Virtual Property Rights Are No Game

Virtual real estate entrepreneur Ailin Graef recently announced that her Second Life avatar Anshe Chung had become the first online personality with a net worth of more than $1 million. But Graef may be living in a fantasy world.

Linden Lab, the company that created Second Life, explicitly states that Second Life residents do not own their accounts or any data on Second Life servers. "Linden Lab retains ownership of the account and related data, regardless of intellectual property rights you may have in content you create or otherwise own," the company's Terms of Service agreement says.

Yet Linden Lab sells the idea of ownership on its site: "Become a part of history by purchasing land and developing your own piece of Second Life," the site says. "The Pricing and Fees are simple; you pay $9.95 a month plus a Land Use Fee proportional to the amount of land you own."

"The land itself and the space and everything is owned, controlled, and built by the people" in Second Life, Linden Lab CEO Philip Rosedale said in a July interview for the AfterTV podcast.

What do cyberproperty magnates really own? That depends. "Some online assets, like domain names, are recognized as legal property by case law and statutes," says Rutgers law professor F. Gregory Lastowka. "The legal status of other online assets, like the virtual property in online worlds, is less clear."

Entertainment companies rule over the virtual worlds they create like gods, imposing Terms of Service and end-user license agreements that give them almost unlimited power. But as virtual commerce takes off, avatars' owners are rebelling, forcing game creators to confront legal reality.

A lawsuit filed last May in Pennsylvania aims to clarify the legal status of virtual land. Second Life resident Marc Bragg is suing Linden Lab and Rosedale for breach of a virtual land auction contract, fraud, and violations of Pennsylvania trade practice and consumer protection laws.

Bragg claims that Linden Lab froze about $8,000 worth of virtual assets and refused to reimburse him. Linden Lab claims that Bragg acquired his Second Life property in an unsanctioned manner by taking advantage of a loophole in its code. At issue is whether virtual property owners have the same rights as those with real property.

"Rosedale has been telling everyone that when you buy property in Second Life, you own the land," says Jason Archinaco, an attorney in the commercial litigation department of White and Williams, who represents Bragg. "But what has happened now is they're trying to say that the Terms of Service agreement somehow modifies the statements that Rosedale is making."

Linden Lab declined to comment for this article.

Property rights also have implications if Linden Lab were to declare bankruptcy, says Ross Dannenberg, an attorney with Banner & Witcoff, since property owners typically have some right to recompense.

Whichever way the judge rules in Bragg's case, Linden Lab stands to lose. If Linden's property seizure is allowed, the value of online land may fall and subscribers may come to resent that virtual ownership means sharecropping in reality. If Linden Lab loses, then all the gaming companies dabbling in virtual world commerce--including Microsoft and Sony--are going to have to re-evaluate where their control of their entertainment properties ends and consumer rights begin.