The Augmented Reality Risk Most Building Owners Aren’t Ready For

Most of you are probably familiar with the game Pokémon Go. An extension of the wildly popular Pokémon franchise, the mobile game uses GPS and augmented reality to locate, capture, and battle virtual creatures that appear in a player’s real-world locations. The game is free to play, making money from local advertising and in-app purchases. It quickly became a sensation when it hit the market in 2016, with more than 500 million users across the globe downloading it that year.

Pokémon Go had more than a billion global downloads by early 2019, and the game had grossed more than $6 billion in revenue by 2020. Since the intended audience for the game are kids and teens, its success may seem fairly innocuous. But it doesn’t seem as silly after you talk to Neil Mandt.

Mandt is the founder and CEO of the newly formed Metaverse Rights, a platform designed to protect real estate owners’ interests in the digital world. He calls Pokémon Go a global criminal enterprise. The game has attracted controversy for contributing to accidents and creating public nuisances, and various governments have expressed security concerns. Some countries even regulate the use of Pokémon Go. 

Mandt is concerned with how the location-based AR game affects commercial property owners. He thinks it’s just the beginning of a wave of augmented reality tech that could be a nightmare for real estate. “Pokémon Go has come inside your lobby and set up an invisible business,” Mandt writes. “They encourage strangers who will not be your clients to enter your property at all hours to play a video game, which can cause harm and danger to the property, its clients, and disruption to visitors.” 

(Augmented) Reality bites

The makers of Pokémon Go argue the virtual creatures aren’t really there; they only exist as images on the players’ phones. But the fact of AR technology is that, as the lines blur between what’s there and not, the game poses a threat. Game users often spend money while playing the game, so it’s like the game creators come to any property, open up shop, and start selling merchandise without the building owner’s consent.

And if AR game players get hurt while playing the game on a building owner’s premises, the property owner is liable, whether they know it or not. Mandt explains that some real estate owners wanted Pokémon Go activity in their buildings, hoping that people would become customers. “This did not happen,” he writes. “What did happen was injuries and disruption.”

When Pokémon Go was at the height of its popularity in 2016, police departments nationwide got a flurry of calls about people wandering neighborhoods and trespassing on properties. Jim McLean, a police chief in Pflugerville, Texas, said they spotted a man that year playing the game in a section of their police parking lot that’s off-limits to the public. “I’m not sure how he got back there, but it was clear what he was doing,” McLean said. “He was playing a Pokemon game with his phone up in the air.” The game warns users to be aware of their surroundings and not enter private property without permission, but not every Pokémon-crazed player follows these rules, or at least they didn’t back in 2016.

Mandt explains that Pokémon has been stealing the use of real estate space to activate their business, generate revenue, and collect data without asking for permission or offering protection in case of injuries. The company settled a class-action lawsuit in 2019, agreeing to remove any game assets from a property and move it away if a building owner complained. But the lawsuit didn’t address paying rent or delivering insurance certificates to building owners, and the company refused to admit wrongdoing. The company updated its policies for in-game content in public areas, but Mandt says, “property owners were suckered into the deal.”

So, why should something like Pokémon be a serious concern to real estate owners? Mainly because many people predict augmented reality tech to explode in the coming years, games like Pokémon Go may foreshadow more significant problems. Pokémon’s parent company, Niantic, has released other AR games recently, including a multi-player game called Neon, where groups of people use a building as a field of play. As AR technology becomes more widespread, the potential of these games and other augmented reality uses raises concerns that may seem very science-fiction-like but may become a reality.

Sounding the alarm bells

Google’s AR eyewear, Glass, famously flopped several years ago, but the tech giant is still working on AR projects. Google is developing an augmented reality headset with a planned 2024 launch date. And Google isn’t the only tech company pouring loads of money into cross-reality devices. Apple is reportedly working on a similar mixed-reality headset, Microsoft is working on the AR-focused HoloLens, and Meta is busy with a new Oculus VR headset and AR glasses.

Estimated mobile augmented reality (AR) market revenue worldwide from 2019 to 2025

There’s a plethora of privacy and other concerns with AR eyewear and headsets like these, and whether or not they become widespread consumer products may still be up for debate. But that isn’t stopping Silicon Valley from pushing for it. For example, Google’s recent presentation for its AR eyewear highlighted the ability to translate languages right in front of your eyes like subtitles in a movie. 

“Looking ahead, there’s a new frontier of computing, which has the potential to extend all of this even further, and that is augmented reality,” Google CEO Sundar Pichai said during a recent keynote address at I/O 2022, the company’s annual tech event where they unveil new products. “At Google, we have been heavily invested in this area. We’ve been building augmented reality into many Google products, from Google Lens to multi-search, scene exploration, and Live and Immersive views in Maps.”

Augmented reality tech could come with some incredible benefits, including in the real estate world. But like any technology, the drawbacks could be just as significant. The risks of AR for building owners, like the disruptions from games like Pokémon Go, aren’t getting much attention because it’s somewhat hard to conceive of what widespread AR use will be like. But people like Mandt of Metaverse Rights are sounding the alarm bells now.

“The problem is most property owners haven’t thought through this,” Mandt told me. “And most tech companies have already established that they don’t care about property owners. The one thing we’ve learned about Big Tech is that they just take, they don’t ask first.”

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Digital rights

Mandt suggests building owners get prepared now and start thinking about their ownership of digital and three-dimensional rights. Anyone putting a billboard on a building would need permission; the same goes for air rights and the space above buildings. Property owners can think about augmented reality and digital rights in much the same way. If an advertiser or AR game creator puts content on or inside a building, it uses a building’s digital and three-dimensional space.

The Lanham Act is part of the federal copyright code that specifically addresses false advertising and endorsements involving commerce that would confuse the public. So, if a property owner doesn’t know there’s an AR advertisement on their property, the endorsement has effectively been stolen from the owner. This violates the Lanham Act, according to Mandt.

This is just one example of how property owners could prepare to defend their digital rights against AR technology. And the concept of AR advertising on real-world buildings isn’t exactly futuristic. It’s already happening or has happened before. HBO hired Snapchat in April of 2019 to create a 3D augmented reality activation on the front facade of the Flatiron building in New York City. The 3D content showed the dragon from Game of Thrones landing on top of the building and then the Flatiron turning into a block of ice. Mandt said he contacted the executive offices of the property to ask if they were aware of this augmented reality advertisement on their building, and they said, “No.”

Mandt’s Metaverse Rights company offers a way for building owners to auction off their property’s digital rights and negotiate values with AR game creators and advertisers. And Mandt isn’t the only one pointing out the risks and suggesting remedies for this problem for real estate owners. Curtis Sano, a partner at Holland & Knight LLP, said that the law on digital advertising and augmented reality is still a bit unclear.

The aforementioned Lanham Act may provide some recourse to building owners, but Sano isn’t so sure. The AR technology is so new, and the cases are so recent that laws and regulations haven’t caught up yet, which could leave building owners exposed. Sano suggests performing periodic due diligence and checking the appearance of properties using commonly available devices and augmented reality apps. “Augmented reality devices and apps are already here and are likely to spread rapidly,” Sano writes.

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The risks aren’t virtual

If handled correctly, augmented reality can bring opportunities for building owners, too. Mandt says that real estate owners could capture advertising revenue from AR games and technology. That would require owners to claim ownership of digital property rights and negotiate with the AR tech companies and game creators. As for the risks of accidents and disruptions caused by AR games, property owners may also want to explore insurance and liability coverage for something they’ve likely not thought about.

“Clients we talked to six years ago about this thought we were crazy,” said Karen Whitt, President of Real Estate Management Services at Colliers and a Metaverse Rights board member. “But people are starting to wake up and realize the risks and opportunities.”

Augmented reality seems like a futuristic technology better suited in a science fiction movie than real life, but the tech is advancing rapidly. Google, Meta, and other Silicon Valley tech giants are pouring tons of money into developing AR eyewear that may become everyday consumer devices. Many building owners may not be aware of this tech’s risks, including disruptions, accidents, and missing out on a sizable stream of advertising revenue. Property owners who develop a proactive strategy for AR tech and digital building rights now may prevent some problems in the future. Pokémon Go and augmented reality games may seem like child’s play, but they’re already causing real headaches for property owners. And very soon, blurring the lines of reality could be a problem that every real estate owner will have to deal with.