Virtual worlds

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Virtual worlds

  1. 1. Virtual Worlds Robert Blamires Digital Media Lawyer, Technology Law Group Field Fisher Waterhouse LLP robert.blamires@ffw.com Presentation to Cambridge University 24 February 2009
  2. 2. Contents• Introduction to virtual worlds and Second Life• Applications• Commerce• Key legal issues• Spotlight on intellectual property• Conclusions
  3. 3. Virtual Worlds: Introduction• Virtual Worlds • Some goal-based • Some free-form • Characterised by persistence, interactivity, large numbers of simultaneous users • Second Life • Informed estimates suggest US$2 billion real money on MMOG in-world transactions between users in 2007
  4. 4. Virtual Worlds: Introduction
  5. 5. Virtual worlds: Second Life• One of many synthetic worlds• Established in 2003• Now more than 16.5 million registered users• More than 8 million unique residents• 112 million user hours per quarter• More than US$33 million spent per month in-world
  6. 6. Second Life: Real life presences• Universities• Religious institutions• Nicolas Sarkozy• Unofficial US Presidential Campaigns• The Maldivian Embassy, the Swedish Embassy• Dublin, Venice, Knightsbridge, Tokyo
  7. 7. Second Life: Real life businesses and brands
  8. 8. Second Life: Applications• Real time collaboration / communication between multiple participants• Political, social, cultural and artistic activities• Games and entertainment• Training and education• Researching new concepts / products• Selling goods and services
  9. 9. Second Life: ApplicationsReal time collaboration/communication
  10. 10. Second Life: ApplicationsPolitical, cultural, social and artistic activities
  11. 11. Second Life: Applications Games and entertainment[Picture of games and entertainment]
  12. 12. Second Life: Applications Training and education
  13. 13. Second Life: Applications Training and education
  14. 14. Second Life: Applications Training and education
  15. 15. Second Life: Applications Training and education
  16. 16. Second Life: ApplicationsTraining and education
  17. 17. Second Life: ApplicationsTraining and education
  18. 18. Second Life: ApplicationsResearching new concepts / products
  19. 19. Second Life: ApplicationsResearching new concepts / products[Pic of researching new concepts]
  20. 20. Second Life: ApplicationsResearching new concepts / products
  21. 21. Second Life: ApplicationsResearching new concepts / products
  22. 22. Second Life: ApplicationsSecond Life:Transactions may take place into the services Selling goods and real world
  23. 23. Second Life: Commerce• In World: Consumer to consumer• In World: Business to consumer• In World: Business to business• Into the real world• In secondary markets
  24. 24. Second Life: CommerceIn-world: consumer to consumer
  25. 25. Second Life: CommerceIn-world: consumer to consumer
  26. 26. Second Life: CommerceIn-world: business to business
  27. 27. Second Life: Commerce Into the real world
  28. 28. Second Life: Commerce Into the real world
  29. 29. Second Life: commerceCommerce Second Life: Into the real worldTransactions may take place into the real world
  30. 30. Second Life: CommerceSecondary markets
  31. 31. Second Life: CommercePaymentsTransactions can be paid for: • ‘in-world’ in Linden $ • ‘round world’ via transactional website from SL hyperlink, generally in US $Linden $ are exchangeable for US $
  32. 32. Second Life: CommerceApplicable rules Which rules apply to Second Life commerce? • Technology • Second Life Community Standards • Behavioural guidelines (the ‘Big Six’): Intolerance, Harassment, Assault, Disclosure, Indecency, Disturbing the Peace • Second Life Terms of Service • Vendor contractual terms imposed in world and via transactional websites accessed from Second Life • Resident custom and practice? • Applicable law (the law doesn’t stop on entry)
  33. 33. Second Life: CommerceApplicable rulesApplicable law? • Challenging area • Affected by: • nature of issue at hand – contract, tort, crime • where contracts are involved, whether dealing with a consumer and/or on standard terms, and • willingness of local courts to exercise extra-territorial jurisdiction • Complicated by: • anonymity, and • lack of jurisdiction information
  34. 34. Legal issues1. Ownership of assets2. Consumer protection3. Regulated activities4. Employment5. Tax6. Competition7. Content liability8. Privacy9. Crime10. Intellectual property
  35. 35. Legal issues Compounded by: • Anonymity • Global nature • cross-border issues • lack of jurisdictional information • Problems of enforcement
  36. 36. Legal issues (1): Ownership of assets • Nature of in world assets and transactions • Ownership of assets • “Second Life is a 3-D virtual world entirely built and owned by its Residents … Because Residents retain the rights to their digital creations, they can buy, sell and trade with other Residents.” (http://secondlife.com/whatis/)
  37. 37. Legal issues (1): Ownership of assets
  38. 38. Legal issues (1): Ownership of assets• “Second Life is a 3-D virtual world entirely built and owned by its Residents … Because Residents retain the rights to their digital creations, they can buy, sell and trade with other Residents.” (http://secondlife.com/whatis) [2007]• Second Life® is a 3-D virtual world created by its Residents … Because Residents retain the rights to their digital creations, they can buy, sell and trade with other Residents.” (http://secondlife.com/whatis) [2008]
  39. 39. Legal issues (1): Ownership of assets• Under the Terms of Service • Users own all IP in content they create • However, Linden: • reserves rights to terminate accounts and hold onto assets without reimbursement • reserves rights to deny, block or reverse Linden $ transactions, and • takes broad licences of all IP in content
  40. 40. Legal issues (2): Consumer protection • Application of contract and general consumer protection law • Application of specific ecommerce and distance selling regulations
  41. 41. Legal issues (2): Consumer protection
  42. 42. Legal issues (3): Regulated activities • Regulated activities: for example gambling, sale of prescription medicines, financial services, etc
  43. 43. Legal issues (3): Regulated activities
  44. 44. Legal issues (4): Employment
  45. 45. Legal issues (5): Tax
  46. 46. Legal Issues (5): TaxThe Electric Sheep Company• IRS ruling that ESC “greeters” for its CSI:NY promotion were “employees” rather than independent contractors• Under IRS rules, companies must: • withhold income taxes • withhold and pay Social Security and Medicare taxes, and • pay unemployment tax on wages paid to an employee, but not on wages paid to a contractor.• IRS can impose fines, penalties, and back taxes for misclassifying an employee as an independent contractor
  47. 47. Legal issues (6): Competition
  48. 48. Legal issues (7): Content liability • For example, defamation, obscene publications etc
  49. 49. Legal issues (8): Privacy
  50. 50. Legal issues (9): Crime • Paedophilia • Theft • Phishing • Hacking • Fraud
  51. 51. Legal issues: Crime (9)Hacks and cheats – system hacks
  52. 52. Legal issues: Crime (9)Phishing
  53. 53. Legal issues: Crime (9)Consumer fraud – pyramid schemes
  54. 54. Legal issues: Crime (9)Consumer fraud – empty box scams
  55. 55. Legal issues: Crime (9)Consumer fraud – island scams
  56. 56. Legal issues (10)Spotlight on intellectual propertyA. IP refresherB. IP in virtual assetsC. Ownership of IP in virtual assetsD. IP ‘tour’E. Recommendations
  57. 57. Legal issues (10):Spotlight on intellectual propertyA. IP refresher (1) • Broad range of legal rights that attach to inventions, software, artistic and musical works, performances, brands, data bases, designs etc • Do not protect ‘ideas’ on their own: only the expression of those ideas • Protect inventors, programmers, authors, artists, brand owners • Generally tradable and transferable • Generally jurisdictionally specific • A shield and a sword
  58. 58. Legal issues (10):Spotlight on intellectual propertyA. IP refresher (2) • Monopoly rights • Ability to exploit • Right to prevent infringement: • Injunctions • Damages • Seizure / accounting for profits • Sometimes punitive damages available
  59. 59. Legal issues (10):Spotlight on intellectual propertyB. IP in virtual assets • Typically Copyright and Trade Mark • Copyright protects: • Creative and artistic works (eg literature, software, movies, music, art, photographs, performances, broadcasts and film and sound recordings) • In Second Life, copyright will protect virtual buildings and items, textures, scripts and software, ‘performances’ • Trade Mark rights protect • ‘signs’ (eg words and logos) used in the course of trade to distinguish one traders goods and services from others
  60. 60. Legal issues (10):Spotlight on intellectual propertyC. Ownership of IP in virtual assets (1)• Copyright • Typically copyright owned by creator • Exception: copyright in works created by employees will be owned by employer if created in the ‘course of employment’ • Commissioned works!• Trade Mark • Registered marks owned by registered proprietors • Unregistered marks
  61. 61. Legal issues (10):Spotlight on intellectual property C. Ownership of IP in virtual assets (2)
  62. 62. Legal issues (10):Spotlight on intellectual propertyC. Ownership of IP in virtual assets (3) Second Life® is a 3-D virtual world created by its Residents … Because Residents retain the rights to their digital creations, they can buy, sell and trade with other Residents.” (http://secondlife.com/whatis) [2008]
  63. 63. Legal issues (10):Spotlight on intellectual property • Under the Terms of Service • Users own all IP in content they create • However, Linden: • reserves rights to terminate accounts and hold onto assets without reimbursement • reserves rights to deny, block or reverse Linden $ transactions, and • takes broad licences of all IP in content
  64. 64. Legal issues (10):Spotlight on intellectual property C. Ownership of IP in virtual assets(5) • ‘You agree that even though you may retain certain copyright or other intellectual property rights with respect to Content you create while using the Service, you do not own the account you use to access the Service, nor do you own any data Linden Lab stores on Linden Lab servers …Your intellectual property rights do not confer any rights of access to the Service or any rights to data stored by or on behalf of Linden Lab.’ • ‘When using the Service, you may accumulate Content, Currency, objects, items, scripts, equipment, or other value or status indicators that reside as data on Linden Labs servers. THESE DATA, AND ANY OTHER DATA, ACCOUNT HISTORY AND ACCOUNT NAMES RESIDING ON LINDEN LABS SERVERS, MAY BE DELETED, ALTERED, MOVED OR TRANSFERRED AT ANY TIME FOR ANY REASON IN LINDEN LABS SOLE DISCRETION … AND WITH NO LIABILITY OF ANY KIND.’
  65. 65. Legal issues (10):Spotlight on intellectual propertyD. IP infringement ‘tour’• Infringing virtual assets• Infringing physical assets marketed in Second Life• Enforcement• Recommendations
  66. 66. Infringing virtual assets
  67. 67. Infringing virtual assetsVirtual Worlds: IP Challenges
  68. 68. Infringing virtual assets
  69. 69. Infringing virtual assets
  70. 70. Infringing virtual assets
  71. 71. Infringing virtual assets
  72. 72. Infringing virtual assets
  73. 73. Infringing physical assets marketed in Second Life
  74. 74. Infringing physical assets marketed in Second Life
  75. 75. Infringing physical assets marketed in Second Life
  76. 76. Infringing physicalassets marketed inSecond Life
  77. 77. Infringing physical assets marketed in Second Life
  78. 78. Enforcement: Role of the platform operator? Second Life Terms of Service enable Linden to take action against IP infringement: • Users agree not to transmit content that infringes or violates any 3rd party rights (and Linden may suspend or terminate their account for breach) • copyright-infringing materials can be identified and removed in accordance with Linden Lab’s Digital Millennium Copyright Act compliance process But…
  79. 79. Enforcement: Role of the platform operator? Linden’s intervention not necessarily satisfactory, at least not for all IP owners: • IP owners lack contractual rights under the Terms of Service to require Linden to remove infringing content (the IP owners may not even be Second Life residents) • A resource intensive task, therefore • probably unmanageable, and, in any case • unlikely to produce solutions acceptable to all relevant IP owners
  80. 80. Enforcement: Role of the platform operator? • Linden not well placed to determine whether IP infringement is taking place – Linden is not a court or authorised dispute resolution body • Linden unable to provide or enforce financial remedies • Platform operator unlikely to be generally willing or able to provide necessary resolution
  81. 81. Enforcement: Eros v John DoePossibly the first Second Life copyright infringement claimEros created and sold “SexGen” virtual products, including avirtual bed for $45“Volkov Cattaneo” selling a similar virtual bed for $15Eros: “has been damaged, and continues to be irreparablydamaged by the diversion of sales”Sued for damages equivalent to threetimes Cattaneo’s estimated profit.Suing John Doe…
  82. 82. Enforcement: Marvel v Cryptic StudiosVirtual world based onsuperhero comic booksUsers creating avatarsbased on characterstrade marked by MarvelTrade mark infringement?Probably not because notuse in commerce
  83. 83. Virtual Worlds IP: Recommendations• Monitor and manage use of your brands and content in virtual environments• When building a virtual worlds presence: • Understand the platform operator’s rights • Ensure your brands and content are properly protected • Beware of having infringement built into your premises• If selling goods / services in a virtual environment, make sure you get the IP ownership / licensing right: • Check you have the necessary rights • Ensure your IP is protected • Be careful about what you assign/license
  84. 84. Conclusions • Highly dynamic area – constant technological and business change • The law doesn’t stop at the edges of the computer screen – it’s capable of touching almost everything in virtual worlds, as in RL • But, jurisdictional uncertainty, relative anonymity, different rule-sets, and the inability of law-makers and regulators to perfectly anticipate virtual world developments means laws will not always apply appropriately or as you’d expect • And the law can never be totally future-proof…
  85. 85. Robert BlamiresDigital Media LawyerTechnology Law GroupField Fisher Waterhousee: robert.blamires@ffw.comAvatar: Declan Shelman

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