Land Sales versus the TOS versus the Courts

This little tidbit from Terra Nova, which pertains to the land sales (real and mistaken) within Second Life.

http://www.grimwell.com/index.php?action=fullnews&id=284

Interesting comments.

Read and know your rights on virtual property.

This is a very interesting paper, thanks for posting the link, Lynn. It's fascinating reading.

Here's a couple of passages that pertain directly to Second Life:

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"...Second Life is a good case study because its TOS grants players some of their intellectual property rights in the content they create, but at the same time disavows that their virtual chattels and currency have any real world value. These two ideas seem to be at odds with each other, largely due to Linden Lab's statements within its promotional materials, other clauses of its TOS/EULA and its own practices in the management of its virtual world.

A short visit to the Second Life website will turn up various web pages that describe its vibrant economy, highlighting the chance to earn real-world cash. The "money" page provides links to Gaming Open Market and Internet Gaming Entertainment, two secondary market services that allow players to buy and sell Linden Dollars ($L), the in-world currency. The Gaming Open Market website charts the exchange rate of $L to $US much like a modern stock or currency exchange. The CEO of Linden Lab, Philip Rosedale, uses the data produced by Gaming Open Market to determine economic policies within Second Life. However, the Second Life TOS/EULA specifically states, "All of your content and accumulated status has no intrinsic cash value and that Linden does not endorse, and expressly disclaims . . . any value, cash or otherwise, attributed to content or accumulated status [all caps formatting removed]." Linden Lab also attempts to disclaim liability for its management of the virtual economy. While the Second Life TOS/EULA claims that user content has no intrinsic value, the website touts the chance to make real-world cash and endorses two secondary market merchants, one of which is the source of data for Linden Lab economic policy development.

This seems problematic from a contract construction perspective. Although Linden Lab seeks to disclaim any liability should player content be destroyed, it also promotes its service by telling prospective users that they too can earn real-world cash by starting a successful business in Second Life. Whether a court would uphold the "All Data Is Temporary" clause of the TOS/EULA is doubtful."
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I guess only time (and a major lawsuit or two) will tell whether the legal view of virtual property will shift from one of "it's just pixels" to "it's property with a real value."

Fascinating article, especially if you've already read Part 1 and 2. If you Google on "virtual property" and variations of that phrase, you turn up all manner of articles and legal opinions on the issue.

One thing that Part 3 didn't seem to elaborate on, but which I think is at the core of this issue, is this: In other games, players do not truly "create" anything. Either a random item taken from a loot table (built by the devs) is created by the game software on the corpse of the deceased, or else one uses the game formula for pre-programmed raw ingredients to craft pre-programmed items which are also taken off of a table.

Those existing games are closed economic systems where the players interact with random number generators to 'create' items which were pre-arranged by the game designers. I liken that to a rat pushing a pellet lever. You might get a yellow pellet or you might get a green one, but you will never get a pellet that the experiment designer did not put into the tube first.

Compare that to Second Life, where 3rd party software can be used to truly create anything you can imagine, from furniture to special effects to animations to sex toys. Anything at all. These items and animations are not necessarily anticipated by the Lindens, and as such I would question whether the Lindens (or anyone) would truthfully have a legal claim on the intellectual property someone else actually creates from their own imaginations. Furthermore, if the Lindens were to try to claim that right I think it would end for once and for all any further creative productivity among SL denizens.

Good stuff. Thanks for the post!

Cindy

Two observations:

First observation: The Terra Nova article points out that "intellectual property rights" of creators in Second Life is problematic, and may rest on contradictory statements in the ToS/EULA. Further, the article maintains that LL has granted limited and sometimes inspecific rights to creators.

One precedent that might apply here is the issue of limited intellectual property as it applies to higher education. Intellectual property created by faculty are usually the exclusive property of faculty, except in the following cases:

1. negotiated contractual transfers
2. joint works, where the university can be considered a co-author under the Copyright Act.
3. works created "for hire".

However, no work can be treated as "joint" or "for hire" merely because it is created with the use of university resources, facilities, or materials commonly made available to faculty. In other words, a faculty member does not lose exclusive rights just because the work was created while the member was employed by a university, and normative university support is being given to her/him.

The basic difference, of course, is that LL does not "employ" its consumers. Or does it? Certainly it encourages and uses consumer creations on a regular basis, and certainly it pays "money" to its consumers in return for their contributions. And the purpose of SL, according to LL statements, is entertainment, content creation, and education - criteria any private college or university fills. Finally, SL is built on the premise that the value of what is created extends beyond the game itself - an idea clearly advertised in promotionals, on the website, and in discussions and articles beyond the LL domain. So too with the university.

If SL were to be considered an "institution" similar to a university, then LL would receive the value of content creation where one or more of the above three conditions were met. It would not receive value simply because it provided the creator, and all other creators, with SL.

Not arguing for this, just speculating.

Second observation: I've always wondered about the inworld lack of contractual procedures and other common means of ordering business, given statements made by LL and by many residents about the opportunities here. Given the many contradictions in the ToS/EULA that the Terra Nova article points out, is there an implication that this lack may not be "accidental", but may serve some purpose?

I'm really fascinated by IP law. It was one of my favorite classes, but I'm not an attorney, either, so pay no attention to me.

Linden Lab would seem to have, contractually, transferred ownership of any original work made in SL to the end user immediately upon creation, as the terms of use state that we retain all IP.

I really, realy wonder how tenable their disclaimer of warranty stance is going to be with that transfer of IP rights happening all the time. If I make an SL killer app product and show several months of steady sales, and then a freak server accident destroys the product and its copies, Linden Lab would have been negligent in the protection of my IP, of which they were sole custodians. If my right to that intellectual property was stronger than Linden Lab disclaiming all warranty for its maintenance and protection, I could see being awarded some damages. Particularly since Linden Lab has no facility for making personal back-up copies of original works.

That seems like it'd be worth arguing if the numbers were right.

We're on the edge of a new frontier, folks. This should be fun.

Are you aware that a group of Korean players actually took the makers of Lineage2 to court over loss of THEIR property within the game - and they won.

I could have a real problem with a western court following a Korean legal precedent. They have some pretty odd property laws there.

Good article, thanks for posting it. I think it belongs in Land & Economy, maybe it will get moved. We've been talking about these kinds of things in that subforum.

Just my opinion, but I think the law concerning virtual property is still an evolving thing and it's difficult to predict how a particular court may treat a particular case. Also, considering that not all users of SL reside in the U.S., it's possible that a case could be filed under another country's laws.

Interesting stuff.. keep it coming.

I agree - good article.

I think the reason SL takes this contradictory stance is largely because the sales of virtual goods are a very "touchy" issue in the courts, and LL doesn't wish to become the token martyr to set precident.

Fortunately for them, Sony Online Entertainment is treading the line much closer with their "Staton Exchange" website. I feel Sony will bear - and deserves - the brunt of such an assault.

I have either read that report or another report... I have a few links to some other good articles on similar areas of interest I think you might also enjoy reading:

The State of Play: Free As In Gaming?

Declaring the Rights of Players

And..

The Laws of Virtual Worlds

I have many questions that are confusing by the TOS and EULA.

One being, how can you advertise to "own your own business in SL" -- when the TOS was recently changed to reflect that they are not a "service provider company."

I really can't run my virtual SL business anywhere else, can I?

Along with the creations, the actual ownership -- the way the EULA is written -- you are simply "renting a virtual area" for your creations. No matter what is said, you don't really own it. LL owns it.

That is, until an IP or copyright lawsuit is brought against them. THEN, the flip side is that "we're not responsible for our end-user creations."

Boggling.

It would be interesting to see how the courts view their newly updated TOS stating they are not a service provider.. when in fact they are providing the service to run virtual buisnesses and have promoted the "game" as such. Sounds like LL themselves are confused on exactly what they want SL to be... maybe they are rethinking if they truely want to have buisnesses in SL? I do not have those answers.

i posted the same link over in Land & Economy yesterday but within a thread. discussion on it exists there as well now. perhaps a moderator could merge the two somehow.

here's that thread: /130/b5/46662/1.html

Several reasons why I posted this in General and not just in Land and Economy. The first being that is more people read General than they do that forum, and this article deals with more than just land -- it deals with overall creativity.

So I hope it's not merged into one large post.

What I would like to see is a comment from LL on this article, and also all of the topics that it brings to the creators in Second Life -- how do they retain ownership of their creations when the EULA states that everything is owned by LL? How can they start/grow and succeed with a virtual business if SL is not a service provider, especially since SL is, more or less, the operating system on which their business runs.

I honestly believe it's time for some answers from the Linden's on these issues -- especially if Second Life is to continue to grow and prosper; and also before a lawsuit becomes a reality when businesses do become large and successful.

By the way, SL is no longer the "only online game to embrace selling of virtual goods" -- Sony is now offering the sale and trading of items from Everquest in their new "ebay-type" store. Two companies made 14K and 22K USD from the selling of WoW (World of Warcraft) gold and epic items -- that was the USD estimated for one month of sales. Since virtual words (gaming companies) are beginning to realize that there is a strong market and that there is a very good profit to be made off sales like this; I truly believe that you will soon see a lawsuit filed here in the US regarding virtual property.

I'm no attorney either, but it seems to me that there isn't necessarily a problem with LL granting IP rights to content creators in combination with the limited warranty provisiions of the TOS/ELUA.

LL grants you the IP rights to any content that you create. Its just asserting that it is not guaranteeing you a mechcanism to transfer those rights. If you choose to transfer those rights using SL mechanisms and using SL currency, LL is simply saying that it doesn't guarantee that those mechanisms will always be available, or that your L$ will have "staying power". You could just as easily choose to trannsfer those IP rights using US$ and other transactions meechanisms.

- Ace

The purpose was that the intellectual property "grant" was a fabulous PR move; unfortunately, LL has intentionally locked your own creations from access to you (i.e. object export) the net result of which is that their "you own your IP" is mostly empty PR fluff and the EULA would likely dominate.

I say mostly empty as they have granted you ownership of the concept, just not the expression. As the concept was "owned" by you from its inception, the "grant" was more an assertion of "we could - through the EULA - claim ownership of your concept, but we won't". I'd normally say good luck trying to enforce ownership of a concept, but the way the USPTO is acting these days, anything is possible.

Intellectual Property may be the single worst invention of the last century. I keep waiting for some heir of Shakespeare to go after The Lion King for IP appropriation from Hamlet or better still, God Almighty v. Every Writer Ever for cribbing from the bible.

Did you also happen to read the three links I posted? They directly tie into withthe first link posted also. The picture is much broder then the scope of just that article.. it goes all the way back to basic rights as virtual users.

Even if you do not agree with all that is said all three articles I have linked to are very good to read.

"So I hope it's not merged into one large post."

was actually thinking that thread could be merged into this one. no big deal either way.

Heh, guess I'll own up to this one. Glad you folks thought it was worth the read.

I wrote the article in the original post as a thesis paper for my Cyberlaw class (IT 808, IIRC). I'm working on my LL.M. (master of laws) in Info Tech & Privacy law. Since I'd been doing a series of articles on games & the law for Grimwell.com that were more "pedestrian," I figured I'd post the thesis iteself for part 3 as opposed to trying to change it into something less academic.

Sadly, I had a limit of about 10,000 words on this thesis, and I think I went over by about 1 or 2 thousand. I would have enjoyed spending more time exploring the theoretical end of IP rights, both regarding the University stuff discussed above and the concepts of "ownership" of copyright, etc. Sadly, the way U.S. courts are right now, a well-written EULA/TOS will trump any of those rights, largely because they are the kind of rights than can be contracted away. To that extent, (and I forget who posted it) the "grant" of IP rights by LL was moreso LL modifiying the TOS to take a more limited chunk of the rights users already have.

As far as a lawsuit over the SL TOS goes, I'm about 90% sure it would be tough to do. IIRC, the TOS contains an arbitration clause. Arbitration clauses have been used to decertify class-actions in the past (See Hill v. Gateway 2000, Inc.). Additionally, courts tend to favor arbitration clauses and enforce arbitration awards. The Federal Arbitration Act affords considerable weight to arbitration awards, and although it provides several grounds for setting aside a binding arbitration award, well, they're not always easy to prove. Suffice it to say, there are ways to get around the arb clause, but that's fancy litigation stuff and I'm not a litigator.

As far as other virtual worlds go, and some that are moreso games than worlds, while there may not be "creation" as there is in Second Life, the rights players assert to those virtual chattels are moreso those of personal property as opposed to intellectual property. Certainly, if time = money, and games like EQ or WoW require time "spent" to gain virtual wealth, someone will make the argument that the time spent is equivalent to "earning" or "purchasing" the item. Given the extensive value some players attribute to their items and the fact that the items have, at first blush, the same "bundle of rights" associated with personal property, it's not hard to see why some courts in Asia (mostly in China and Korea) are recognizing at very least a limited property right in these things.

I actually got an email from a Korean judge who contributes to Terra Nova from time to time. She pointed me to some resources on how the Korean legal system is handling these things. She also linked me to an article, but I need to find a translator before I can really get into it.

So, all that said, I'm hoping to publish this sucker in a law journal out there, maybe with some stuff added. This is the beauty of post-post-graduate study! I can make my games and virtual world addiction into academically legit work. And it allows me to tell my fiancee that I'm doing "research" when I'm playing video games.

There is not much doubt in my mind that somewhere in the near future a big test case or two are lurking to pounce.

For all our sakes, lets hope SL is not involved. Even if we are not destroyed, there is ultimately no-one to bear the court costs but us, the customer.

In my opinion LL are deliberately, and wisely, leaving these issues a bit vague for the time being, and it would be better for us to go along with this for now.

Our user base and capitalisation is still dangerously small. If such a fight is to come, we need to be bigger. Every month we get 1000 new users. Each month we postpone it we get stronger.

The best outcome, as suggested elsewhere, is for someone really big, like Sony, to bear the cost of sorting this out, after which all we little ones fall into line with the newly-established legal position, if we are strong enough to do so and survive.

So my advice is - don't rock the boat for now. Lets keep growing and gather strength. And don't any of us sue or threaten SL for the moment. You would be sueing and threatening your fellow residents.

Don't leave invested any more than you would be willing to lose on a server glitch or Linden whim, without the urge to rush to a court. Anyone who risks more is in my opinion a danger to us all.

"Our user base and capitalisation is still dangerously small. If such a fight is to come, we need to be bigger."

that cuts both ways afaic, and is the cause of my related concerns over some other IP rights issues. agree that we all need to tread lightly.

and a big thanks to Barrister Kennedy. enjoyable reading.