Virtual Property:

Who is the Rightful Owner of the Sword of a Thousand Truths?

WATCH: http://www.southparkstudios.com/clips/155270/the-sword-of-a-thousand-truths

[Instructions: Read every link that has READ in front of it. Links without are merely for background or your own amusement. Please read the EULA and ToS excerpts; I have provided links to the full documents, but it is not necessary that you read them in their entirety.]

I. Background (Never Underestimate How Nerdy Nerds Can Be)

Virtual property can be loosely described as computer coded “goods” existing solely in a virtual realm that function as “property” for the purposes of an emergent virtual economy. Kurt Hunt, a former Law in Cyberspace student, defines virtual property as “code that is (1) persistent - ‘they do not go away when you turn your computer off,’ and (2) interconnected – ‘[o]ther people can interact with them’”. This Land Is Not Your Land: Second Life, Copybot, and the Looming Question of Virtual Property Rights, 9 Tex. Rev. Ent. & Sports L. 141, 145 (2007-2008). The concept of virtual property most often comes up in the context of persistent multiplayer computer games such as Second Life, the World of Warcraft, and Eve Online.

The “goods” in such online worlds can take a number of forms, from developer-created “gear” earned for in-game characters, to user-created “items” for trade and sale between characters, to in-game currency, to virtual “land” in the game universe. Such items can perform a function within the game, or be purely cosmetic. These goods are the subject of often quite sophisticated and dedicated market economies. For example, take a brief look at The Undermine Journal page for one of the three in-game auction houses available on just one of World of Warcraft’s 241 North American servers: https://theunderminejournal.com/?realm=H-Uldaman (nerd alert: this happens to be my old server).

While often such economies take place solely in-game, “black markets” selling in-game items, currency, and characters for real currency have existed for years. Currency converters for exchange rates between in-game currencies and “real world” currencies abound, such as the EVE ISK (the currency for EVE Online) Currency Converter: http://isk.thealphacompany.net/?isk=480000000#.

What has changed in recent years is the willingness of game developers and publishers to establish official channels for the sale and trade of purely virtual property. The Diablo III Real Money Auction House http://www.forbes.com/sites/insertcoin/2012/06/13/why-diablo-3s-real-money-auction-house-should-not-be-your-summer-job-2/ induced an internet furor when it was introduced, but will be shutting down next year. Second Life has both in-game currency and real-life currency auctions for virtual land: http://usd.auctions.secondlife.com/.

“Virtual” property goods also typically fall into one of two categories: 1) “developer-created”, and 2) “user-created.” Developer-created goods are those designed by the developer from the game, and thus owned by the developer. Every piece of clothing and equipment worn by this Night Elf Priest from the World of Warcraft, for example, is developer-created, and can only be “earned” by playing the game itself:

“User-created” goods, in comparison, are designed and created by users of the game software, usually by way of licensed-access to parts of the game’s software. In Valve Corporation’s DOTA 2, for example, users are free to submit and then sell (through Valve’s store) gear, artwork, and units that other users can purchase and see in the game itself. The “courier” unit here is one such example: http://www.dota2.com/store/itemdetails/10192. The creators of such items get 25% of the purchase price, which can add up to a sizable income for both Valve and the creator:

READ: Phill Cameron How to make a living selling virtual hats, IGN.com (April 16, 2013, available at http://www.ign.com/articles/2013/04/16/how-to-make-a-living-selling-virtual-hats).

N.B.: The term “virtual property” has been commonly distinguished from “digital property,” which more properly describes digital data, including Internet accounts, identification data, and intellectual property rights. What differentiates “virtual” property from “digital” property is not only the way that virtual property “feels” like physical or real property, but also the amount and type of legal protection received. “Digital property” receives some protection through various means, including privacy common law, intellectual property law, and the like. “Virtual property” has comparatively received little official legal attention, whether legislative or judicial.

Is this distinction a good one? What are the policy implications of “digital property” and “virtual property” that lead to them being treated differently by the law?

II. What Should Govern Virtual Property?



The above section demonstrates that people certainly seem to treat and approach such virtual goods in the ways we normally treat and approach meatspace property. Is that correct?

READ: Yochai Benkler, There Is No Spoon, The State of Play: Law and Virtual Worlds, Jack M. Balkin and Beth Smone Noveck, Eds. (available at: http://www.yale.edu/lawweb/jbalkin/telecom/yochaibenkerthereisnospoon.pdf).

Do you agree with the implication in Benkler’s article that the “goods” in virtual property are better understood as avatars/platforms for social relations and interactions than as “property”, so to speak? Is this a question that should be addressed to the “engineers who design game platforms and to their business managers or marketers” rather than to “judges or regulators”?

III. “Private” Law and Virtual Property

Benkler notwithstanding, the progress of contract and licensing law governance of virtual property has been pretty uniform: the “property” earned or submitted to such online games and communities is licensed, not owned, and severely limited in what the players can do with it. Nearly every online game requires agreement to click-wrap Terms of Service and End User License Agreements for access to the “services” the developer provides and the servers the game runs on. Any “virtual property” rights are limited by the terms of such agreements.

Courts have fairly consistently found click-wrap ToSs and EULAs valid and enforceable:

READ Evans v. Linden Research, Inc., 763 F.Supp.2d 735 (E.D. Pa. 2011) (available at http://scholar.google.com/scholar_case?case=17398663132717127254).

Evans applied a contract-law unconscionability standard to a forum selection clause in Second Life’s ToS, and found the clause enforceable. Is unconscionability the right standard to apply to click-wrap license clauses regarding property ownership?

The Evans court distinguished “mandatory” forum selection clause from those which offer a number of choices. Is that a valid means of distinguishing enforceable from non-enforceable click-wrap license clauses?

I have excerpted below a few relevant EULAs and ToSs from various online games:

Blizzard’s World of Warcraft EULA (Full document available at: http://us.blizzard.com/en-us/company/legal/wow_eula.html) (emphasis added):

  • The license granted to you in Section 1 is subject to the limitations set forth in Sections 1 and 2 (collectively, the "License Limitations"). Any use of the Game in violation of the License Limitations will be regarded as an infringement of Blizzard's copyrights in and to the Game. You agree that you will not, under any circumstances:

    • H. sell, grant a security interest in or transfer reproductions of the Game to other parties in any way not expressly authorized herein, or rent, lease or license the Game to others.

  • A. All title, ownership rights and intellectual property rights in and to the Game and all copies thereof (including without limitation any titles, computer code, themes, objects, characters, character names, stories, dialog, catch phrases, locations, concepts, artwork, character inventories, structural or landscape designs, animations, sounds, musical compositions and recordings, audio-visual effects, storylines, character likenesses, methods of operation, moral rights, and any related documentation) are owned or licensed by Blizzard. The Game is protected by the copyright laws of the United States, international treaties and conventions, and other laws.

  • This Game is an 'on-line' game that must be played over the Internet through the Service as provided by Blizzard. You understand and agree that the Service is provided by Blizzard at its discretion and may be terminated or otherwise discontinued by Blizzard pursuant to the Terms of Use.



Notice the distinction between the “Service” and the “Game.” When a player purchases a copy of the Game (typically for around $50.00), do they own that game? Is that game even usable without the “Service”?

Linden Lab’s ToS for Second Life (Full document available at: http://lindenlab.com/tos) (emphasis added):

  • "Content" means any works of authorship, creative works, graphics, images, textures, photos, logos, video, audio, text, and interactive features.”

  • "In-World" means within a three-dimensional virtual world environment (such as within Second Life).

  • Linden Lab provides access to Linden In-World Content and hereby grants you a non-exclusive, non-transferable, non-sublicensable, limited, revocable license to use, reproduce, distribute, prepare derivative works of, display, and perform the Linden In-World Content solely In-World as permitted through the normal functionality of the Service and under these Terms of Service, except that photographs, images, films, and videos of Linden In-World Content may be used in other areas of and outside the Service as provided in our Snapshot and Machinima Policy. To be clear, and without limiting the foregoing, you may not use, reproduce, distribute, prepare derivative works of, display or perform any Linden In-World Content, whether modified by you or not, outside the virtual world environment of the Service except as provided in the Snapshot and Machinima Policy or as expressly agreed upon in a written agreement with Linden Lab. The foregoing license is referred to as a "Linden In-World Content License." You acknowledge that when you receive a Linden In-World Content License you do not acquire ownership of any copies of the Content, or transfer of any copyright or other intellectual property rights in the Content.

User Content

  • You retain any and all Intellectual Property Rights you already hold under applicable law in Content you upload, publish, and submit to or through the Servers, Websites, and other areas of the Service, subject to the rights, licenses, and other terms of this Agreement, including any underlying rights of other users or Linden Lab in Content that you may use or modify.

  • Except as otherwise described in any Additional Terms (such as a contest’s official rules) which will govern the submission of your User Content, you hereby grant to Linden Lab, and you agree to grant to Linden Lab, the non-exclusive, unrestricted, unconditional, unlimited, worldwide, irrevocable, perpetual, and cost-free right and license to use, copy, record, distribute, reproduce, disclose, sell, re-sell, sublicense (through multiple levels), modify, display, publicly perform, transmit, publish, broadcast, translate, make derivative works of, and otherwise exploit in any manner whatsoever, all or any portion of your User Content (and derivative works thereof), for any purpose whatsoever in all formats, on or through any media, software, formula, or medium now known or hereafter developed, and with any technology or devices now known or hereafter developed, and to advertise, market, and promote the same. You agree that the license includes the right to copy, analyze and use any of your Content as Linden Lab may deem necessary or desirable for purposes of debugging, testing, or providing support or development services in connection with the Service and future improvements to the Service. The license granted in this Section 2.3 is referred to as the "Service Content License." 

Is the distinction between the specifically permitted uses of Linden In-World Content “solely in-World” and the specifically prohibited uses of Linden In-World Content “outside the virtual world environment of the Service” a logical one? What is Linden trying to preserve for itself? What kind of behavior is it trying to prohibit?

The Linden ToS grants that Users own the Intellectual Property rights for User Content. Do they “own” such content in a non-intellectual property sense? Do the User Content IP ownership policies conflict at all with the In-World Content policies?

Valve’s Steam Subscriber EULA provisions for user-created items (Full document available at: http://store.steampowered.com/subscriber_agreement/) (emphasis added):

F. Ownership of Software

  • All title, ownership rights and intellectual property rights in and to the Software and any and all copies thereof, are owned by Valve US and/or its or its affiliates’ licensors. All rights are reserved, except as expressly stated herein. The Software is protected by copyright laws, international copyright treaties and conventions and other laws. The Software contains certain licensed materials and Valve’s and its affiliates’ licensors may protect their rights in the event of any violation of this Agreement.

Trading and Sales of Subscriptions Between Subscribers

  • Steam may include one or more features or sites that allow Subscribers to trade, sell or purchase certain types of Subscriptions (for example, license rights to virtual items) with, to or from other Subscribers (“Subscription Marketplaces”). An example of a Subscription Marketplace is the Steam Community Market. By using or participating in Subscription Marketplaces, you authorize Valve, on its own behalf or as an agent or licensee of any third-party creator or publisher of the applicable Subscriptions in your Account, to transfer those Subscriptions from your Account in order to give effect to any trade or sale you make.

  • Valve may charge a fee for trades or sales in a Subscription Marketplace. Any fees will be disclosed to you in connection with the trade or sale.

  • If you complete a trade, sale or purchase in a Subscription Marketplace, you acknowledge and agree that you are responsible for taxes, if any, which may be due with respect to your transactions, including sales or use taxes, and for compliance with applicable tax laws. Proceeds from sales you make in a Subscription Marketplace may be considered income to you for income tax purposes. You should consult with a tax specialist to determine your tax liability in connection with your activities in any Subscription Marketplace.

  • You understand and acknowledge that Valve may decide to cease operation of any Subscription Marketplace, change the fees that it charges or change the terms or features of the Steam Subscription Marketplace. Valve shall have no liability to you because of any inability to trade Subscriptions in the Steam Trading Marketplace, including because of discontinuation or changes in the terms, features or eligibility requirements of any Subscription Marketplace.

  • You also understand and acknowledge that Subscriptions traded, sold or purchased in any Subscription Marketplace are license rights, that you have no ownership interest in such Subscriptions, and that Valve does not recognize any transfers of Subscriptions (including transfers by operation of law) that are made outside of Steam.

Content Uploaded to the Steam Workshop

  • You grant Valve and its affiliates the non-exclusive, irrevocable right to use, reproduce, modify, create derivative works from, distribute, transmit, broadcast, and otherwise communicate, and publicly display and publicly perform, your User Generated Content, and derivative works of your User Generated Content, in connection with the operation and promotion of the Steam site. If you use Valve cloud storage, you grant us a license to store your information as part of that service. We may place limits on the amount of storage you may use.

  • You may, in your sole discretion, choose to remove a Workshop Contribution from the applicable Workshop pages. If you do so, Valve will no longer have the right to use, distribute, transmit, communicate, publicly display or publicly perform the Workshop Contribution, except that (a) Valve may continue to exercise these rights for any Workshop Contribution that is accepted for distribution in-game or distributed in a manner that allows it to be used in-game, and (b) your removal will not affect the rights of any Subscriber who has already obtained access to a copy of the Workshop Contribution.



Notice what you can do with an “item” in the Valve Marketplace: you can trade, sell, or purchase it, and you have to pay the taxes on those sales. It appears that you still own the intellectual property rights to the item, and may remove it from the Valve Marketplace at your discretion. Yet, as far as it exists in the game (and it can only be used in the game), you still do not “own” it.

Should developer-created items and user-created items be treated the same way when it comes to click-wrap licensing agreements?

IV. Judicial Review of Virtual Property

READ: Jacqui Cheng, Second lawsuit over purloined naughty bits settled, Ars Technica (March 26, 2008) (available at: http://arstechnica.com/gaming/2008/03/second-life-lawsuit-over-purloined-naughty-bits-settled/).

Ultimately what is being treated as “property” are computer scripts and codes. Copying such codes is far easier than copying a physical object. Is property law well-equipped to handle this difference, regardless of how those codes are treated by their creators, buyers, and sellers?

READ: Bragg v. Linden Research Inc., 487 F.Supp.2d 593 (E.D. Penn. 2007) – Sections I: “Background”, and II: “Motion to Dismiss for Lack of Personal Jurisdiction” (ONLY up to page *602) (available at http://scholar.google.com/scholar_case?case=583434033289222111). Note particularly the Court’s focus on the “virtual town hall meetings” held in the Second Life game regarding ownership of “virtual property.”

Does it make sense to apply “real world” personal jurisdiction based on “virtual” representations regarding “virtual” property? (N.B.: the Bragg case eventually settled out of court.)

V. The “Virtual Property” Approach and e-Books

The issue of e-book “ownership” has been achieving increasing attention, primarily when providers (such as Amazon) delete or limit access to purchased content.

READ: http://www.forbes.com/sites/suwcharmananderson/2012/10/23/amazon-ebooks-are-borrowed-not-bought/

E-books, by the terms of their license agreements, cannot be bought or sold the way truly virtual property can and often is. One of the hallmarks of traditional legal notions of property is the power to exclude. How “exclusive” are e-books or virtual property? Why do you think e-book ownership issues have received so much more attention than virtual property ownership issues?

LAW 897 Syllabus: http://www-personal.umich.edu/~jdlitman/classes/cyber/syllabus.html