“Unconscionable!” Court Blasts Linden Terms of Service, Holds that Philip can be target in Bragg Lawsuit.

by Urizenus Sklar on 31/05/07 at 12:54 pm

Yesterday the US District Court for the District of Pennsylvania ruled on two motions by Linden Lab in the case of Bragg vs. Linden Research. One motion had to do with removing Philip Linden as a target of Bragg’s lawsuit. The second issue had to do with Linden Lab’s terms of service, which says that any disputes with Linden Lab must go to arbitration. Here is the skinny: Philip *can* be personally targeted, and the ToS is “unconscionable” for a gazillion reasons (We told you so!) — indeed it is unfair in so many ways it is not even fixable by “bluelining”. In other words, this baby is going to court. But beyond this decision, there was the language of the Court, which suggests that not only does the Court understand the issues, but also that Philip is in a great big shitpile of trouble. Following are some choice passages:

p. 14, regarding specific person jurisdiction

Rosedale’s personal role was to “bait the hook” for potential customers to make more interactive contact with Linden by visiting Second Life’s website. Rosedale’s activity was designed to generate additional traffic inside Second Life. He was the hawker sitting outside Second Life’s circus tent, singing the marvels of what was contained inside to entice customers to enter. Once inside Second Life, participants could view virtual property, read additional materials about purchasing virtual property, interact with other avatars who owned virtual property, and, ultimately, purchase virtual property themselves. Significantly, participants could even interact with Rosedale’s avatar on Second Life during town hall meetings that he held on the topic of virtual property.

That may sound harsh, but think about it. Linden Lab is in the position of (i) telling people that the stuff they buy in Second Life is theirs, but (ii) then turning around and seizing the property. The marketing quotes from Philip are damning:

p. 4:

Defendant Rosedale personally joined in efforts to publicize Linden’s recognition of rights to virtual property. For example, in 2003, Rosedale stated in a press release made available on Second Life’s website that:

“Until now, any content created by users for persistent state worlds, such as Everquest or Star Wars Galaxies , has essentially become the property of the company developing and hosting the world. . . . We believe our new policy recognizes the fact that persistent world users are making significant contributions to building these worlds and should be able to both own the content they create and share in the value that is created. The preservation of users’ property rights is a necessary step toward the
emergence of genuinely real online worlds.”

Press Release, Linden Lab, Linden Lab Preserves Real World Intellectual Property Rights of Users of its Second Life Online Services (Nov. 14, 2003). After this initial announcement, Rosedale continued to personally hype the ownership of virtual property on Second Life. In an interview in 2004, for example, Rosedale stated: “The idea of land ownership and the ease with which you can own land and do something with it . . . is intoxicating. . . . Land ownership feels important and tangible. It’s a real piece of the future.” Michael Learmonth, Virtual Real Estate Boom Draws Real Dollars, USA Today, June 3, 2004. Rosedale recently gave an extended interview for Inc. magazine, where he appeared on the cover stating, “What you have in Second Life is real and it is yours. It doesn’t belong to us.”

Philip has placed himself in an impossible position on this one. He is arguing that the Terms of Service agreement say the stuff isn’t really Bragg’s, but meanwhile his marketing spiel is off the hook: “It doesn’t belong to us.” Meanwhile the ToS looks like it is going to crumble like a house of cards under legal scruitiny. The Court argued that it was so unfair and such a mess it wasn’t even fixable. Here are some highlights.

p. 28

The TOS are a contract of adhesion. Linden presents the TOS on a take-it-or-leave-it basis. A potential participant can either click “assent” to the TOS, and then gain entrance to Second Life’s virtual world, or refuse assent and be denied access. Linden also clearly has superior bargaining strength over Bragg. Although Bragg is an experienced attorney, who believes he is expert enough to comment on numerous industry standards and the “rights” or participants in virtual worlds, see Pl.s Resp., Ex. A ¶¶ 59-64, he was never presented with an opportunity to use his experience and lawyering skills to negotiate terms different from the TOS that Linden offered. Moreover, there was no “reasonably available market alternatives [to defeat] a claim of adhesiveness.”

p. 30

Linden buried the TOS’s arbitration provision in a 17 lengthy paragraph under the benign heading “GENERAL PROVISIONS.”

p. 33

Here, the TOS contain many of the same elements that made the PayPal user agreement substantively unconscionable for lack of mutuality. The TOS proclaim that “Linden has the right at any time for any reason or no reason to suspend or terminate your Account, terminate this Agreement, and/or refuse any and all current or future use of the Service without notice or liability to you.” TOS ¶ 7.1. Whether or not a customer has breached the Agreement is “determined in Linden’s sole discretion.” Id. Linden also reserves the right to return no money at all based on mere “suspicions of fraud” or other violations of law. Id. Finally, the TOS state that “Linden may amend this Agreement … at any time in its sole discretion by posting the amended Agreement [on its website].” TOS ¶ 1.2.

p. 34

In effect, the TOS provide Linden with a variety of one-sided remedies to resolve disputes, while forcing its customers to arbitrate any disputes with Linden. This is precisely what occurred here. When a dispute arose, Linden exercised its option to use self-help by freezing Bragg’s account, retaining funds that Linden alone determined were subject to dispute, and then telling Bragg that he could resolve the dispute by initiating a costly arbitration process. The TOS expressly authorized Linden to engage in such unilateral conduct. As in Comb, “[f]or all practical purposes, a customer may resolve disputes only after [Linden] has had control of the disputed funds for an indefinite period of time,” and may only resolve those disputes by initiating arbitration. 218 F. Supp. 2d at 1175.

Linden’s right to modify the arbitration clause is also significant. “The effect of [Linden's] unilateral right to modify the arbitration clause is that it could . . . craft precisely the sort of asymmetrical arbitration agreement that is prohibited under California law as unconscionable. Net Global Mktg., 2007 U.S. App. LEXIS 674, at *9. This lack of mutuality supports a finding of substantive unconscionability.

p. 40

Here, neither in its briefing nor at oral argument did Linden even attempt to offer evidence that “business realities” justify the one-sidedness of the dispute resolution scheme that the TOS constructs in Linden’s favor.

You can download the entire Court order here:
Download robreno_order.pdf

119 Responses to ““Unconscionable!” Court Blasts Linden Terms of Service, Holds that Philip can be target in Bragg Lawsuit.”

  1. Prokofy Neva

    Jun 3rd, 2007

    um, if C. Sven Johnson feels there is something to report here from this land in Patagonia of my tenant’s, he’s welcome to abuse report it. I don’t see any sexualized “ageplay” or child porn on this parcel which has tenants who have been there for months. Lindens have come to this sim to fix its road and invisible prim blockages and water problems probably a half dozen times, and have never complained. I fail to see anything here that would warrant action, but of course C. Sven Johnson, who believes that simulated child porn among consenting adults is NOT a crime is free to try to trump up something and report it. I do believe that simulated child porn *IS* wrong and I would *remove it* from any rental where it appeared, but a swingset or playpen or something is hardly enough grounds for action. Many people like to play with child avatars without any sexualized play.

    As I don’t see any sexualized play here whatsoever, I’m afraid I can’t act on the basis of a swingset, or the fact that a hot-tub is next to a swingset, but anyone is free to make their own judgement.


  2. urizenus

    Jun 3rd, 2007

    Joshua, the possibility of a class action lawsuit is interesting. I wonder how many people have had property seized without due process, and if it amounts to enough money to make a lawsuit worthwhile. I also wonder if it would be possible to track down all the effected parties..

  3. csven

    Jun 3rd, 2007

    “um, if C. Sven Johnson feels there is something to report here from this land in Patagonia of my tenant’s, he’s welcome to abuse report it.”

    And if I see anything I consider “broadly offensive”, I most certainly will.

    Which leads me to a certain avatar by the name of Vane Bellman – apparently a Ravenglass customer – who is IM’ing me to death thinking I’m going to report something. The basic message is “I’ll do what I fucking want to do in Second Life so leave me alone”.

    I can’t imagine what an upstanding customer of Prokofy’s would have to worry about. I mean, it’s only playground equipment.

  4. Joshua Nightshade

    Jun 3rd, 2007

    What do my opinions on what consenting adults do in the privacy of their “homes” have to do with Bragg’s lawsuit, Prokofy? /eyeroll.

  5. Joshua Nightshade

    Jun 3rd, 2007

    Sorry, I misread “Johnson” and thought it said Joshua. Whew.

  6. csven

    Jun 3rd, 2007

    And all I was saying was that I was hoping someone would steal the playground (the notes are for that *other* thread).

  7. D.G.

    Jun 4th, 2007

    Years of comments about legal issues in SL, here and in other forums, and most of it boils down to this: “Here’s what seems sensible to me, and therefore the law must conform to my idea of sensibility.”

    No. The law is not “sensible”. It has a coherent logic, but that logic does not conform to everyday sensibilities. Instead, the key issue is to maintain the broader order – economic, social, and civil. The law is entirely pragmatic – not sensible. If it takes injustice, incivility, or sheer intellectual nonsense to maintain order, the courts will do it and hope that few will notice.

    LL doesn’t understand applicable law, much the same as they don’t understand the concepts of “community”, “behavior”, and “consistent policy” that keep rising up and biting them in the collective ass. A good, public example of this misunderstanding was their decision to name a former forum on community affairs “political science” – as though that academic discipline had much to do with the community and political needs of their product. Another example was LL’s decision to send employee-alts into that forum to instruct residents on what “the law” was and how it functioned. The material these Linden-alts posted was embarrassingly naive and the subject of amusement among the legal community that was interested in virtual worlds. But it was also an indication of how crude Linden-thinking was on the dynamics of community and social process within SL. Now, with the conflict with German sexual and family law, with American service contracts and advertising fraud, and with a number of other issues that are about to become public knowledge – the ignorance and arrogance that many of us warned LL about is coming to fruition.

    Technical issues have always been a secondary problem in SL; the real issues are the ones that LL refused to face and the SL community never seemed to recognize – community, and the cultural, economic, and legal interface with the world.

  8. csven

    Jun 4th, 2007

    “The law is not “sensible”. It has a coherent logic, but that logic does not conform to everyday sensibilities.”

    I like D.G.

  9. Alyx Stoklitsky

    Jun 4th, 2007

    Ho ho ho. Looks like LL now has only two options:

    A: Lose the right to ban people, as they would be denying access to others property.

    B: Admit that nobody in SL actually owns anything, and that it’s still all property of LL.

    I suspect B.

  10. Hazim Gazov

    Jun 4th, 2007

    I suggest that Prokofy Neva stop bathing in butter and that csven be made a Linden, because he is neat. Also, I hart mootykips, everytime I see him, my heart becomes an hero.

  11. Ace Albion

    Jun 5th, 2007

    Meanwhile, a guy in Michigan is prosecuted for accessing an open wireless network.

    Guessing at URLs isn’t a million miles from typing in “admin” and then “password” at a login screen, and I don’t think anyone would claim that was public access? Does it only count if the password is really hard to guess?

    I’d like to refer to something Prokofy mentioned way up in the comments- Uri says that if Bragg wins this is great for everyone, because it affirms our legal rights to virtual property. But if that’s the case, then all these virtual world providers may well roll up and take their balls home, leaving us with nothing. Who’d run a system when every day some antagonistic user is threatening to sue over something or other? Easier to find another line of business.

    If Bragg rocks the boat enough, everyone sinks.

  12. t welles

    Jun 7th, 2007


    I can state the answer to the question of “Do I truly own the land I purchased” without hesitation.

    The answer is NO.

    After purchasing a quarter sim, the owner of the sim took the whole sim back from every one on it and claimed he wanted to re-sell it back to us or someone else. $800 USD down the pipes.

    After sending in a months worth of ABUSE REPORTS within the client, Linden still did not help us in any way. In this case, it was pure fraud and Linden did nothing, even with proof of it all.

  13. sim owner

    Jun 8th, 2007

    People should realize that they are only entering a online content hosting deal with Linden Lab. This is no different than getting yourself a website with Godaddy. Land is a misnomer for this. You are contracting them to host interactive content – which you retain the intellectual rights to.

  14. sim owner owned by who?

    Jun 8th, 2007

    and you work for who?

    “People should realize that they are only entering a online content hosting deal with Linden Lab. This is no different than getting yourself a website with Godaddy. Land is a misnomer for this. You are contracting them to host interactive content – which you retain the intellectual rights to.

    Posted by: sim owner | June 08, 2007 at 12:12 PM”

  15. Damien

    Nov 2nd, 2008

    The fact that everything is up to Linden Labs is the problem, they can say whatever they want to and us users have no say in the matter. For example what would anyone think if they accidentally did something wrong and suddenly wound up losing all of their land and items, which they paid real money for. If this was happening in the real world Linden Labs would be being charged with theft or something like that, but because it is in their game people have no options. People pay real money for land and items, they should not be allowed to just take it all with no compensation for it, and for no reason either.

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