The PRNewswire, which as best I can tell is a site that collects press releases, has a press release on a new lawsuit filed over a “virtual land deal” gone awry. From the press release:
In May 1st, 2006, a possible first-of-its-kind lawsuit was filed in local district justice court to seek remedy for a virtual land deal gone sour. The suit seeks financial damages in the thousands, in part for a breach of a virtual land auction contract and for violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. This suit is unique because the land doesn’t actually exist.
Marc Woebegone, known in the real word [sic] as Marc Bragg, has filed suit in the local district justice court in West Chester, Pennsylvania, a small town located 25 miles west of Philadelphia, PA. Bragg purchased virtual land, known in Second Life as “sims,” using real US currency. Bragg learned of a way to purchase virtual land significantly below market values, and invested thousands of US dollars purchasing land in an attempt to resell this land at a profit. Bragg claims that employees of Linden Research, Inc., the company who creates, manages and maintains this online world, allowed the auction to be created, and after Bragg paid US dollars for the land, terminated Bragg’s account, without explanation, without citing any violation of community policy, and have since refused offer a credit or a refund. Bragg’s calls to customer service and Linden Lab’s legal counsel have gone unanswered. Bragg’s final option? Seek relief in a real world court.
A decade ago, this lawsuit would have triggered 20 law review articles and a few books about the new world of cybercitizens buying cyberproperty to make a cyberprofit (or for other cyberreasons), and then bringing cybersuits in cybercourt to enforce their cyberrights. Am I right that today we can see this as pretty much just a standard breach of contract claim? Woebegone, known in the “real word” [sic] as Bragg, purchased a set of rights. The company did not give him what he claims they promised to give him, leading him to sue for breach of contract. Seems pretty old-fashioned to me.
On an unrelated front, am I the only one who thought of Dr. Evil after reading that the complaint seeks financial damages “in the thousands”?
I have no idea whether it impacts on the trial, but this is one of the clauses in the Terms of Service of Second Life (http://secondlife.com/corporate/tos.php):
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2.6 Linden Lab may suspend or terminate your account at any time, without refund or obligation to you.
Linden Lab has the right at any time for any reason or no reason to suspend or terminate your Account, terminate this Agreement, and/or refuse any and all current or future use of the Service without notice or liability to you. In the event that Linden Lab suspends or terminates your Account or this Agreement, you understand and agree that you shall receive no refund or exchange for any unused time on a subscription, any license or subscription fees, any content or data associated with your Account, or for anything else.
Yes, but I think there are still many issues particular to the online enviornment. In particular since most online usage happens subject to some EULA there are tough questions about what are valid terms in these contracts.
I realize that this is the same sort of thing we see in the real world (are the terms unconscionable etc..) but I suspect these issues are more common and less resolved in the online world. It isn’t normal in the real world to make purchases for thousands of dollars the value of which exists only pursuant to a ‘contract’ that allows the service provider to terminate your account at any time for any reason.
In other words the online world exists in this funny place where people’s actual expectations of behavior (having accounts canceled etc..) differs widely from the contractual agreements (which they never read) which theoretically govern their interactions. I think there are a lot of interesting questions about what provisons of these EULAs are enforceable.
[OK Comments: I'm not arguing that nothing changes when we go online. To the contrary: Much of my scholarship is about how criminal law and procedure changes in the case of digital crimes. Rather, I think we need to be nuanced and careful about what changes and what doesn't rather than simply assume something is different because it is "cyber".]
In numerous online game worlds which are created for fun rather than for profit (at least, not for the user’s profit), there is an ongoing debate as to whether the software creator can enforce contractual terms that preclude the creation of a real-world secondary market. In other words, they specify via EULA that you cannot sell your in-game goodies for real-world cash, and that if they catch you doing so, they may terminate your account and keep the stuff.
The reason why the Linden Lab case sounds unexceptional is that it involves a virtual world where virtual commodities are intended to have a real-world cash value. But in a virtual world that exists for entertainment only, users still have an intuitive expectation that they “own” the virtual stuff they accumulate, even if the contract expressly provides to the contrary. Thus, you see intuitive arguments along the lines of “it’s mine, I have the right to do what I want with it”; “I’m not selling the virtual good, I’m selling the time I invested in getting it”; and the like.
My sense is that the contract simply prevails, but it would be interesting if one of these cases actually got litigated, if only because I doubt many judges would be in a position to truly understand the nature of the virtual economy.
At first I thought this might be a breach of covenant of good faith and fair dealing case – you can’t let someone buy something from you that assumes ongoing use, and then terminate them.
It appears, though, that he is buying and selling with other members, in which case the provider had no duty of good faith for him to obtain the benefit of his membership. That said, if the provider knew he was running this auction (and the auction didn’t violate and rules), there might be an argument for interference with prospective business advantage or interference with contract. It’s a tough call when there is an at-will termination right, though.
Either way, you’re right – this really is about contract and tort, and not about “cyber.”
Actually, there’s still quite a bit of “cyber” activity on this topic. E.g., this paper by Balkin and this one by Lastowka and Hunter and the State of Play series of conferences.
Under a purely contract law analysis, the player of a world with an appropriately restrictive EULA probably has no right to complain if the company deletes his account or his virtual items. But that’s only the end of the story if contract law really is the governing legal regime. And in some places, it’s not.
Joshua Fairfield’s Virtual Property, 85 Boston University Law Review 1047 (2005), rolls up in Part III.D events from Taiwan, China, and Korea in which some inroads have been made on the companies’ rights to confiscate or withhold virtual items. In China, for example, a virtual world company has been required to return to a player an item that he lost when his account was hacked. In Taiwain, a game maker won ruling that its EULA didn’t violate the anti-trust laws, but (as of Josh’s writing) the actual enforceability as against players of the virtual property terms occupied a legal grey area. More recently, it appears that Vietnam is weighing similar moves.
So the answer to your question is that yes, there’s nothing in general “cyber” about this that would override contract law. But there might, just might, be something more specifically “virtual world” (perhaps limited to specific sorts of virtual worlds with specific relationships to the real world) that would. The burden appears to be on player-plaintiffs to articulate a new legal theory of the why, the when, and the how, but it’s not wholly outside the realm of possibility that they will.
(Disclaimer/self-promotion: I’m frantically revising a chapter on these and related issues in virtual world EULAs.)
[OK Comments: James, I confess it sounds outside the realm of possibility to me that such a new theory of virtual world liability could actually be successful.]
There are, of course, standard contract law questions as to the enforceability of EULAs. But I am with Prof. Kerr that it seems implausible for a court to rule that you have some kind of property interest in what amounts to your score in a video game.
The issue is actually ripe for litigation in some ways, since accumulating virtual property in these games has become big business. Kids in countries like China and Korea are paid token wages to play the game all day and accumulate stuff, which is then resold to wealthy American players looking to get an edge in the game. The brokerage services who make all this possible accordingly rake in quite a bit of cash – and they are also probably guilty of a few torts.
I don’t know if I expect the issue to ever be litigated all the way to a decision, simply because I can’t believe the brokerage services really think a “virtual property” theory would be accepted by a court, and it would be the death of their business model if they got a bad ruling. In any event, this is a pretty fascinating area for law/computer geeks.
It’s an interesting data point about different national legal cultures that overriding the EULA on this point seems close to unthinkable in the U.S. but almost unremarkable in other countries. (There are other issues, such as liability for deliberately intended damage to players’ computers, on which U.S. law might be less willing to enforce the contractual terms, but this doesn’t immediately appear to be one of them.)
A more likely scenario might be that a company decides that its business model is so tied up with successful virtual property that it decides to forego the option of deletion at will. (This would probably happen in an economy-like virtual world sooner than it would in a game-like virtual world.) That company would probably keep contractual rights to modify the world and to expel misbehaving players, but introduce some due process protections or Just Compensation-type offsets for any virtual property it confiscated. (I could imagine, for example, a company that promised not to close an account without a statement of the particular rule violated by the player, possibly even “appealable” to arbitration.)
Another interesting thought exercise is to start with Second Life, and then start morphing it into TradeSports, and then into an electronically-mediated stock exchange, and then into a bond-issuing corporation, and to ask at what point (whether contractual or institutional) the potential obligor should no longer be able to change the rules mid-stream.
Probably the reason for the “thousands” is because district justice courts in Pennsylvania have a maximum jurisdictional limit of only $8,000.
Ok, I’m going to be the stupid 1L who asks… what is a EULA?
With that out of the way, I have to agree with Steve M that the brokerage houses will never litigate this fully. However, I can easily see some kid who has an attorney for a parent going all the way. Anyone remember the teenager who tried to sue Pepsi for a Harrier Jet after the Pepsi Points commercials ran? Obviously if it was only a trial court ruling there would be only token precedential value. However, if the parent/ attorney actually took the time to appeal then the brokers of virtual land may be in trouble.
The language that Matthew quotes highlights what I’ve been saying for years: there’s something deeply insane about the amount of real money that goes into stuff like this. I mean literally pathological. It’s a form of gambling: people bet, with no information, that the online company won’t go bust, that they won’t pull some kind of scam like this, etc.
In a way, it is about “cyber,” because it’s easier to get away with garbage like this online, with clickwrap lengthy EULAS, etc. Can you imagine what would happen to the value real world goods if the original seller reserved the right to take them back at will? “I’ll sell you this car, but at any time I reserve the right to take away the driving privileges of you or any person who subsequently owns it.” The car suddenly doesn’t have much market value, does it?
And don’t think that the site owner isn’t getting away with something. After all, the site owner sold the “land” in the first place, and the initial sale value must have increased by the seller’s expectation of a market for resale, which is increased by buyer’s feeling that they can buy without being arbitrarily punished, etc. etc.
I happen to have looked into this second life thing a while back. They maintain that “land,” which enables people to create and sell other “objects,” is a market representation of computing resources on Linden Lab servers. So what they’ve done is sold cpu cycles, and then taken them back.
I wonder if the market will respond to this piece of information about the amount of reliance that can be placed on Linden Lab’s “sales?”
In terms of the merits of a suit, I don’t even begin to know. Probably the unconscionability angle on the EULA is best.
Mike:
EULA = End User License Agreement.
You know when you install a piece of software, and a long scroll of legal text shows up with an “I Accept” box? That’s the EULA.
This lawsuit brings up interesting discussions regarding items heretofore not discussed. If I purchase land in second life, create a virtual casino on my sim (an SL term for a plot of land), and people walk into my casino and spend money inside the casino, and I earn an income worth $10K a month in real life, should I pay taxes on it (this scenario exists already)? Should Linden be required to send a 1099 to the IRS? Should I have a gambling license in the state that servers are located? If I sell virtual land at a profit, should I pay short term or long-term capital gains on the profit of the sale of the virtual land? If I create a virtual adult club, do the township ordnances regarding sexually explicit materials or establishments legally bind me in my city or in the town of the headquarters of the company? I can cash my currency out into real US dollars, and we have seen examples of people inside Second Life making real world incomes of $250K annually. If I design a line of virtual clothing, and people steal that design, is that copyright infringement? Second Life is a $60M world and growing. These issues are not going away.