Second Life spawns new world of law

Issue 19 | Autumn/Winter 2007

Photography: Melissa Di Ciero and Greg Ford

Dr Melissa de Zwart

Keeping up with the pace of day-to-day life is a challenge for most of us, but for millions of internet users, time-out is spent developing and nurturing a virtual 'Second Life'. Dr Melissa de Zwart, a Senior Lecturer in Law, explains why our legal system can't ignore the rapidly growing interest in virtual worlds.

The latest internet phenomenon is a virtual world in which relationships are created, businesses operated and money exchanged.

For users, this virtual world becomes so real that relationships are formed and deals are made, lost and won at great financial cost.

On 1 May 2006, a virtual businesswoman makes the front cover of Business Week magazine. She is Anshe Chung, an internet-creation (or avatar) who makes money from developing and selling property in Second Life, an online virtual world.

Chung is the creation of German resident Ailin Graef, who claims the internet identity is the world's first virtual millionaire. She may be right, but what legal issues does this simple claim give rise to?

How can you claim to be a property or business mogul when your land and buildings exist only as a set of data on a computer server in the United States? If you make a profit, who do you pay tax to? What if you or a virtual purchaser reneges on a deal, can you go to a real world court to have it enforced? What if your virtual land is repossessed or business closed, do you have any constitutional right to fair compensation?

Virtual worlds or MMORGs (Massively Multiplayer Online Role Playing Games, as they are also known), such as Second Life, World of Warcraft, There, Entropia Universe, Everquest, are attracting hundreds of thousands and in some cases millions of subscribers worldwide. User growth has skyrocketed, particularly in the last twelve months. Linden Lab, the owners of Second Life, claim to have a total of more than five and a half million residents.

It's spurned the creation of the Linden Dollar, used for 'in-world' transactions in Second Life, which is currently valued at approximately 240 Linden dollars per US$1. Last month the 'Amsterdam sim', (a place in Second Life) sold for US$50,000.

Wherever there is money, there will be lawsuits. In May 2006, Marc Bragg, a US attorney, brought an action against Linden Lab, claiming that it had unfairly terminated his Second Life account, thereby confiscating his property portfolio, leaving him no means of accessing his land and other investments. Bragg based his claim in conversion, fraud, unjust enrichment and breach of contract. The case is continuing.

Dr de Zwart's avatar.

In a radical move, Linden Lab has granted creators of materials in Second Life intellectual property rights in their creations (with an irrevocable, perpetual, royalty- free licence back to Linden Lab). This simple fact facilitates the generation and commercialisation of a huge range of content, but also opens up the possibility of theft and misappropriation.

Those firmly anchored in the real world may find it hard to assess the damage, but virtual designers claim they could lose thousands of dollars of revenue in this way.

Participation in these worlds is largely regulated by the relevant world's terms of service or end-user licence agreement. These legal documents set out the rules that apply to participation in the game, such as agreeing to be bound by the rules of conduct and community standards. Most of these terms of service are set out as a clickwrap contract, where the user is required to browse through the terms and click on an 'I Accept' icon to access the game for the first time.

The legal validity of such contracts has been upheld in cases in lower US courts, but the issue is still open to question in Australia. It is likely they will be found to be binding in cases where users have had sufficient opportunity to review them and decide to proceed even if they have chosen not to read the terms.

Inhabitants of the online world.

Many of the legal issues generated by virtual worlds are parallel to those raised by the opening of the Internet to commercial traffic in 1996: copyright, content regulation, taxation, jurisdiction, privacy, and contract. The legal issues are not unique, but they are being raised in new and interesting contexts.

Virtual worlds and other online communities provide a fascinating resource for research and study into a range of legal issues. They also potentially provide a forum for students to explore some of the issues in a hands-on context.

It is likely that an increasing number of people will become engaged in some form of online community or virtual world, and just like any new community, the halcyon days of harmony and like-mindedness will give way to a period of dissent and debate over dominant rules.

We are going to see some interesting cases before the courts, providing some fascinating case studies for lawyers and law students in the years to come.