme. This phenomenon saw a simplified and exaggerated version of Knuckles from the Sonic the Hedgehog franchise being widely used within VRChat, often accompanied by the phrase “Do you know the way?” The meme quickly spread across the internet, garnering millions of views and interactions on social media platforms. While some viewed the meme as a humorous and organic piece of internet culture, others criticised it for cultural insensitivity.
From a copyright perspective, the meme posed an interesting challenge for Sega, the owner of the Sonic franchise. Rather than taking aggressive legal action to remove infringing avatars from VRChat, Sega appeared to adopt a more relaxed stance. This approach arguably benefited the company, as the meme inadvertently increased public awareness and engagement with the Sonic brand. Some reports suggested that this viral exposure positively influenced Sega’s stock prices in the short term, demonstrating how IP infringement in online spaces, and within meme culture, can sometimes yield unexpected marketing benefits rather than outright harm.
In contrast, taking a hard stance against the use of their copyrighted character, may have alienated gamers and VRChat users who were using the avatar, which could have caused more commercial harm than the harm suffered from allowing the copyright infringement to persist
This phenomenon highlights the precarious relationship between game developers and their communities. From VRChat’s perspective, aggressive enforcement of copyright policies could alienate users, leading to similar backlash and potential reputational damage. In this regard, it should come as no surprise that they exempt themselves from liability due to copyright infringement in their Terms of Service, which not only puts the onus on rights holders to enforce their own copyright, but inherently also shift the risk of reputational harm to the rights holders for taking any action.
Conclusion: The Reputational Risk of Enforcement
In the gaming industry, reputational harm often outweighs the actual damages suffered from copyright infringement. While IP holders have legitimate claims to protect their assets, heavy-handed enforcement in social VR and gaming spaces risks alienating the very communities that sustain these platforms. For VRChat (and any other VR or traditional game where users can import their “own” creations), navigating this legal grey area requires a careful approach. The sweet spot, so to speak, is one that upholds IP rights without triggering consumer revolt. Ultimately, the question is not just about legality but about maintaining the delicate balance between creative freedom and responsible content governance in the virtual world.
