Is Virtual Property on the Verge of Reality?

November 13, 2007 by Scott Gfeller

    Cross border transactions are a hot topic in today’s legal community. However, picture a very different type of border and a very different type of transaction. The dispute is real, the border vague, and the substance is, well, virtual.

On May 1, 2006 Marc Bragg, a Pennsylvania lawyer, launched an action against Linden Labs Research Inc. Linden Labs is the company responsible for the creation and management of the hit Massively Multiplayer Online Game (MMOG) Second Life. For those unfamiliar with this online world, items such as virtual clothing, land, or furniture are traded and sold for virtual dollars which can then be converted into real world dollars, according a reality based bottom line to the otherwise virtual entrepreneur. The dispute in question arises over a `parcel’ of virtual land auctioned by the defendant corporation. The plaintiff acquired the parcel of land below market value by manipulating web addresses to buy the land before it was officially released into the game. Linden Labs voided the transaction and froze the plaintiff’s Second Life account, including his virtual assets, estimated to be worth $4000-$5000. The defendant alleges the land acquisition violated the terms of service account holders agree to upon creation of same. Bragg is seeking restitution of $8000.

In all likelihood this case will not delve into the infant arena of virtual property law as the cause of action is more appropriately based in contract law, turning on the interpretation of Second Life’s terms of service. Interlocutory efforts have left the terms of service somewhat ransacked and amounting to a contract of adhesion, dissolving the arbitration clause and sending the dispute onto US Federal Court. However, notwithstanding the possibility that the court may not address the concept of virtual property this dispute remains an excellent primer for discussion on the subject.

There is no shortage of protection at law for intangible property or proprietary rights, take copyrights, trademark rights or patents as general examples. Despite the fact that there are no copyright `carve outs’ or common law recognition for virtual property one might still be inclined to think it’s the next candidate to sweep IP practices off their feet. Maybe.

The obvious question is, can we `legally’ consider virtual property to be property? One traditional view of property is as a bundle of rights or more generally as a relationship among people in respect of objects, tangible or not. These rights protect the inherent value, economic or sentimental, which an individual has either vested or created in said object. Consider a virtual house bought or created in the construct of a MMOG, can we apply these principles? Why not? There is a definable virtual economy for such property that trades in real world dollars. These are intangible items that players purchase and exclusively possess, wielding traditional property rights over said objects in respect of other players.

A real world court in China has already legally recognized virtual property, ordering a gaming company to return to a players account items stolen by a hacker due to software vulnerabilities. Simple right?

The reality is, it’s not so simple. If in fact virtual property is property, who owns it? In order for players to `own’ the property there must be virtual world rules that recognize such rights. Typically by accepting the games terms of service players will contractually cede all IP rights, if any, to the game developer. This is where Second Life differs, their terms of service grant the players IP rights in their creations, but in a somewhat limited way. For example, the terms of service grants Linden Labs royalty free rights to more or less do anything they wish with the content players create, including reproduction, removal and/or deletion. The contractual limitations certainly make it look less like property and more like an end user license.

Furthermore, consider the ramification for game developers that would ensue from a legal recognition of virtual property. The developers would in essence be custodians of various virtual property portfolios. The resulting liabilities could be entirely consuming, potentially curbing the growth or access to the industry for small scale game developers.

Until such time that courts deliver up some precedent on the topic, player’s creations reside in the legal unknown. While the Bragg case is likely not the dispute the industry has been waiting for it at least fuels academic commentary, legal discourse and other such discussions, the result of which might be a more informed judicial dialogue on a budding and important area of law