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Thursday, February 7, 2008

Virtual Property Protection: Continue the Experiment

by: Erik Paulson, Associate Editor, MTTLR

Editor: This post is part of a short MTTLR Blog series on virtual worlds - Part one explores parallels between virtual property and real-world property. Part two (this post) examines the contract agreements that govern relationships between virtual world participants and creators. Part three (this post) considers taxation in virtual worlds.

How should intellectual property laws protect ownership in virtual property? Second Life, a virtual world, has grown explosively since 2003 attracting millions of members from around the globe.1 The creators of Second Life describe the online game as “a 3-D virtual world entirely created by its Residents” who retain rights to their digital creations.2 Residents of Second Life can use Linden Dollars to purchase virtual cars, nightclubs, and even islands. These virtual items are worth real money. Islands cost a whopping $1675 US each,3 and IBM recently purchased twelve.4 Second Life has an exchange where US dollars can be converted to Linden dollars and vice versa. Hundreds of thousands of US dollars worth of exchanges occurs every day.5 With this amount of money being invested in virtual worlds, property rights become very important. There has already been litigation, but the question remains, who actually owns this virtual property? More importantly, should legislatures step in to protect it?

EULAs govern

Currently, End User License Agreements (EULA) govern the legal relationship between most virtual world users and virtual world creators. EULAs are contracts users agree to be bound by before using computer software. Effectively, EULAs give virtual world creators the legal power to determine how virtual property will be protected. However, users are not left without remedy. Unlike the lawlessness of the Wild West, EULAs are governed by contract law principles, so they may not be “unconscionable” and are limited by “reasonableness” requirements. Additionally, consumer protection statutes in many states limit the enforceability of contracts. Most importantly, world creator power is limited by users’ ability to choose whether or not to enter a virtual world.

Virtual worlds are created for different reasons. Some, like World of Warcraft are video games, created to provide entertainment. In game-like virtual worlds, the real world sale of virtual property is often discouraged since the creators feel it detracts from the gaming experience. Other virtual worlds, such as Second Life, are intended as havens for virtual property, and as mentioned above, even set up real world monetary exchanges for virtual currency. The goals of virtual worlds are different and would not fit easily under a single virtual property protection regime.

Virtual world creators are not ignorant of the needs of their users. Users are the essence of any virtual world. Varying levels of virtual property protection may attract a certain user base, and given the ease with which users can join or leave a virtual world, if they are being treated unjustly they can quickly move to another venue with a few clicks of the mouse. Unlike the real world, virtual world costs to move from one world to another are relatively low. Virtual world creators competing for users will create virtual property protection that best suits their business model.

Competition between virtual worlds will ensure creators give adequate consideration to the type of property protection desired by users. The simultaneous successes of Second Life (with strong virtual property protection) and World of Warcraft (with weaker virtual property protection) provide strong support for this assertion – different users seem to be attracted to different levels of virtual property protection. Of course, factors other than virtual property protection affect a user's decision to join one virtual world or another. But only the individual can adequately weigh the importance of virtual property protection when choosing a world to join.

Alternatives to the EULA scheme

Consumer contracts can be criticized for binding users who neither read nor understand the contract. This same criticism can be leveled against EULAs and in favor of a legislatively-imposed standard virtual property regime. But a protective regime is unnecessary for several reasons. First, from a public policy standpoint, unlike contracts involving real-world property, most users are not significantly invested in virtual property. Second, users of virtual worlds are educated at higher levels than the general population – one study found 65% of Second Life users have attained a college degree6 as compared with 29% of the US population.7 Users of virtual worlds do not need the government’s protection, since the users are positioned to be more informed and better understand conditions imposed by a EULA compared to the average denizen of the real world. Third and most importantly, users have a general awareness of virtual property rights associated with the world they participate in from a variety of sources including blogs, news articles, and community members. In the real world, people rarely read long form contracts they are required to sign. Yet, people understand the general implications of agreeing to contracts. Without reading the EULA, the typical user of Second Life is likely aware they have more virtual property protection than a World of Warcraft user.

Virtual property rights should be allowed to vary depending on the goals of the world creators. Well-functioning standard contractual agreements have developed previously without legislative intervention. The GNU standard for software licenses embraced by the open-source software community is an example.8 GNU licenses provide different levels of protection depending on the desires of the software developer.9 Both developers and consumers know what to expect with a particular GNU license without needing to read the language of the contract. Virtual property rights are well suited to a tiered level of protection. An internal standardizing body could create different levels of protection. Once widely adopted, users could gravitate towards the virtual property protection regime they prefer. In addition, user rights groups will likely develop to lobby on behalf of virtual citizens. Legislative intervention is not a pre-requisite for virtual property protection. As noted by a recent commentator, many virtual world users may prefer legislatures stay out.10

Most importantly, virtual world citizens are not a captive group. They can leave their virtual worlds at any time, granted they must leave potentially valuable virtual property behind. But since users are the most important element in the virtual world business, creators have plenty of incentive to treat users fairly. In the future, we may see virtual world coalitions that create standards for transferring virtual property between virtual worlds. The optimal level of virtual property protection is unknown. But what is certain, an open market in virtual worlds and virtual citizens should be left to its own devices to coalesce around a virtual property protection regime of its own development. Courts do have a place in this: virtual property rights should be enforced in accordance to EULAs. However, legislative tampering or the creation of a one-size-fits all standard for virtual property rights will not benefit virtual worlds, or virtual citizens.

1 Second Life, What is Second Life?, (last visited Jan. 26, 2008).
2 Id.
3 Second Life, Land: Islands, (last visited Jan. 23, 2008).
4 John Bringardner, IP’s Brave New World, Law.Com (Feb. 1, 2007), (last visited Jan. 23, 2008).
5 Second Life, LindeX Market Data, (last visited Jan. 26, 2008).
6 New World Notes, Surveying Second Life, (last visited Jan. 26, 2008).
7 U.S. Census Bureau, One-Third of Young Women Have Bachelor’s Degree (Jan. 10, 2008), (last visited Jan. 26, 2008).
8 Gnu.org, The GNU Operating System, (last visited Jan. 26, 2008).
9 Gnu.org, Licenses, (last visited Jan. 26, 2008).
10 Kevin Deenihan, Leave Those Orcs Alone: Property Rights in Virtual Worlds, (last visited Jan. 26, 2008).

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