I wrote the following piece as a term paper for a class I took early on during my LL.M. studies. I’m currently working on some other material related to this, and the topic of RMT in general, so I thought I’d repost it here since it seems that Grimwell has removed the archives of old articles from Grimwell.com. It could also be that I suck at using websites and I could have just linked the nice, formatted copy that I had but can no longer find.
At any rate, this is just as much a reminder to myself to get back on a few back-burnered projects, and hey, maybe this is still worthy of some discussion. There’s a few ideas in here that I don’t necessarily buy anymore, but for the most part, I think it’s a fair read on the law. Anything regarding EULAs is probably not as accurate as it could be, but if anything, EULAs are still strong, just vulnerable on a case-by-case basis.
There’s Gold In Them Thar Pixels!
An Examination of Virtual Chattels and Property Rights
“When a time comes that new modes and venues exist for communities, and said modes are different enough from the existing ones that question arises as to the applicability of past custom and law; and when said venues have become a forum for interaction and society for the general public regardless of the intent of the creators of said venue; and at a time when said communities and spaces are rising in popularity and are now widely exploited for commercial gain; it behooves those involved in said communities and venues to affirm and declare the inalienable rights of the members of said communities.”
–Raph Koster[1]
I. Introduction
Although the above quote was first written on August 27, 2000[2], the conflict between the laws of the real world and the rules of virtual worlds has yet to be resolved. While recent U.S. court opinions indicate that End User License Agreements and Terms of Service (EULA and TOS) govern the relationships between game developers and the denizens of their virtual worlds[3], other countries’ legal systems are beginning to recognize the rights of the players who inhabit these virtual worlds. For instance, in 2003, a Chinese man sued Beijing Arctic Ice Technology Development Co. Ltd., the developer of the game Red Moon, seeking the return of weapons and treasure that were stolen from him by an account hacker.[4] Arguing that his investment of “labor, time, wisdom and money” made his virtual belongings his property, Li Hongchen demanded 10,000 yuan ($1,205 U.S.) in damages.[5] The Beijing Chaoyang District People’s Court ruled that since the game servers were vulnerable to hacking, the developers had to take responsibility for the lost property.[6] Although this is not binding precedent for U.S. courts, it seems to represent a shift in the way we think about virtual worlds.[7]
This shift in paradigms has not gone unnoticed in the American legal community. New York Law School and Yale Law School have co-hosted two conferences dedicated to discussing the social, legal and ethical issues that surround virtual worlds.[8] Judge Richard Posner wrote, “What if any social controls should be placed on the evolution of video online worlds. . .”[9] Currently, the rights of the users of virtual worlds are governed by contract theory; however, these contract concepts may inadequately address the intellectual and personal property issues that arise with increasing user involvement in virtual worlds and the secondary markets they generate.
II. Background
Virtual worlds have been around since 1972, when Richard Bartle created MUD1, but they did not gain widespread popularity until Ultima Online and Everquest came on the scene in the late 1990s.[10] Although not the first games to add graphics, these virtual worlds were among the first to create detailed, graphical worlds. Virtual world users create a digital representation of themselves, also known as an avatar. One key difference between virtual worlds and single-player games is that the worlds are persistent, and players continue to act “in-world” even after one specific avatar logs out. Through their avatars, players interact with the world and other players, fighting, chatting, creating, and dying. Players become so involved in their virtual worlds that they even stage in-world protests to address their concerns to the game developers.[11]
These virtual worlds, also known as Massively Multiplayer Online Games (MMOGs), have skyrocketed in popularity since Raph Koster penned his Declaration of the Rights of Avatars. As of January 2005, MMOG subscriptions in the United States and Europe are just shy of the 3.5 million mark.[12] Regardless of whether these subscriptions represent 3.5 million individuals or simply 3.5 million active subscriptions, the MMOG industry is a multi-billion dollar business. The Themis Report 2002, published by Themis Group, indicates that in 2001, virtual worlds earned approximately $275 million in revenues.[13] According to numbers collected by Themis Group in December 2004, the MMOG industry brought in $2.23 billion.[14] DFC Intelligence’s latest report, The Online Game Market 2004, predicts that virtual world revenues will reach $9.8 billion by 2009.[15] Given the massive revenue spike between 2001 and 2004, this predicted growth does not seem wildly out of reach. Virtual worlds have seen a large spike in subscribers in the last four months; Blizzard announced in March 2005 that its latest offering, World of Warcraft, reached the 1.5 million subscriber mark, with up to 500,000 players online simultaneously, a new industry record.[16] Given the vast popularity of online games worldwide, it seems that virtual worlds are here to stay.
Virtual worlds have brought along an often-unwanted companion; the secondary market for virtual items and cash. While estimates of this market’s revenues vary, one of the market’s major players estimates that the industry is doing $880 million US per year in business.[17] Sony Online Entertainment (SOE) estimates that this number is closer to $200 million per year.[18] The secondary market in virtual chattels encompasses in-game items, real estate, characters, strategy guides, programs to automate gameplay (macros), “power leveling” services, and currency.[19] Some developers of virtual worlds, most notably SOE, have worked directly with eBay to eliminate these secondary market auctions from their listings.[20] Some games encourage or allow sales of in-game items, and the sale prices can be staggering. For example, in a game called Project Entropia, an island sold for $26,500 U.S.[21] This island, however, is nothing more than data on Project Entropia’s servers.
While spending $26,500 on a non-existent island may seem outlandish or downright insane to the casual observer, it demonstrates that players attribute large amounts of value to their virtual chattels. Sometimes disputes over the ownership of virtual items spill over into the real world. On March 30, 2005, it was reported that an online gamer in Shanghai stabbed another player to death for selling a virtual sword that he had lent to the deceased.[22] The item sold for 7200 Yuan, which is approximately $870 U.S.[23] Although the attacker had sought legal recourse by reporting the theft to the police, he was told they could not help him.[24] While this does not excuse such a horrible crime, it does demonstrate a situation where current law and license agreements do not necessarily protect the rights of players in their virtual chattels.
Occasional item sales are just the tip of the digital iceberg; the secondary market has the potential of becoming the primary source of income for some gamers. For instance, author and journalist Julian Dibbell spent a year in the virtual item and currency trade in Ultima Online in an attempt to prove that he could “truthfully report to the IRS that [his] primary source of income [was] the sale of virtual goods,” and that this income would be more, “on a monthly basis, than [he] had ever earned as a professional writer.”[25] While Mr. Dibbell’s results fell slightly short of his expectations, he made approximately $47,000 in yearly profits.[26] Other virtual entrepreneurs have turned their second lives into businesses that provide them with an income from that of a part-time job to low five-figures.[27] It would seem that much like the virtual world, the secondary market in virtual chattels is here to stay as well.
The secondary market’s staying power is directly related to the value players attribute to virtual chattels and properties. On average, gamers spend 22 hours per week online.[28] Although “Time is Money” may be a cliché, it is possible to mathematically determine how much money one’s time is worth.[29] Due to the time players invest in developing their avatars status in virtual worlds, it is not surprising that many feel they own their game account, their characters, and their virtual chattels. However, game companies have largely taken steps to deny players ownership rights in anything they acquire during the course of gameplay. For instance, most game companies draft their EULAs and TOS to specifically prohibit the sale of virtual chattels and game accounts. In order to play Everquest II, one must agree that he has no property rights in all things related to the game including, “character(s), item(s), coin(s) or other material or property.”[30] However, both Player Auctions.com and IGE.com list hundreds of sales for Everquest II in-game items, coins and characters.[31] Regardless of the wishes of developers, players will participate in the secondary market.
One game developer has realized that this is the case, and has taken steps to give rights to players that other developers don’t. Linden Lab, developer of Second Life, has drafted its Terms of Service to allow players to retain their property rights in their creations. The TOS specifically states, “you will retain any and all applicable copyright and/or other intellectual property rights with respect to any Content you create using the Service.”[32] This clause allows players to re-sell their virtual chattels, possibly even taking them out of the virtual world and into the real world. One player (“resident”) has done just that. Nathan Kier, known in Second Life as Kermit Quirk, recently sold his widely-popular game, Tringo, to a real-life game developer for a fee in “the low five figures.”[33] This model of rights management is unique and will be the focus of this article. The article will also discuss a new, recently announced model. Both approaches highlight various issues with the current contract-based method of addressing virtual chattels.
III. Discussion
End User License Agreements and Terms of Service are construed according to State contract laws.[34] However, Federal statutes can preempt state law if they contain a preemption clause.[35] In Davidson & Associates v. Internet Gateway, the court determined that an EULA can preempt the Copyright Act if the clause in question created “a right not existing under copyright law.”[36] The Davidson court noted that, in order to avoid preemption, a contract must only require an extra element, “instead of or in addition to the acts of reproduction, performance, distribution or display, in order to constitute a state-created cause of action.”[37] To this extent, an EULA or TOS only has to limit a user’s copyright in user-created content, or impose an extra duty to avoid preemption under the Copyright Act.
The Davidson court further indicated that an EULA or TOS is generally valid. Applying the Uniform Commercial Code and precedent from state courts, the court stated that the precise method of contract formation was not important so long as it “show[ed] agreement, including conduct by both parties which recognizes the existence of such a contract.”[38] Additionally, the court held that while the EULA or TOS was not on the box or on an insert within the box, being asked to agree to it during installation was sufficient notice for purposes of contract formation.[39] It is important to note that most MMOGs present their EULA or TOS to the user each time the game is launched, and the user must agree to play. To this extent, it seems that virtual world license agreements will generally be binding.
Internet Gateway, the defendants in Davidson, argued that the Blizzard Terms of Use and EULA were unconscionable.[40] A contract is unenforceable when some level of both procedural and substantive unconscionability exists.[41] The Davidson court stated that while there was a disproportionate relationship of power between the plaintiff and defendants, the defendants had the option of playing another game and returning the software they had purchased to Blizzard.[42] This portion of the opinion seems the most vulnerable to being rejected by other courts. Although there are competing game products from which to choose, the vast majority all have equally restrictive license agreements. Additionally, games can be similar to each other, but no two are identical. The ability to “vote with one’s wallet” seems to be a straw man at best. If a player’s right to his intellectual property and virtual chattels is recognized by U.S. courts, it is entirely possible that future EULAs and TOS could be found to be unconscionable. F. Gregory Lastowka and Dan Hunter opine that courts will begin to reject EULAs “to the extent that they place excessive restrictions on the economic interests of users.”[43]
Lastowka and Hunter also discuss several compelling justifications for viewing virtual chattels as property. They address the “timeworn metaphor of property as a bundle of rights . . . the rights to use, exclude, and transfer.”[44] The owner of virtual property has all three of these rights. Lastowka and Hunter use the example of a battle axe that only its owner can use or sell.[45] In virtual worlds like Second Life, both virtual objects and real estate encompass these rights. It is possible to set use and access permissions for both one’s virtual objects and for one’s virtual land. Applying the “bundle of rights” definition, it seems that virtual chattels behave much like property in the real world.
Due to the similarities between virtual property and physical property, and given that players attribute intrinsic value to their virtual chattels, Lastowka and Hunter conclude that virtual chattels are the property of the player.[46] However, the majority of modern virtual world EULAs force players to waive any rights they may have in their virtual chattels, game accounts, characters, and any content they create. Linden Labs has made a positive step forward in recognizing the rights of its players, but its TOS highlights some of the inadequacies of the current contract-based method of virtual world management.
The differences between virtual worlds make individual analysis necessary when dealing with intellectual property issues and, to some extent, those involving virtual chattels. “Not all virtual spaces are alike, and the law should not treat them as if they were all the same.”[47] Second Life is a good case study because its TOS grants players some of their intellectual property rights in the content they create[48], but at the same time disavows that their virtual chattels and currency have any real world value.[49] These two ideas seem to be at odds with each other, largely due to Linden Lab’s statements within its promotional materials, other clauses of its TOS/EULA and its own practices in the management of its virtual world.
A short visit to the Second Life website will turn up various web pages that describe its vibrant economy, highlighting the chance to earn real-world cash.[50] The “money” page provides links to Gaming Open Market and Internet Gaming Entertainment, two secondary market services that allow players to buy and sell Linden Dollars ($L), the in-world currency.[51] The Gaming Open Market website charts the exchange rate of $L to $US much like a modern stock or currency exchange.[52] The CEO of Linden Lab, Philip Rosedale, uses the data produced by Gaming Open Market to determine economic policies within Second Life.[53] However, the Second Life TOS/EULA specifically states, “All of your content and accumulated status has no intrinsic cash value and that Linden does not endorse, and expressly disclaims . . . any value, cash or otherwise, attributed to content or accumulated status [all caps formatting removed].”[54] Linden Lab also attempts to disclaim liability for its management of the virtual economy.[55] While the Second Life TOS/EULA claims that user content has no intrinsic value, the website touts the chance to make real-world cash and endorses two secondary market merchants, one of which is the source of data for Linden Lab economic policy development.
This seems problematic from a contract construction perspective. Although Linden Lab seeks to disclaim any liability should player content be destroyed, it also promotes its service by telling prospective users that they too can earn real-world cash by starting a successful business in Second Life.[56] Whether a court would uphold the “All Data Is Temporary” clause of the TOS/EULA is doubtful. It could be considered unconscionable due to the unequal bargaining positions of Linden Lab and its users. It is also possible that a court would consider the contradiction between Linden Lab’s actions and the language of its EULA misrepresentation because it seems clear that virtual chattels in Second Life have extensive real world value. Although the Davidson opinion seems to indicate that players have a choice of what game to play, Second Life is the only virtual world that allows players to retain their intellectual property rights to their creations, and to that extent, it is unique.
Second Life is also unique because its residents can buy and sell land for in-game currency or for U.S. dollars. The sales for real currency are done via auction on the Second Life website.[57] In the event that Linden Lab terminates a resident’s account, the TOS/EULA sets forth the equivalent of a foreclosure sale for a resident’s virtual land.[58] Residents will even be charged up to $100 as a “Resale Fee.”[59] Given these factors, it seems that virtual chattels and land do have an intrinsic value within Second Life. This could be problematic for Linden Lab. As Jack Balkin notes, if a game developer was to go bankrupt, recognizing the intrinsic value of virtual chattels and currency could cause players to “petition the bankruptcy court to keep the game running, restructure the business, and/or sell it to another party so that player’s virtual property interests are not destroyed.”[60]
Balkin’s hypothetical scenario is more troubling due to how Linden Lab attempts to manage the players’ retention of intellectual property rights in content they create. The full text of Clause 4.3 (“All Data Is Temporary”) of the Second Life TOS/EULA indicates that the copyright players hold in their creations is not subject to the clause, nor are the rights Linden Lab retains in resident-made content.[61] However, later in the contract, Linden Lab indicates that these retained rights aren’t completely exclusive. Residents grant Linden Lab several “limited licenses” in exchange for their intellectual property rights.[62] Residents grant Linden Lab a transferable license to use and reproduce their content for marketing and promotional purposes, a right to delete any resident content for any reason, and any potential patent rights to use the content within the Second Life service.[63] The fact that Linden Lab sought to retain rights to exploit and use resident-created content for commercial gain, and the fact that it does not disclaim the intrinsic value of user copyright could expose it to a scenario much like the one that Balkin discusses.
An apparent problem with managing rights to intellectual property and virtual chattels via contract is that the rights tend to blend together, making it hard to determine whether something is solely intellectual property or virtual chattel. For instance, if a Second Life resident purchases a plot of land, it appears to be a virtual chattel. The player has the bundled rights of exclusivity, use, and transfer. However, within the rules of the virtual world, players can terraform their plot of land, raising land, lowering land, creating plateaus or valleys, adding channels for water or ponds. This expression of the idea of land seems to fall within the boundaries of the Copyright Act. The plot of virtual land could be described as possessing both intellectual property and virtual chattel qualities. The termination clause of the EULA/TOS provides for the equivalent of a foreclosure sale of a resident’s land, which seems to add real property concepts to the mix. These ambiguities could be problematic when attempting to interpret the contract.
One final difficulty with managing the rights of players via contract is that while Linden Lab allows players to retain their intellectual property, it also expects players to hold it harmless for the deletion of their content, reserving the right to do so for any reason. This is important to protect Linden Lab because there is no screening process before user content is uploaded to its servers. The most recent revision of the Second Life TOS/EULA includes language that provides non-resident copyright holders a means to request that Linden Lab remove infringing content pursuant to the Digital Millennium Copyright Act.[64] To this extent, it is important that Linden has the right to delete user content for any reason. Lawsuits for contributory copyright and trademark infringement are no longer novel in the MMOG industry. Marvel Comics recently sued NCSoft and Cryptic Studios, publisher and developer of City of Heroes alleging that the City of Heroes character creation system allowed users to create characters that looked like Marvel comic book characters.[65] It is conceivable that Linden Lab could be sued under a similar theory if it does not take steps to remove user content that may infringe another copyright holder’s rights. This is especially true because the latest version of the Second Life software allows residents to stream video onto their virtual land, opening up the possibility for unlicensed performance of television programs and movies.[66] It is important to the longevity of virtual worlds that they protect themselves against liability for the actions of their users.
Sony Online Entertainment (SOE) has taken another approach towards managing virtual chattel sales that may limit its liability in the case of accidental deletion or a virtual world closing down. While in the past SOE has tried to be aggressive in its efforts to curtail the trade in virtual chattels,[67] it has recently announced that it will be facilitating player to player sales of items, coins, and characters by adding special “exchange enabled” servers for its flagship title, Everquest II.[68] In exchange for allowing players to trade in their virtual chattels, SOE will take a percentage of the sale price as a transaction fee.[69] Instead of allowing players to retain property rights in their virtual chattels, SOE has instead decided to grant a transferable, “limited license right, not an ownership right.”[70] In effect, SOE does not recognize property rights to virtual chattels, but only allows players to transfer the right to use a specific item, coin or character from one player to another. This solution to the “problem” of the secondary market seems effective at first glance. It allows players to engage in the secondary market with a greater sense of security because all trades will be administered by SOE.[71] This helps solve the problem of fraud, where a player buys an item that does not exist, an account with a bogus or altered password, or where the seller simply does not show up to complete the trade. It also denies that virtual chattels are property, making a player’s economic interest in his or her transferable, limited license to use virtual chattels somewhat less. Since the items are not personal property, SOE is not liable for conversion if the items are destroyed and is not obligated to reimburse players in the event that SOE has to shut the doors to Everquest II.
However, this limited liability may be a tenuous position for SOE. Although its approach is different from that of Linden Lab, some of the same issues present themselves. Although SOE can justify the transaction fee for in-game sales for U.S. dollars as a “service charge,” it seems that it is also an acknowledgement of the intrinsic value of virtual chattels. By involving itself in an industry that hinges on the idea that players own their virtual items, coin and characters, SOE’s practices may contradict its assertions in its EULA. Describing sanctioned virtual chattel sales as a license transfer may protect SOE in the short term, but since the items behave as property, and because SOE is taking a share of the sale price, it is possible that the EULA could be invalidated under a misrepresentation theory. However, until this model is tested in court, any weaknesses in the EULA are purely speculative.
The limited use and transfer license model may be a short-term solution for the problem of secondary markets in more traditional MMOGs. As long as courts continue to uphold EULAs, this method may prove effective for managing players’ interests in their virtual chattels. However, this model does not address the attributed value players associate with their online possessions. If virtual chattels rise to the level of personal property or personal investments, companies will have to address new methods for protecting themselves against liability for lost and stolen virtual chattels, as well as the problems associated with shutting down a game once it has ceased to be profitable to run. Additionally, if the SOE model does not stop the secondary market in SOE-related virtual chattels, the positive benefits, such as fraud prevention, will be a drop in the bucket at best. To this extent, at some point, the law will still have to address how we wish to treat virtual worlds and virtual chattels as a society.
IV. Conclusion
As virtual worlds develop and players invest more time in them, issues of rights management will continue to surface. It is important to develop a model that recognizes the difficulty of contracting for all possible contingencies, while also seeking to establish a legislative or judicial solution to the problem of virtual chattels and the intellectual property rights of players. As the MMOG industry continues to grow, so does the secondary market in virtual chattels. Neither market is going to die out; the worldwide trend seems to indicate that, sooner or later, virtual chattels will be just as real to our court system as a car, television, or the computers on which these games are played. While the virtual property rights of players should be recognized, it seems that it is necessary to protect virtual world creators as well. Statutory limitations on liability and damage awards may be better methods for protecting the interests of game companies, while allowing players to retain some amount of rights to their virtual chattels. If virtual world developers are inadequately protected, and face the risk of losing revenues to extended legal battles, they may drop out of the market entirely.
From a public policy perspective, it is important to protect the financial investments of both consumers and corporations. Certainly, if the financial risk of producing a virtual world outweighs the potential profits, developers may just stop making these games. This would be a blow to the game industry, cutting out a significant revenue stream. This, in turn, could lead to game companies cutting staff. On the other hand, if players come to expect that their virtual chattels are personal property, it is important to protect consumers from fraud, theft, and loss of their investment, whether it is time or money. Clearly, a middle ground needs to be found. One solution is to recognize virtual chattels as a temporary property right. Players can buy and sell their virtual chattels as they please, but with the understanding that in the event of accidental deletion or a game shutting down, they are unable to seek cash reimbursement from the virtual world developer. Developers would be liable if they failed to secure their servers and virtual chattels or personal information were stolen. This middle ground would protect both the investments of game companies and their players. Of course, as we are seeing in this developing field, what will happen ultimately remains to be seen.
[1] Raph Koster, A Declaration of the Rights of Avatars, at http://www.legendmud.org/raph/gaming/playerrights.html (last visited March 24, 2005). Raph Koster is currently the creative director at Sony Online Entertainment’s Austin, TX studio. He was previously the lead designer for Electronic Arts’ Ultima Online.
[3] See Davidson & Associates v. Internet Gateway, 334 F. Supp. 2d 1164 (ED MO 2004) (indicating that while Federal statutes would normally govern defendants’ use of reverse engineering to create a server emulator for Blizzard’s Diablo 2 game product, the game TOS usurped Federal law and controlled the dispute.)
[4] Xinhua General News Service, On-Line Game Player Wins Virtual Properties Dispute, December 19, 2003.
[7] See also Daily Yomiuri, ‘Ultima Online’ Hacker Arrested Over ‘House’ Sale (February 14, 2003)(describing the arrest of a hacker who invaded another player’s Ultima Online account and sold the virtual chattels associated with the account). This arrest, like the Chinese lawsuit, indicates that attitudes towards virtual chattels are shifting towards recognizing personal property rights.
[8] See State of Play II| Reloaded, available at http://www.nyls.edu/pages/2396.asp (last visited March 30, 2005)(including archives of the papers presented at both conferences).
[9] Richard Posner, Back To The Matrix, Posted on the Lessig Blog, available at http://www.lessig.org/blog/archives/002124.shtml (last visited March 30, 2005). Justice Posner also noted that the issue “has attracted little attention.” Id. He states that regardless of whether virtual worlds ever become as immersive as the Matrix, “people will find it increasingly difficult to distinguish between the actual and virtual worlds in which they participate.” Id.
[10] F. Gregory Lastowka & Dan Hunter, The Laws of Virtual Worlds, 92 Calif. L. Rev 1, 18-26. Lastowka & Hunter provide a detailed history of the development of games and virtual worlds, highlighting developments in gaming since 1972.
[11] Beth Simone Noveck, Introduction: The State of Play, 49 N.Y.L.SCH.L.REV. 1, 2-4 (2004/2005).
[12] Bruce Sterling Woodcock, Total MMOG Active Subscriptions, http://www.mmogchart.com (last visited March 24, 2005). While these figures do not take into account the Asian MMOG market, they are a useful snapshot of the approximate number of subscriptions in the Western MMOG market.
[13] Caroline Bradley & A. Michael Froomkin, Virtual Worlds, Real Rules, 49 N.Y.L.Sch.L.Rev. 103, 127 (2004) (citing Themis Group, The Themis Report 2002, at 14).
[14] According to Nova Barlow, Market Research Manager, Themis Group. This data will appear in upcoming Themis publications. She also states that of the $2.23 billion worldwide, $316 million is attributable to the United States/European Union market.
[17] Michele Mandel, Money For Nothing: Michele Mandel Reports Big Game Hunters Are Getting Rich In The Cyber Jungle, The Toronto Sun, March 13, 2005
[23] Id.; See also XE.com, The Universal Currency Converter, available at http://www.xe.com/ucc/ (last visited April 2, 2005).
[27] See Mandel supra note 15 (discussing Nathan Kier, a Second Life player who has sold one of his creations to a game developer for “low five figures,” and indicates that for one virtual currency exchange, the largest amount cashed out was $40,000 US).
[28] Mandel, supra note 15
[33] Mandel, supra, note 15. Tringo is a combination of Tetris and Bingo, where players place randomly given shapes to create squares of varying dimensions, highest score indicates the winner.
[34] See Davidson & Associates, supra note 3 (analyzing the Terms of Use for Blizzard’s Battle.net service and the End User License Agreements of Blizzard’s games based on California and Missouri state law).
[35] Davidson & Associates, 334 F.Supp.2d 1164 at 1174.
[40] Id. at 1179. Procedural unconscionability deals with “oppression or surprise due to unequal bargaining power. . .” and substantive unconscionability “focuses on overly harsh or one-sided results.” Id.
[43] Lastowka & Hunter, 92 Calif. L. Rev. 1 at 50.
[47] Jack M. Balkin, Law And Liberty In Virtual Worlds, 49 N.Y.L. SCH. L. REV. 63, 80 (2004).
[48] Linden Lab, Terms of Service and End User License Agreement for Second Life, Cl. 5.3, available at http://secondlife.com/tos.php (last visited April 4, 2005).
[54] Second Life TOS/EULA Cl. 4.3.
[56] Second Life Website, supra note 49.
[58] Second Life TOS/EULA Cl. 7.1
[60] Balkin, 49 N.Y.L. SCH. L. REV. at 79.
[61] Second Life TOS/EULA Cl. 4.3
[62] Id. at Cl. 5.3 “Participant Content.”
[64] Id. at Cl. 12 “Copyright Information.”
[71] See Smedley supra note 68.
August 28th, 2007
I caught news of the ban on Second Life casinos yesterday via Lum and Raph’s blogs, but then our power went out and, well, it was really dark. Apparently Linden Lab has announced a “no gambling/casinos” policy. Since a large portion of the in-world “hot spots” are casinos, this may lead to some interesting times in Second Life.Some people envision this as a major economic collapse or recession. Some envision dirt cheap land for sale rather soon as the multitude of existing casinos begin closing. Given that there’s blood in the water already, I wouldn’t be shocked if there was a lawsuit. In light of a recent opinion of the Ninth Circuit, I’d say that there may be an interesting argument on the side of the casino owners.
On July 18, 2007, the Ninth Circuit discussed whether (at California law) a “keep yourself informed” contract modification policy was valid. At issue in Douglas v. U.S. District Court ex rel Talk America, No. 06-75424, was whether changes to a TOS/EULA-style contract are valid if there is no notice given. In many EULAs and TOS agreements, you’ll see language (possibly under the heading “notice”) that indicates that it is the responsibility of the user to check the contract for any changes. The Second Life TOS is no different:
Linden Lab may amend this Agreement at any time in its sole discretion, effective upon posting the amended Agreement at the domain or subdomains of http://secondlife.com where the prior version of this Agreement was posted, or by communicating these changes through any written contact method we have established with you.
What Linden Lab does is basically modify the agreement, and then makes a post to the Official Linden Blog. I have never received an email about a TOS or other policy change. I think I did receive one for that password security issue they had, but that’s a different can of worms. In the Douglas case, the AOL Talk America service agreement contained similar notice provisions. Talk America added in four new clauses that changed rates, mandated arbitration, barred class actions, and chose NY as a forum state. It gave Douglas no notice of this change beyond modifying the TOS at their website.
At this point, the really observant reader will say, “But wait, Linden Lab posts notices to the Official Linden Blog. Clearly, that difference is sufficient for providing notice.” It sounds reasonable, doesn’t it? Not really. The Ninth Circuit had this to say about “website notice”:
He could only have become aware of the new terms if he had visited Talk America’s website and examined the contract for possible changes. . . . However, Douglas claims that he authorized AOL to charge his credit card automatically and Talk America continued this practice, so he had no occasion to visit Talk America’s website to pay his bills. Even if Douglas had visited the website, he would have had no reason to look at the contract posted there. Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side.
[Bold is mine]
Douglas seems like a typical MMO user to me. Heck, he seems like a typical consumer. If he doesn’t need to go to “the official website” to make his product work/be fun/whatever, he won’t. Talk America didn’t go so far as to provide a blog post, but does the blog post make THAT much of a difference? I’d argue that it doesn’t. If many users don’t pay at all and the ones that do pay are paying via CC or Paypal, what reason do they have to visit www.secondlife.com? Not very much, although I do enjoy the “Friends Online” function. Visiting the Official Linden Blog? Even less.
Something else worth noting, when the SL TOS snippet above says, “communicating these changes through any written contact method we have established with you,” it may seem to include the Official Linden Blog. Here’s the problem — is that Blog a “written contact method” that is also “established” with the user? The language in Douglas would seem to indicate that no user is required to visit a website to receive notice of a change to a contract. Since the Official Linden Blog is located on…waaaiiit for it…a website, I’m guessing that it’s not a valid written contact method. Moreover, an “established” method would imply one where contact has actually been made with the individual, not just posted on the web.
There’s no lawsuit out there of which I’m aware, but I do wonder whether Linden Lab should start emailing these changes to their users. It’s a low-cost solution to the problem, particularly when other portions of the TOS also indicate that email is a valid communication method.
July 27th, 2007
