The brand reality of the virtual world
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The brand reality of the virtual world

IP owners risk jeopardizing their rights if they fail to protect their copyright and trade mark rights in online worlds such as Second Life

Think that computer games are the preserve of semi-hibernating teenage boys and that virtual reality worlds are only for those who can't cut it in real life? Think again. The gaming industry has shaken off its reputation as the purveyor of pastimes for geeks and gone mainstream.

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The statistics bear that out: the US-based Entertainment Software Association estimates that the average age of a computer gamer is now 33, while 38% of players are women. When it comes to online games, from World of Warcraft to Solitaire, women are catching up with their male counterparts, making up more than two-fifths of players.

READ MORE: Facebook IP head revisiting priorities amid lockdown

And people are spending more time than ever before racing virtual cars, slaying fantasy dragons and scoring their dream goals. Market research company Nielsen Interactive Entertainment calculates that young men play an average of 12.5 hours of videogames each week, compared to less than 10 hours spent watching TV.

All those gamers mean that the industry is big business for computer game developers and manufacturers. As Managing IP went to press, French media company Vivendi was planning to merge its computer games business with US-based Activision in a deal worth almost $19 billion. If it goes ahead, the merger will create the world's largest computer games company.

Opportunities

But the rising number of gamers has also led to an explosion in in-game advertising as brand owners seek to promote their products to waiting consumers – who now represent a demographic far wider than just adolescent boys. In 2005 Yankee Research Group predicted that the value of in-game advertising by 2009 would reach more than $800 million. By 2011, that figure is set to rise to $1.1 billion, says Ed Bartlett, co-founder of specialist gaming advertising company IGA.

The rapid growth of the industry has created big opportunities for brand owners to exploit a new medium through which to target audiences that are becoming increasingly hard to reach via traditional broadcast and print advertising. Companies such as Intel, Red Bull and T-Mobile have paid to place their products in games on IGA's roster, which includes Battlefield 2142, Counter-strike, Colin McRae: Dirt, and Brian Lara International Cricket 2007 (see box on page 42).

READ MORE: TikTok: licensing floodgates to open, say lawyers

But as game players are transported into worlds that increasingly resemble their own – complete with brand name cars, fast food restaurants and mobile telephones, as well as bill boards promoting clothes, magazines and music that they can buy in their local high street, they have higher expectations about the level of realism they will find in on-line worlds. "Seventy percent of heavy gamers state that contextual ads make games more realistic," says Nielsen Interactive Entertainment. This demand for so-called realism creates a higher risk of online trade mark and copyright abuse for IP owners as game developers seek to raise the level of authenticity in their games.

Although brand owners may be able to control the way in which their IP rights are used when they have paid to have their products or services featured in a computer game, more and more are finding that virtual versions of their trade marked products are appearing online without their authorization as inhabitants of reality worlds become better able to create replicas of their favourite products.

Benjamin Duranske, a lawyer-turned-blogger who has taken a sabbatical from legal practice to run a website called virtuallyblind.com and write a book called Virtual Law, has been keeping a watch on the phenomenon of trade mark infringement on the best-known virtual reality site, Second Life. In a snapshot search in May this year, he found more than 15 shops advertising Ferrari cars, 40 stores selling virtual Rolex and Chanel watches and another 50 that carried sunglasses branded as Gucci, Prada, Rayban and Oakley. None of the companies is believed to operate these stores itself.

"The dirtiest little legal secret in Second Life isn't virtual escorts, illegal gambling, ponzi schemes [a scam similar to pyramid selling], or even money laundering," says Duranske on his blog. "The secret is this: misappropriation of major corporations' trademarks in Second Life is so ubiquitous, so safe, and so immensely profitable, that it has become a wholly transparent part of Second Life's bustling commercial landscape."

But it's not just trade marks that are being used without permission in virtual reality sites such as Second Life, There and China-based HiPiHi. Copyright owners are also affected. In Second Life, for example, the avatar characters created by users can buy unlicensed iPod devices pre-loaded with unlicensed music from Michael Jackson to Gwen Stefani despite Apple having no official presence on the site. The company does, however, have a replica of its flagship Fifth Avenue store in Second Life, thanks to an enthusiastic fan of the brand (see below).

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Elsewhere, players can dress up their avatars as characters from Harry Potter. There is even a sim – a plot of land in the virtual world – that recreates sets from the Harry Potter movies. "From one end to the other it's copyright infringement," says Duranske.

What's the problem?

So is the unauthorized use of IP rights in parallel world website a problem for IP owners in the real world?

Despite virtual knock offs being traded for Second Life currency (the Linden dollar), which can ultimately be exchanged for real-world money, the sums involved amount to petty cash for most multinational companies compared to the money they lose from counterfeiters in the real world. Those brand owners who have decided to take a proactive approach to protecting their online rights are far more likely to focus on websites that are designed to make money in dollars, rather than in Lindens.

"It's not been a big issue for our customers," says Fred Felman, chief marketing officer at internet services company MarkMonitor. "Most people care about the use of their trade marks and copyright to draw traffic, or to sell illicit goods, but we haven't heard a lot [from them] about the issue of abuse in games and virtual worlds."

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More and more law firms, companies and academic institutions are setting up in Second Life. Here are just a selection.

LAW FIRMS: Field Fisher Waterhouse, Lovells, Davis, Simpson Millar, Faasen & Partners.

COMPANIES: Dell, IBM, American Apparel, Cisco, Intel, Telstra, Microsoft, Reebok, Adidas, Vodafone, Armani, BMW, Sun, Fiat, ABN Amro, Mercedes, Toyota, Telecom Italia.

MEDIA AND PUBLIC RELATIONS: Sky News, Reuters, Leo Burnett Worldwide, Endemol.

OTHER: Creative Commons, Harvard Law School, Estonian embassy, Swedish embassy

As a result, few IP owners have taken action against virtual reality infringers. "It surprises me how little activity there has been, although we're starting to see a growing attention to the issue from bigger companies," says Duranske. Although he says that he is aware of a case in which a large financial institution sent a cease and desist letter to a self-styled bank operating on Second Life under a name similar to its own, he says that such examples are still few and far between.

Risks

Despite their apparent unwillingness to tackle this kind of online infringement, IP owners are taking a gamble if they fail to take action against infringements in the virtual world. They face three main risks. The first is that they will be met with a formal opposition when they come to renew their trade marks from rivals who say they have abandoned their rights by failing to police third party use.

The second risk is that by declining to tackle virtual world infringers they may jeopardize their ability to exploit the site for their own marketing purposes in the future. There may be plenty of second lifers, for example, who would be unwilling to visit a new luxury goods store to browse all the designer's new season's products if he has already kitted out his avatar in a knock-off version of an outfit he bought elsewhere.

Finally, unchecked trade mark infringement carries the risk of brand dilution, tarnishment and blurring, as IP owners lose control of how their mark appears, and on which products.

Taking action

How should IP owners approach this new kind of online infringement? When it comes to copyright, they have some specific support from the law. The Digital Millennium Copyright Act (DMCA) in the US, for example, gives copyright holders the right to ask a service provider to remove infringing content. In the EU, the e-commerce directive provides that a service provider who hosts information must remove any unlawful material "expeditiously" if he wants to escape liability for it.

But when it comes to launching a civil action for trade mark infringement, things become more complicated because of the difficulties in determining that any alleged infringement being carried out in a virtual world is being done in the course of trade.

Many online players would argue that any use of third party trade marks as part of playing what amounts to a rather sophisticated game simply constitutes fair use. But Alex Chapman, a partner with Campbell Hooper in London who advises computer games companies on IP issues, says that there is a growing belief in legal circles that trade mark use in virtual worlds can amount to trade mark use in the course of trade. "People often create products to sell for in-world currency and the Linden dollar has a real world worth," he says.

Susan Rector, a partner at Schottenstein Zox & Dunn and co-chair of INTA's Internet Committee's Online Trademark Use Subcommittee, agrees. "The US Internal Revenue Service is apparently considering whether, when someone is paid in Linden dollars, that money is liable to tax," she says, arguing that this implies that trade mark use in reality worlds could constitute use in commerce for the purposes of establishing infringement. But without a test case, she admits that there is little way of knowing how the courts would address the issue. On top of that, there is the added complication of determining whether the use of a trade mark only for personal use amounts to an infringement. "When people create a pair of virtual world adidas trainers just for themselves, then that is a different question," says Chapman.

Duranske says that Second Life has a hands-off approach to policing trade mark infringement on its site. Although there are provisions in the DMCA that require it to take down copyright infringing material if put on notice, there are no equivalent rules relating to trade marks. As a result, the Second Life site provides online forms to report suspected copyright abuse, while there is, as yet, no equivalent mechanism for reporting trade mark infringement.

Going it alone

If IP owners decide to tackle the infringer directly, Duranske urges them to work closely with an IP attorney, and in particular one that is familiar with infringement on the internet. They should consider entering into the spirit of the site by creating an avatar who can approach the player's virtual world alter-ego and ask him or her to stop the infringement.

"Most people are not doing it maliciously," he says. "It's often a kid in college who really, really likes his Nike trainers and discovers he can make a buck on each pair he sells. It's not much money and he might just feel like it's a game but the brand owner still has an obligation to police the use of the mark."

Infringers who are unwilling to stop using the mark should be sent a cease and desist letter. If they still refuse, then the brand owner has limited options: bringing an infringement lawsuit is likely to cost thousands, possibly hundreds of thousands, of real-world dollars – many times more than the actual loss being suffered by the owner. In these cases, Duranske suggests that the trade mark owner try and work with the content creator.

"These people are potential brand ambassadors and they can make a virtual replica of your product. You might want to find the people doing the best job of knocking off your product and license the trade mark to them. Essentially you should think about employing them."

When furniture designer Herman Miller discovered fake versions of its chair collection on Second Life, the company decided to take action. In the real world, it runs a "Get Real" campaign to tackle those who copy its innovative designs. But in the virtual world, it decided to set up an online presence on the site and offer anyone who had bought knock-off versions of its chairs the chance to exchange them for an "authentic" virtual product. The publicity around the move focused attention on the company's furniture products, and undoubtedly boosted demand from players for new pieces on sale for between 300 and 850 Linden dollars ($1.40 to $3.50 in real world currency).

The rapid growth of the online gaming industry and virtual reality websites means that the laws governing IP ownership, property rights and contractual relationships in these parallel worlds lag far behind technological developments. IP owners and their lawyers must navigate their way through a legal landscape that, as yet, is not neatly way-marked with statutes and case law. But if IP owners fail to take steps to monitor and police their rights in these new online spheres, they could find that they lose more than just a quirky marketing opportunity.

The lucrative world of in-game advertising

Where are all the big spending consumers? Increasingly, they're to be found gripping computer games consoles or visiting their alter ego avatars in parallel worlds via an internet connection.

But where they go, advertisers follow. In-game advertising is now big business. Whereas computer games manufacturers once sought permission from trade mark owners to feature their brands in attempt to add realism to their games, now brand owners are spending millions of dollars to place their products in computer games.

New technology is facilitating their efforts. Gamers whose consoles or computers are connected to the internet can now be targeted by so-called dynamic advertising, which allows brand owners to alter the adverts that appear in the game minute by minute.

Ed Bartlett, who co-founded in-game advertising company IGA, says that the technology allows cinemas to list up-to-date movie showing times on the billboards that appear in games, and magazine publishers to announce that the latest issue is on sale now.

Other companies pay to have their products feature as an integral part of the game. UK fashion label Ben Sherman, for example, has used the online driving game Test Drive Unlimited to boost brand awareness. Hive, a subsidiary of IGA, re-created the interior of Ben Sherman's flagship store in locations throughout the game, allowing would-be racers to try on outfits and kit themselves out with the latest collection of clothes before setting off. Although some purist players resent the intrusion of corporate marketers into the world of gaming, these new technologies are allowing brand owners to target consumers that are drifting away from traditional media. The results are impressive: Hive says that almost 1 million copies of Test Drive Unlimited have been sold over the counter worldwide since the campaign began in 2006, and calculates that more than 2.5 million gamers could have come into online contact with the Ben Sherman brand.

Unwanted attention

What happens if your brand makes an unauthorized appearance in a computer game?

BT, a UK telecoms company, was unhappy when it discovered that the central character in Sony's 2002 PlayStation 2 game, The Getaway, pretends to be a BT engineer before raiding a police station and carrying out a killing spree. The company complained to Sony that it was worried that the game may incite attacks on its staff and the games maker subsequently agreed to edit the game to remove the offending scenes.

More recently, Sony came under fire from the Church of England after featuring Manchester Cathedral in a violent game called Resistance: Fall of Man. During the game, the church nave becomes the location of a virtual shoot out. But despite the Church's threats of legal action, Alex Chapman, a partner with Campbell Hooper in London who advises computer games companies, says that it would have stood little chance of success. The Church had no IP rights in the building so there was no infringement, he says.

To avoid these kinds of public relations problems or threats of litigation, he advises his game developer clients to obtain trade mark clearance from brand owners or to change content to make products more generic. But while he advocates that clients veer on the side of caution, he says that some developers are becoming unnecessarily nervous about breaching IP rights.

"In the UK, if you include the name of a football club in a football computer game then it isn't an infringement as long as it forms part of a list of all the premiership clubs. But some gamers are seeking licences from clubs to use their names or – in the case of Pro Evolution Soccer – changing them, so for example, West Ham becomes East London and Liverpool is Merseyside (Red). My view is that it's not trade mark infringement, but there is a lot of paranoia about it."


Real worlds, virtual rights

With so many people investing time and energy in virtual worlds such as Second Life, questions are being raised about users' IP rights. Eklavya Gupte provides a short guide

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From being typecast as a haven for geeks, Second Life has reached mainstream success with almost 10 million users worldwide. In the space of five years, Second Life has evolved into a self-sufficient universe with its own currency and has everything – or almost everything – the real world offers. Including IP rights.

It has its own Reuters news agency and reference tool Wikipedia; artists such as Jay-Z and Richard Hawley have performed live on its premises; Harvard Law School holds its lectures there; and brands such as Dell and IBM have their own workstations and islands.

With the creation of this cyber universe, the legality and significance of virtual law especially pertaining to rights is fascinating and has attracted broad commentary from academics, lawyers, the media and students alike. IP rights in virtual worlds are defined by the end user agreements, terms of conditions and privacy policy that you agree to when registering or entering a world or a game. And, in early November this year, the Second Life Patent and Trademark Office (SLPTO) was established by a Second Life resident. Within a few weeks it has already received hundreds of applications.

So, what do IP owners need to know about Second Life and what risks do they face? Managing IP provides a brief guide.

Is it true that Second Life gives its users IP rights for its virtual world creations and content?

Yes, you heard right. A few months after it was launched in 2003, Second Life's creators Linden Labs decided to give its residents complete IP ownership over the digital content they create in Second Life. In a statement released at the time, CEO Philip Rosedale said this policy was a means to recognize the significant contributions that users are making to build virtual worlds. He added: "The preservation of users' property rights is a necessary step toward the emergence of genuinely real online worlds."

Second Life states on its website: "This right is enforceable and applicable both in-world and offline, both for non-profit and commercial ventures. You create it, you own it – and it's yours to do with as you please."

This is very rare, isn't it? Other virtual worlds don't have the same IP rights policy, do they?

That's correct. Its competitors and other online games do not have the same policy towards IP rights. Massively multiplayer online role-playing games such as Everquest, City Of Heroes and virtual worlds such as There.com and Habbo Hotel clearly stipulate that the rights to all the materials created or sent are owned by the site's creators.

The trend is for game and virtual worlds to claim ownership of the player-created IP including the user's avatars (a user's online representation of himself or herself). This ownership claim arguably makes those companies responsible for any infringement. This ownership has also led most companies to be thorough about not tolerating infringement in the terms-of-use and end-user licence agreements for their specific games.

S Gregory Boyd, an associate with Paul, Weiss in New York, believes that the Marvel v NCSoft case in 2004/2005 showed the game industry that being wary of player infringement is an important concern. "On the whole, game companies are taking this responsibility seriously and trying to police their worlds and enforce their rule sets," he told Managing IP.

The Digital Millennium Copyright Act enacted in the US in 1998 provides those that operate the virtual world with online immunity for copyright infringement through its safe harbour provision. As long as it takes steps to notify supposed infringers and terminate users' accounts when the need arises, then Second Life should be protected by the provision.

James Nguyen, a partner of Foley & Lardner, says that through these safe harbour provisions, the DMCA gives online service providers certain immunity from copyright infringement liability for content that they carry. "The rationale behind these safe harbours is that online service providers should not have monetary liability for being merely passive conduits of content carried across their services," he explains.

What happens if I infringe a copyright or trade mark in the virtual world?

If the owner of the brand name finds out it has to notify either you directly or the virtual world developer, who has to alert you. You will then have to take it down.

What happens if I do not comply?

You will be warned again, and if the brand owner is not satisfied he or she will take you to court (in the real world, of course). However, no case has yet reached trial. Jurisdiction is likely to depend on where the lawsuit is filed. Due to the scarcity of cases on this issue there is no model or direction to work on. Settlements have been the preferred choice as both parties look to find a compromise. An important question to ask is whether the infringement is being utilized for commercial use in the virtual or real world.

Is there any case law?

Yes. Two cases that looked at these issues are the Marvel v NCSoft case and Marc Bragg v Linden Labs and Philip Rosedale (see boxes). Both of these were settled and the terms of agreement were not made public. This led to more speculation and did not provide a clear answer to many of the questions people have.

Hasn't there been a recent case involving a dispute between users in Second Life?

Yes, in October this year six Second Life content creators filed a lawsuit in the Eastern District of New York against Second Life user Thomas Simon, claiming copyright and trade mark infringement. The six parties accused Simon of duplicating copies of the creators' products and selling these items to other Second Life users. Linden Labs declined to comment on the case. On December 3, the parties filed a consent judgement after reaching a settlement. The judgement must be entered by the Court to take effect.

Benjamin Duranske from the Virtuallyblind.com blog said that once the judge enters the consent judgment as written, including its reference to copying of "merchandise," then it will stand as the "first formal, if tentative, recognition of virtual property by a US court".

Duranske also noted that although the "judgment will not have as significant a precedential value as a contested decision on the merits would have had, it will be cited for the foreseeable future".


Copyright squabble over online game

City of Heroes, a popular multiplayer online role-playing computer game, allows users to create their own custom-made super heroes, which are derived from already existing comic heroes and characters. This process was challenged and tested when the game's developer Cryptic Studios and publisher NCsoft faced a lawsuit by Marvel Comics in November 2004.

It is widely believed that in City of Heroes a lot of the users create heroes that are based on well-known superheroes and comic characters and even involve some mimicry. This raised an important issue for companies such as Marvel, which believed that City of Heroes allowed for the creation of characters that infringe its copyright and trade mark rights.

In City of Heroes, the intellectual property created by users is owned by Cryptic Studios (unlike Linden Labs which enable Second Life users to retain rights). Thus, Marvel Comics directly approached the developers and publishers rather than the users.

Marvel received its first setback when a US District Court in Los Angeles rejected its key claims, when it was found that the alleged infringing characters displayed as evidence were created by actual Marvel employees in the game. The judge also dismissed some of the charges of contributory infringement as the "allegedly infringing names and characters were not used in commerce to identify goods or services".

Soon after, in October 2005 the parties reached an agreement on the pending claims, though none of the terms were disclosed. This outcome posed more questions than it answered, yet this case was instrumental in highlighting the responsibilities of the game owners on their users' actions and the need for them to remove specified infringing material when notified.


Virtual property dispute sparks real world suit

Marc Bragg v Linden Labs is regarded as the most telling and talked about case concerning intellectual property in virtual worlds. Marc Bragg, an attorney from Pennsylvania, took Linden Labs and its CEO Philip Rosedale to court claiming virtual property fraud. In October this year, the case was settled after almost two and a half years.

In Second Life, Marc Bragg is not a lawyer, he is Marc Woebegone, a real-estate dealer. His account was terminated by Second Life after allegations of an illegal online auction by which he bought vast amounts of land at very low prices. Bragg claimed that Linden Labs had confiscated his virtual world property portfolio and in turn he demanded $8,000.

Bragg first sued only Linden Labs in May 2005 on defraud charges and soon after withdrew his claim. A year later he filed a new lawsuit against Linden Research Inc and CEO Philip Rosedale in Pennsylvania. This action was subsequently cancelled and he filed another action in October that year.

Linden Labs asked for the case to be settled in arbitration in California according to its terms of service agreement. This meant Bragg would have to spend a minimum of $10,000 just for the arbitration. However in May 2007, the District Court in Pennsylvania rejected Linden Labs' arbitration request.

As Judge Eduardo C Robreno said in his memorandum, the issue was the "novel questions of what rights and obligations grow out of the relationship between the owner and creator of a virtual world and its resident customers". "While the property and the world where it is found are virtual, the dispute is real," he added.

Robreno observed that the terms of service in Second Life provide "Linden with a variety of one-sided remedies to resolve disputes, while forcing its customers to arbitrate any disputes". As a result of this ruling, Second Life amended its terms of service in September 2007, giving its residents the option of resolving claims for amounts less than $10,000 through the telephone, online or based on written submissions. It went on to say that this will "save Residents both time and money by eliminating the need to appear in person at the arbitration hearing to resolve small claims".

The following month, Bragg and Linden agreed to settle the case and conceded that the dispute took place due to "unfortunate disagreements and miscommunications regarding the conduct and behaviour by both sides". Bragg's Marc Woebegone account was reinstated and the settlement terms were not revealed. The case demonstrated the reluctance of parties to solve their disputes through litigation due to the risks involved and the ambiguity of the how real world law can be applied to virtual worlds.


Virtual burden

As the law is still developing in the field of virtual worlds, Eklavya Gupte asked some of the lawyers and academics who have been at the forefront of virtual right issues for their views about the difference between game or virtual world owners retaining IP rights (as There.com does) or granting them to players (as Second Life does). We asked: does the granting of IP rights to game players give the owners of a game or a virtual world an additional responsibility and if so what is that additional responsibility?

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Sean Kane, attorney consultant, Drakeford & Kane

Granting a player or avatar rights will potentially result in a panoply with responsibilities and liabilities attached thereto.

Once IP rights are recognized then the virtual world is no longer a game. The commoditization of a virtual world converts it from a closed world (where real world laws arguably do not apply) to an open world where laws will be applicable. This may require the virtual world developer or publisher to comply with many more real world laws than one might expect – that is banking, tax, gambling, etc. Moreover, if a developer or virtual world publisher provides its players with the rights to the property they create or earn in the virtual world, then the entity may also need to protect those rights.

Protection of rights may mean as little as complying with the Digital Millennium Copyright Act and its take-down provisions or other international requirements for protecting against copyright infringement. It may require a more proactive protection structure including policing of avatar and player activity and access to the courts or some other form of dispute resolution.

The most problematic result that I see from a company providing its players with IP rights is that there could be the argument that a virtual world cannot then be shut down without compensating the players for their lost rights. Given the amount of potential value in some of these worlds this number could be astronomical.

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S Gregory Boyd, partner, Paul, Weiss, Rifkind, Wharton & Garrison

Granting IP rights to players makes the question much more complex, and we have even less to go on in terms of direct case law. The granting of IP rights, especially when coupled with acknowledged monetary value, appears to burden the game companies with additional responsibilities.

The Marc Bragg v Linden Research case provided hints in the intermediate rulings that companies that go this route may have heightened responsibilities toward players and their accounts. Simple cancellation, customer service, and dispute resolution mechanisms of the past may not be enough to deal with users that have intellectual property and acknowledged monetary value in virtual worlds.

Furthermore, in addition to these customer service responsibilities, it is still an open question if the game companies remain responsible for user copyright and other types of infringement as well, just as in the more traditional publisher-owned IP rights models.

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James Grimmelmann, associate professor, New York Law School

With great virtual power comes great irresponsibility. People who run virtual worlds have cosmic power over what happens in those spaces, and yet in many cases they forswear any serious attempts to help their players resolve disputes amicably.

Thousands of players running around doing cool things are bound to have problems now and then - your virtual billboard is ruining the view from my virtual resort; I'm trying to hunt here but you're scaring away all the wyverns; your stripey shirt is a rip-off of my stripey jacket; and so on. Virtual world companies could try to help players work out these disagreements by taking advantage of their deep knowledge of the world and ability to enforce decisions cheaply and easily. But most don't even try.

When Linden Labs allowed players to retain copyright in their creations, it was joining in a long tradition of virtual world companies throwing up their hands at the governance problem. Only this time, instead of saying: "Sorry we won't help you solve this, sucks to be you," they've said: "Sorry we won't help you solve this, why don't you sue each other in federal court instead?"

Perhaps that trend is inevitable (and to be fair there are good reasons why Linden might not want to get caught up in acrimonious IP disputes) but still. Something has been lost when a virtual world company tells players that the most appropriate way to have their disagreements settled is with lawsuits at 20 paces.

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James Nguyen, partner, Foley & Lardner

In an online game or virtual world, users often are permitted to create their own avatars, characters or other content. In most instances, the game or virtual world provider does not claim ownership to that user-generated content, and only takes a broad licence (typically through its terms and conditions) to use the user-generated content. If a game or virtual world provider wants to claim ownership to the user-generated content, that could be very risky. The game or virtual world provider would no longer be just a passive conduit for users' content, but would instead now be owning that content.

There is a good argument to be made that an online game or virtual world providers should then be responsible for the content, and no longer eligible for the DMCA safe harbours. After all, it's hard to claim you're not responsible for content if you claim to own that content. There does not appear to be any case law precedent yet on this specific question, but given the policy rationale behind the DMCA safe harbours, online game and virtual world providers are certainly at risk for knocking themselves out of the safe harbours if they claim ownership to user-generated content on their services.

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Joshua Fairfield, associate professor of law, Indiana University School of Law

Virtual world creators assert the power of sovereigns – they have so much power over the lives of their customers that they call themselves "gods". Through all-embracing end-user licence agreements and codes of conduct, creators control what virtual world inhabitants can say and do, whether they can own property in the virtual world, and many other aspects of everyday life that we often entrust to governments. It is ironic that creators do this in order to protect themselves from legal liability. My prediction is that the more control creators assert the more responsibility they will bear if something goes wrong.

It's worth looking at how control and responsibility have played out before. An internet service provider, under US law, is not liable for the actions of its customers if it does not select or control content, or monitor and control its customers' actions. For example, if a customer posts a defamatory blog entry, or a picture that infringes copyright, the ISP is not liable as long as it did not control the content. Compare the current practice of virtual world creators: most not only assert ownership of player-created content, but enforce rules about speech and conduct of their customers.

If content is infringing, or the players' conduct is tortious or criminal, then the virtual world creator may be liable.


Register your IP rights at the SLPTO

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The Second Life Patent & Trademark Office (SLPTO) was founded by two Second Life residents in October this year. FlipperPA Peregrine (Tim Allen in the real world) and Michael Eckstein set up the SLPTO to help residents protect their intellectual property online without the need for an attorney.

According to its website, a Second Life resident can register his/her creation with images, a description, a time stamp and other identifying information. If a dispute arises, the SLPTO will provide the relevant facts from its database as a neutral third party.

The legalese, terms of service and privacy policy are not yet finalized and the SLPTO is in the process of adding new features. The Office has also clearly stated that it is a neutral third party and not a legal authority.

Registration is free and the creators are waiting to see the response in the first couple of months before adopting a particular business model. All the information is stored in the Second Life Vault, which is directly linked to the SLPTO server. The Office is hoping to further integrate the system by making it easier for content creators to use.


The seven steps to IP protection on Second Life

1. Create an avatar on Second Life

2. Log on to the Second Life Patent and Trademark Office (SLPTO) website – www.slpto.com 

3. Locate a SLPTO registration terminal in the world by logging on to a terminal on the SLPTO website

4. Register an account on the terminal and select your password

5. Make a list of patents and trade marks you want to register

6. After logging in to your account you will be offered the SLPTO Vault program on which you can store your creations and access and communicate with the SLPTO database

7. Once you have registered your patents and marks, the next step is to set a price for them so fellow residents can buy licences from you. This concept is known as selling limited editions. To sell a “limited edition” (similar to granting a compulsory licence) you need to grant permissions and download a Second Life script from the SLPTO website. As items sell, the Vault will be automatically updated with transaction and financial details

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