PropertyProf Blog

Odinet on Virtual Property and Secured Credit

Chris Odinet (that's me!) (Southern) has posted BitProperty and Commercial Credit (Washington University Law Review) to SSRN. Here's the abstract:

In the past several years the growth of virtual property in today’s economy has been explosive. The everyday use of virtual assets ranging from Twitter and Facebook to YouTube and virtual world accounts is nearly absolute. Indeed, by one account Americans check social media over 17 times per day. Further, a growing number of savvy virtual entrepreneurs are reporting incomes in the six and seven figure range, derived solely from their online businesses. Nevertheless, although the commercial world has come to embrace these newfound markets, commercial law has done a poor job of keeping up. Scholars have argued that laws governing everything from taxation, to bankruptcy, to privacy rights have not kept pace with our ever-changing virtual world. And nowhere is this truer than in the law of secured credit. Doubtlessly virtual property has come to represent significant wealth and importance, yet its value as a source of leveraged capital remains, in large part, untapped. This unrealized potential is not without good reason; the law — specifically Article 9 of the UCC and the law of property more broadly — suffers from a number of deficiencies and anomalies that make the use of virtual property in secured credit transactions not only overly complex and expensive, but almost entirely untenable. This Article shines light on these shortcomings, and, in doing so, advances a number of guiding principles and specific legislative recommendations, all geared toward a reformation of the law of secured credit in virtual property.

$500,000 Profit for Sale of Virtual Property

The online world Entropia Universe, already the home of highest initial sale price for a piece of virtual property ($300,000), just had what is probably the most profitable virtual real estate transaction to date.  Jon Jacobs (aka "Neverdie") sold his share in a virtual asteroid for $500,000.  He had already made back his initial $100,000 investment over the past few years by renting out the right to use parts of the asteroid to other players.

Ben Barros

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Grimmelmann on the Internet as Semicommons

James Grimmelmann (New York Law School) has posted The Internet is a Semicommons on SSRN.  Here's the abstract:

The Internet is a semicommons. Private property in servers and network links coexists with a shared communications platform. This distinctive combination both explains the Internet's enormous success and illustrates some of its recurring problems.

Building on Henry Smith's theory of the semicommons in the medieval open-field system, this essay explains how the dynamic interplay between private and common uses on the Internet enables it to facilitate worldwide sharing and collaboration without collapsing under the strain of misuse. It shows that key technical features of the Internet, such as its layering of protocols and the Web's division into distinct "sites," respond to the characteristic threats of strategic behavior in a semicommons. An extended case study of the Usenet distributed messaging system shows that not all semicommons on the Internet succeed; the continued success of the Internet depends on our ability to create strong online communities that can manage and defend the infrastructure on which they rely. Private and common both have essential roles to play in that task, a lesson recognized in David Post's and Jonathan Zittrain's recent books on the Internet.

Ben Barros

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More on What Virtual Property Can Do For Property: The Problem of Analogy

In my string of posts, I'm trying to explain how the study of virtual property can clarify our thinking about property generally and intangible rights in particular. In my last post, I explained some of the analytical problems in designating "intangible" as a property category. Here, I'll explain some problems with another analytical path that some courts follow in trying to fashion rules for intangible rights.

If you look at the bottom of that last post, you'll see that it's in the "Intellectual Property" category. Ben and I put the first post there because there wasn't a "Virtual Property" category two weeks ago, so we agreed that "Intellectual Property" was good enough. Why was it good enough? For one thing, I am discussing some IP. Eros v. Simon, the sex bed case, IS an intellectual property case.

But we also decided it was good enough because we analogized virtual property to intangible rights that we know already, and when many lawyers think of intangible rights, they think of intellectual property. Courts, of course, do the same, and sometimes reach results that are not very helpful, or worse, do not make much sense.

Another domain name case, Dorer v. Arel, 60 F. Supp. 2d 558 (E.D. Va. 1999) illustrates the problem of characterizing all intangible rights as intellectual property. Dorer was a creditors' rights case in which a judgment creditor wanted reach the domain name by garnishment. Under the applicable statute, only a property right could be garnished. So the court looked to one body of intellectual property law, trademark law, and concluded that a domain name that was eligible for trademark protection was property and thus garnishable, while a domain name not eligible for trademark protection was not property and therefore not garnishable.

Here's the problem. A domain name that is eligible for trademark protection can't be transferred without the goodwill of the business to which it is attached, and as a result, is not of much value to creditors. A generic domain name, on the other hand, is not eligible for trademark protection, but can be VERY valuable to a creditor because it can be transferred for lots of money.

So again, here's where the virtual world cases can help out. Virtual world disputes mirror disputes in the tangible world. People complain when they're denied use of their assets (Bragg v. Linden Research) and they complain when someone steals their designs (Eros v. Simon). The disputes are different from tangible world disputes in a way that should not be important -- they ALL involve intangible assets. Virtual world disputes can teach us to put tangibility aside and concentrate on other aspects of property rights.

Juliet Moringiello

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Moringiello on Estates in Virtual Property

Juliet Moringeillo (Widener University School of Law) has posted Towards a System of Estates in Virtual Property on SSRN.

Virtual worlds such as Second Life have received a lot of press in the United States recently. As individuals and businesses participate in these virtual worlds, questions arise regarding the application of existing laws to their virtual world transactions. Many questions have arisen regarding the property rights of participants in virtual worlds, and a Second Life member recently sued Linden Research, the company that developed Second Life, alleging that Second Life converted his virtual property. The questions regarding the legal nature of virtual world assets tend to mirror the questions regarding intangible rights generally, as courts have tended to struggle over whether these rights are property rights or contract rights. In this paper, I propose that the principle of numerus clausus be applied to virtual property, so that courts faced with disputes over such assets will have mandatory property forms to which to resort. Such an approach would limit the ability of vendors of such rights to customize them through their contracts, which are commonly embodied in electronically-presented standard forms.

Ben Barros

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