Business and Technology Law

“The Matrix isn't real.” – Trinity. “I disagree, Trinity. I think that the Matrix can be more real than this world. All I do is pull a plug here, and then...” – Cypher.

Historians, take note. In 2007, the virtual world and real world collided. As Federal District Judge Eduardo C. Robreno stated in the opening paragraph of his opinion, “While the property and the world where it is found is ‘virtual,’ the dispute is real.”

In this case, Marc Bragg (“Bragg”) sued Linden Research, Inc. (“Linden”) for unlawfully seizing his virtual real property and revoking his account. Linden operates a massive multiplayer online role-playing game (“MMORPG”) called Second Life. Second Life is an Internet-based virtual world, where its users, called "Residents", interact with each other through motional avatars. Second Life Residents interact, socialize and even conduct business. An integral part of Second Life's real world business model is the exchange of virtual currency known as the Linden Dollar. Residents purchase Linden Dollars with real U.S. Dollars. As noted in Judge Robreno’s opinion, “Second Life avatars may now buy, own and sell virtual goods ranging ‘from cars to homes to slot machines.’”

However, what makes Second Life unique in the MMORPG world is Linden’s recognition for its users’ property rights. In a press release dated November 14, 2003, Philip Rosedale, the Linden’s CEO touted, “The preservation of users’ property rights is a necessary step toward the emergence of genuinely real online worlds.” Plaintiff Bragg purchased virtual real property, the subject of which formed the basis of the lawsuit. In 2005, Plaintiff Bragg paid Linden to join Second Life and become a Resident. One year later, Bragg purchased several plots of virtual real property in Second Life and began to re-sell such parcels to other Residents for a profit. However, in April 2006, Linden sent Bragg a notice stating that he purchased virtual real property through an exploit and subsequently cancelled his account and confiscated all of Bragg’s virtual property. Bragg brought suit claiming misrepresentation and expropriation of property. Linden moved to dismiss for lack of jurisdiction and moved to compel arbitration.

Judge Robreno held that Linden, a California based company, was subject to jurisdiction in Pennsylvania because the interactive nature of its Internet “game” gave the Court specific jurisdiction by means of its minimum contacts. Second, the Court held that the arbitration clause contained in Second Life’s terms of service constituted an unconscionable contract of adhesion under California law and was therefore unenforceable. Specifically, Judge Robreno objected to the lack of mutuality in the contract, that arbitration must take place in California and that the arbitration must take place before a panel of three arbitrators, which is extraordinarily more expensive than pursuing this matter before the Court.

Although the legal issues addressed by the Pennsylvania Federal District Court may be found in standard contract law, the context in which this dispute arose is not ordinary. This virtual real property is a newly created commodity that may create a whole new set of rules and laws. Linden’s creation of Second Life property rights where real money is exchanged and monetary value is no longer considered “virtual” created real damages and real causes of action. The real question to be asked in this virtual world is not whether Linden will be sued again, but when and for what?