Virtual property at the mercy of operators

As the struggle continues to protect intellectual property in our rapidly evolving technological landscape, a new kind of property is emerging that might prove even more vexing, virtual property.

Virtual property is created, exchanged, and sold everyday in virtual worlds such as Linden’s Second Life or Habbo Hotel , as well as in MMORPGs (massively multiplayer online role playing games) like Blizzard’s World of Warcraft . A quick text search for Second Life on reveals hundreds of listings to bid on ‘Linden Dollars’ with which Second Life members may purchase real estate, clothing, or scripts for just about anything within the Second Life world. Initially this may not have appeared to be problem. Today however, some participants are earning serious money from their virtual property and are investing significant real world resources to do so. What was once an isolated group of hobbyists is becoming big business, and the legal issues naturally follow.

The most prominent success story in the virtual economy is that of virtual real estate magnate and Second Life fashion designer Anshe Chung , a fictional avatar in the Second Life world. In late 2006, Anshe hit real world headlines when she announced her real-world net worth of over one million dollars earned entirely though her Second Life activities. Anshe has since been featured (in avatar form) on the cover of Business Week , and has also been interviewed in Forbes Magazine. She employs over 60 people full-time to manage her empire which sells and rents virtual real estate, clothing, and most recently, provides virtual banking services in other virtual worlds.

While not everyone is making a fortune, Second Life claims that in May of this year 189 individual users of Second Life earned more than $5,000 from their online exploits. These numbers are just scratching the surface of what is to come. In countries like South Korea, ninety percent of those who are between the ages of twenty and thirty are members of a virtual world called Cyworld , which happens to sell over $300,000 worth of the currency called ‘acorns’ to their users everyday.

With all of this time and money being invested in virtual property, it wasn’t long before the issue popped up in court. The first big case was Bragg v. Linden Research . Bragg, an independent lawyer and Second Life enthusiast, found a way to manipulate the urls associated with purchasing land plots from Second Life in order to purchase plots still unavailable for public sale, and at much lower rates. Linden discovered the activity and canceled Bragg’s account , erasing the structures he built on his land. Bragg filed suit against Linden claiming they deprived him of over $8,000 in virtual property, including property he had purchased before his unauthorized activity. Unfortunately, the case settled privately before the court could rule on the issue, but we do know that Linden reinstated his account and replaced Bragg’s property to some extent. Linden has since modified their user agreement to strengthen their ability to act in future disputes.

Linden’s move to leverage their position is indicative of the constant struggle between virtual world operators’ rights and users’ rights, especially users’ rights in their virtual property. It’s this very relationship that has led some to label Linden’s founder Philip Rosedale as a dictator . While agreeing that he may be a dictator in the generic sense, Rosedale argues that Linden never takes land without reason, unlike real world dictatorships. Rosedale insists that it’s in Linden’s own interest to respect users’ rights because to do otherwise “would so risk everything we have built .” But one fact remains; as long as operators such as Rosedale can terminate accounts largely on their own terms, users will be investing in virtual property at their own risk.

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