Friday, March 14, 2008

Sex Beds and Virtual Land: What can Virtual Property Do for Property?

Thanks for the introduction, Ben! Ben's description of me as someone "who also teaches Property" is just right; I started teaching Property after over ten years of teaching upper-level Property-related courses such as Secured Transactions, Bankruptcy, and Electronic Commerce. My years teaching Secured Transactions piqued my interest in intangible assets, which is what brings me to sex beds and virtual land. Sex beds and virtual land were at the center of two controversies involving the property rights of participants in the wildly popular virtual world, Second Life. In later posts, I'll explain how property rights arise in Second Life, but in this post, I would like to introduce the two disputes, Eros v. Simon and Bragg v. Linden Research.

In Eros, several Second Life merchants sued Thomas Simon, who had been making and selling unauthorized copies of the plaintiffs’ products. The plaintiffs are described in the complaint as some of the most successful merchants in Second Life. Kevin Alderman, the principal of the lead plaintiff, Eros, built the first in-world sex bed and sells a host of adult-themed items, and the other plaintiffs sell items such as virtual clothing, virtual furniture and avatar skins. According to the complaint, the items sold by the plaintiffs are protected by trademark and copyright laws. The defendant copied all of these items and started selling them to Second Life residents himself. All of the objects were marked “no copy” or “no transfer.” These markings make copying theoretically impossible, but there are security flaws in Second Life that enable copying of such objects. The plaintiffs sued for, among other things, copyright and trademark infringement.   

The plaintiff in Bragg wanted to develop "real estate" in Second Life. To do so, he joined Second Life and started to acquire virtual land. A member purchases virtual land with the Second Life currency, Lindens. Lindens can be freely traded, and the Second Life web site includes a currency exchange, the Lindex. Today, $1 equals 265 Lindens. So, Mr. Bragg bought Lindens, and then bought land.

There are several ways to buy land in Second Life, one of which is by auction. Bragg bought numerous pieces of land and then discovered an exploit in the system that allowed him to buy land cheaply. His use of the exploit violated the Second Life Terms of Service, so Linden (the operator of Second Life) terminated his accounts, denying him access to his land and Lindens. Bragg sued Linden, alleging that Linden converted his property.

Both of these matters settled, but they provide property scholars with the opportunity to analyze rights in intangible assets in the context of intangible assets that look and act an awful lot like real property and tangible personal property. More on that next week.

Juliet Moringiello

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Have you read Castronova? I submit that very soon the term "intangible" or "virtual" should become obsolete with regard to currency portion of these properties, due to their obviously substantial, REAL WORLD valuations.

Posted by: Sam Gompers | Mar 19, 2008 6:38:49 AM

Yes, Castronova's work is terrific. I have read "Synthetic Worlds," which I highly recommend to those who are interested in these issues, and I'm in the middle of "Exodus to the Virtual World: How Online Fun is Changing Reality." I agree completely with your point about the currency, in fact when you think about it, ALL currency is virtual.

Posted by: Juliet Moringiello | Mar 19, 2008 1:49:49 PM

I hope he wins the case.
Linden Labs staff are living in a bubble. making such a big deal out of everything!
you're not police! let us play by the technical rules u set, instead of terminating everyone.

Posted by: Terminated Again | Jan 26, 2009 6:14:13 PM

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