Where the Law Stands on Virtual Property

By Shari Claire Lewis, New York Law Journal March 28, 2008; "The filing of a complaint by a Pennsylvania lawyer against the operators of an online virtual world, and last year's decision by a Pennsylvania federal district court in that case, Bragg v. Linden Research Inc.,[FOOTNOTE 1] has generated a great deal of interest in the media and among lawyers, as well as in the virtual world community.[FOOTNOTE 2] The attention has gone well beyond that which the decision would have garnered if it had not involved a virtual world and virtual property, given that it simply found an arbitration clause in a terms of service agreement to be unconscionable and therefore unenforceable. It is clear, however, that the case reflects the growth of real-life litigation over virtual-world property. Undoubtedly, as participation in virtual worlds increases, real-life lawsuits will be growing in number, too. So-called "massively multiplayer online role-playing games" are online games with names like "World of Warcraft," where players interact and compete with other players by creating images (known as avatars) to represent themselves and by acquiring, selling or building property and even dating and having children.[FOOTNOTE 3] Online virtual worlds are wildly popular, attracting millions of people every day, and a recent Google search for MMORPG yielded approximately 32 million results. Second Life, one of the more popular online virtual worlds, was involved in the Bragg case. Second Life describes itself as "a 3-D virtual world entirely created by its Residents" (i.e., players). It promises a "vast digital continent, teeming with people, entertainment, experiences and opportunity," including a "perfect parcel of land to build your house or business." Second Life says its residents have "near unlimited freedom" to create what they want to create in the virtual world: "If you want to hang out with your friends in a garden or nightclub, you can. If you want to go shopping or fight dragons, you can. If you want to start a business, create a game or build a skyscraper you can." Moreover, players "retain the rights to their digital creations" and therefore they "can buy, sell and trade with other residents." [FOOTNOTE 4] Interestingly, numerous lawyers have set up legal offices in virtual worlds, as have well-known retailers and other companies; even the Department of Homeland Security has considered establishing a presence there.[FOOTNOTE 5]

To further blur the boundary between the real and virtual worlds, Second Life participants use "Linden dollars" (named after the company that created Second Life) in that world's commerce, and Second Life property can be bought and sold on eBay and other Web sites while Linden dollars can be converted to U.S. dollars on various online exchange sites. With all of this going on, can real-life lawsuits be far behind? The answer is that, as the Bragg case illustrates, real-life litigation over virtual world property is already here. Some disputes over virtual world property probably can be resolved in the virtual world, based on the service or end-user license agreements and the rules establishing the virtual world. Indeed, one can imagine that a real-life lawyer with a presence in a virtual world might be asked to help a player resolve a property dispute with another player. On the other end of the spectrum are cases in real-life courts dealing with real-life property that players use to participate in virtual world environments, such as Robinson v. Fakespace Labs Inc.[FOOTNOTE 6] The dispute in Robinson was over a patent issued to the plaintiff directed to a pair of gloves adapted for use as a controller for a joystick control port of a video game or computer. The defendant, Fakespace, produced hardware and software tools for virtual reality analysis and design, including a product known as the "Pinch Glove System," which was used for interacting with three dimensional data.
The plaintiff believed the Pinch Glove System infringed his patent, and brought suit. The case reached the U.S. Court of Appeals for the Federal Circuit after a district court dismissed the case and entered final judgment in favor of Fakespace. The appellate court upheld the district court's decision, finding the Fakespace glove did not infringe on the plaintiff's patent. Then, there are the lawsuits in real-life courts that directly involve virtual property. For example, plaintiffs in one case who were selling virtual products in Second Life brought suit in October in a federal district court in New York, alleging that the defendant sold virtual property in Second Life that infringed on the trademarks and copyright they held. The complaint asserted causes of action under Section 43(a) of the Lanham Act, among other things, and was settled in December.[FOOTNOTE 7] In a case filed in July in a Florida federal court, the plaintiff, a Second Life participant, claimed that an avatar the complaint identified as "Volkov Catteneo" had sold software the plaintiff had created that enabled avatars to engage in sexual acts. The plaintiff's attorney was quoted as saying that the case involved "a piece of software and software is copyrightable" and he equated it to "basic intellectual property principles."[FOOTNOTE 8] There also has been international litigation over virtual world issues. For example, as reported at http://forum.pcvsconsole.com/, a court in China ordered an online video game company to restore virtual property to a player that had been lost to a hacker.

THE FUTURE

Future litigation over virtual world property is likely to be as diverse as litigation in real-life courts is today. For instance, one can imagine that well-known avatars, such as Anshe Chung, who claims to be the first online personality to achieve a net worth exceeding $1 million in a virtual world,[FOOTNOTE 9] might assert property rights in their avatars including the right of publicity and perhaps the right of privacy that would limit the ability of others to use those avatars in virtual worlds (and even in real life). Additionally, real-life corporations may have to take steps to protect their property rights in virtual worlds to ensure that they are not misused -- to the possible detriment of their real-life assets. Not too long ago, the Internet was not something considered in corporate strategic plans and concerns over legal issues involving the Web were easily dismissed. It certainly seems likely that virtual world property, and legal issues that it will engender, may become just as significant to businesses in the near future as the Web is today. Shari Claire Lewis, a partner at Rivkin Radler in Uniondale, New York, specializes in litigation in the areas of the Internet, domain name and computer law.