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Virtual property dispute goes to court |
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Written by Felix Da Silva (fdasilva@bitnip.com)
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Monday, 04 June 2007 |
 A lawsuit filed in May of 2006 by Pennsylvania attorney Marc Bragg accused Linden Lab and its CEO Philip Rosedale of wrongfully seizing his virtual land and unilaterally shutting down his Second Life account. Linden Lab filed two motions to dismiss the suit, arguing that Bragg came into possession of his land wrongfully, but the Pennsylvania judge denied those motions.
According to a press-release issued by Bragg, "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."
However, Bragg did not acquire the virtual land a typical user would. Normally, a user would bid on an auction to acquire that virtual property but Bragg claims he "learned of a way" to purchase virtual land at a U.S. Dollar price significantly below market value, invested thousands of dollars and then tried to resell the land at a profit.
Bragg was able to access the auction which wasn't publicly available yet and was not posted on Linden Lab's main auction page. He was able to get to it by changing out the ID number in a URL for an auction that was public for one that wasn't. He was then able to purchase the land for far below virtual market value and complete the sale automatically before the auction ever officially started.
Even though the account termination is permissible according to the Terms of Service for Second Life, Bragg seems to think there are real-world rules being broken here. Bragg said, "These games are like the virtual Wild West, but Linden Lab is still obligated to honor real-world contract law and consumer law, even if their world doesn't really exist."
These games are like the virtual Wild West, but Linden Lab is still obligated to honor real-world contract law and consumer law.
This case is interesting in that it is the first case that I am aware of that deals with virtual property that made it all the way to court. In addition, Linden Lab has long maintained that virtual property owned by its users in Second Life belongs to the users and the virtual property is purchased with real money and the property has real value.
Being a geek myself, I have played MMORPG and did buy and sell virtual items online from auctions sites with real money. However, this activity is clearly prohibited in their Terms of Service and is discouraged by the developers of the game as it ruins the game experience. The difference between the normal MMORPG and Second life is that buying and selling through auctions are a part of Second Life.
Even though Bragg might not have acquired the virtual property in the best possible way, he did acquire it and it was not illegal per se, therefore a contract was created. If you put this into perspective and imagine Bragg did this offline in the real world, what Bragg did might not seem as outrageous. There are times when companies make mistakes and there are users that will take advantage of those mistakes which would result in the companies to lose money.
An example is when a typing mistake costed a Japanese bank £ 128 million. The trader at Mizuho Securities typed incorrect details into his computer. He wanted to sell one share in a new telecoms company called J Com, for 600,000 yen (about £3,000). Unfortunately, the order went through as a sale of 600,000 shares at 1 yen each.
The consequences were much worse because 600,000 shares represents more than 40 times the total number issued by the company, and the vast discrepancy effectively created a technical shortage of shares, worth about £1.6 billion. It is thought that Mizuho, once it realised its mistake, sought to buy back 550,000 shares from itself in a desperate effort to limit the damage, which is expected to run into billions of yen because J-Com’s share price soared, making the repurchase more costly.
Mizuho did not have the power to just retract the mistake they just did and seize back all those shares nor can they ban every person that bought their shares at below market value. So why should Linden Lab be able to seize the virtual property back and ban Bragg just because he acquired some virtual property that is not of market value because of their mistake of having an insecure auction site? In addition, Linden Lab should not be allowed to hide behind the Terms of Service as justification on seizing virtual property that has real value in which, from what I can see, a valid contract has been formed.
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