Virtual Property Law — Game Law Series Part III
Monday, July 28, 2008
Virtual property is a topic that gets lots of attention from legal scholars. There is something intriguing about the lawlessness of virtual worlds. Most of the legal writing in this area focuses on which laws apply and whether traditional legal principles can be transfigured to apply to virtual worlds. As I have mentioned in earlier posts in this series, the focus of these articles is not the theoretical, but practical information for people who make games.
In a virtual world, the publisher’s Terms of Service are the Law. While scholars think theoretically about which real-world laws should and shouldn’t apply in virtual worlds, game developers fortunately have the ability to move past the issue and create their own law. In a virtual world, this means creating a clear and well drafted Terms of Service. A developer or publisher’s Terms of Service are the constitution for its new world. If the publisher says it is legal for people to steal in-game items from each other, then it is. If the publisher’s Terms of Service say that the publisher can suspend player’s accounts, or repossess in-game items, it can. That said, while publishers can create the law, like real world legislators, if the publisher’s laws are too restrictive, arbitrary or unfair, gamers will rebel or take up residence in a more favorable world.
As a game company develops its rule of law, there are two decisions that will have a significant effect on the type of game it creates.
Who Owns Player Created IP?
One issue that that gamers have been paying more attention to in recent years is who owns items that they create in-game. Some publishers of virtual worlds, like Linden Lab, give IP rights in creations to the gamers that create them. Other publishers maintain ownership of all in-world items.
There are upsides to giving players rights in their creations. Second Life’s policies with respect to IP ownership have resulted in a vast and diverse world created primarily based on the time and effort of its players. When Second Life shifted to a policy of allowing players to own the IP rights in their creations, development in-world increased dramatically
The downside to allowing users to own IP rights in their creations is that the publisher looses some degree of control over its world. This is less of an issue in Second Life, because it is not trying to tell a story in the way that many games do. In story driven games like the the Matrix Online or Starwars Galaxies, valuable intellectual property is embodied in the virtual worlds themselves. The Matrix and Starwars universes, for instance, are too valuable to risk allowing users to create derivative characters or stories within the world.
Whether to Acknowledge Virtual Property?
Many game companies do not consider this question in enough depth before launching their game. There are two positions a game company can take with respect to in-game property:
Disavow Virtual Property. The first position is that in-game property has no real world value. Under this theory, in-game items (e.g., swords, articles of clothing, game cards, gold) are purely licensed rights that can be used within the game. Companies that take this approach typically ban the sale of in-game items inside and outside the game. In most cases these companies don’t actively enforce this rule. The most compelling reason that companies take this position is to avoid anti-gambling laws. Each State has its own rules with respect to what constitutes an illegal lottery. To oversimplify this explanation, a common theme among the States is that gambling equals wagering plus chance (G = W + C). Companies that take the position that virtual items in their games have no real world value are working to eliminate the wager part of this equation. The argument is that if in-game items have no value, it is not gambling to put them at risk in a game. The downside to this approach is that the game company looses the ability to get involved in the marketplace for in-game items, which can be a profit center.
Embrace Virtual Property (but eliminate chance). The second position is to acknowledge that in-game items have real-world value. This can make a game or virtual world more compelling for gamers, and can permit a game publisher to become involved in the market for virtual property within the game, but this approach comes with a variety of risks. One risk is the gambling issue described in the previous section. By acknowledging property rights in in-game items, a publisher reintroduces the wager element into the equation. In order to reduce the risk of a claim that its game constitutes gambling or an illegal lottery, the element of chance must be eliminated (or reduced, depending on the jurisdiction). This is a difficult thing to achieve, and typically involves modifying the game rules to eliminate the degree of chance involved. The common law theory that provides this leeway for skill-based games dates back to times when governments sought to encourage athletic competition as a means of encouraging a physically fit armed forces. The legacy is that in many states skill-based competitions are permitted, even when the participants pay an entry fee to compete for a prize. Game companies that are interested in pursuing this approach, should consult with an attorney to help craft game rules that eliminate as much chance as possible.
Another risk associated with embracing the existence of in-game property is that a player may argue that a game publisher has taken his or her property rights if the game is discontinued, or the player is banned from the online community. A player recently sued Linden Lab alleging this type of taking. The player had manipulated Lindon Lab’s land purchasing engine in Second Life to purchase in-game land at below market values. When Lindon Lab discovered the manipulation of the system, it suspended the players account. The player sued and the case eventually settled. Since the case didn’t proceed to judgment, the law is still unsettled. Until such time as this issue is resolved by the courts, these risks are best mitigated through well drafted and forward-thinking Terms of Service.
Conclusion
This article is a fairly gross simplification of the framework around this area of law. My hope is to provide some high level thoughts, without writing a treatise on gambling or skill-based gaming. That said, if you have questions about the area, or there are glaring gaps in the summary, please feel free to let me know and I will update accordingly.
DISCLAIMER: Please read the disclaimer language using the link at the top of this page, or click here. This article is not intended to be legal advice, and no attorney client relationship should be inferred from this blog. The law varies from jurisdiction to jurisdiction and you should consult with an attorney before relying on anything you read here. This article and this blog do not reflect the views of Wilson Sonsini Goodrich and Rosati.
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