The Alphaville Herald

Unconscionable!

by Alphaville Herald on 20/05/05 at 9:46 am

CmdrSlack has a post on Grimwell Online, entitled “There’s Gold in Them Thar Pixels!: an examination of virtual chattels and property rights.” Of particular interest to denizens of SL, is the discussion of Linden Lab’s schizophrenic policy of simultaneously (i) saying they are not responsible for loss of property and (ii) advertising on their web site that you can make money in the game and exchanging it for US Dollars. CmdrSlack offers that a court may well find this “unconscionable.”

Here is the skinny, more below: “Although Linden Lab seeks to disclaim any liability should player content be destroyed, it also promotes its service by telling prospective users that they too can earn real-world cash by starting a successful business in Second Life. Whether a court would uphold the “All Data Is Temporary” clause of the TOS/EULA is doubtful. It could be considered unconscionable due to the unequal bargaining positions of Linden Lab and its users. It is also possible that a court would consider the contradiction between Linden Lab’s actions and the language of its EULA misrepresentation because it seems clear that virtual chattels in Second Life have extensive real world value. “

Here’s a longer excerpt from the story. I highly recommend that readers go to the Grimwell site to read the whole thing.

“A short visit to the Second Life website will turn up various web pages that describe its vibrant economy, highlighting the chance to earn real-world cash.50 The “money” page provides links to Gaming Open Market and Internet Gaming Entertainment, two secondary market services that allow players to buy and sell Linden Dollars ($L), the in-world currency.51 The Gaming Open Market website charts the exchange rate of $L to $US much like a modern stock or currency exchange.52 The CEO of Linden Lab, Philip Rosedale, uses the data produced by Gaming Open Market to determine economic policies within Second Life.53 However, the Second Life TOS/EULA specifically states, “All of your content and accumulated status has no intrinsic cash value and that Linden does not endorse, and expressly disclaims . . . any value, cash or otherwise, attributed to content or accumulated status [all caps formatting removed].”54 Linden Lab also attempts to disclaim liability for its management of the virtual economy.55 While the Second Life TOS/EULA claims that user content has no intrinsic value, the website touts the chance to make real-world cash and endorses two secondary market merchants, one of which is the source of data for Linden Lab economic policy development.

“This seems problematic from a contract construction perspective. Although Linden Lab seeks to disclaim any liability should player content be destroyed, it also promotes its service by telling prospective users that they too can earn real-world cash by starting a successful business in Second Life.56 Whether a court would uphold the “All Data Is Temporary” clause of the TOS/EULA is doubtful. It could be considered unconscionable due to the unequal bargaining positions of Linden Lab and its users. It is also possible that a court would consider the contradiction between Linden Lab’s actions and the language of its EULA misrepresentation because it seems clear that virtual chattels in Second Life have extensive real world value. Although the Davidson opinion seems to indicate that players have a choice of what game to play, Second Life is the only virtual world that allows players to retain their intellectual property rights to their creations, and to that extent, it is unique.

Second Life is also unique because its residents can buy and sell land for in-game currency or for U.S. dollars. The sales for real currency are done via auction on the Second Life website.57 In the event that Linden Lab terminates a resident’s account, the TOS/EULA sets forth the equivalent of a foreclosure sale for a resident’s virtual land. Residents will even be charged up to $100 as a “Resale Fee.” Given these factors, it seems that virtual chattels and land do have an intrinsic value within Second Life. This could be problematic for Linden Lab. As Jack Balkin notes, if a game developer was to go bankrupt, recognizing the intrinsic value of virtual chattels and currency could cause players to “petition the bankruptcy court to keep the game running, restructure the business, and/or sell it to another party so that player’s virtual property interests are not destroyed.”"