Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

The Burning Crusade license granted

Last week, it was reported by Gamasutra.com that NetEase had suspended new user registrations due to its application to the Chinese government for a license to operate the World of WarCraft expansion pack The Burning Crusade. It appears that Chinese regulators are showing concern over the "undesirable content" of online games and are allegedly cracking down on foreign investments in its growing online gaming industry.

On February 16, 2010, Gamepolitics.com reported that China's General Administration of Press and Publication (the "GAPP") has granted the license permitting NetEase to operate The Burning Crusade. While the GAPP reportedly claimed to have previously suspended NetEase's permit for what it allegedly referred to as "gross violations" of regulations, NetEase appears to have always maintained that it did not violate any regulation. The GAPP has reportedly said that it granted NetEase the license because it had "taken necessary corrective measures."

Coverage at Gamasutra and Gamepolitics

Nintendo Co. can Shout Wii over Legal Victory

It has been reported that Nintendo Co. has won the dismissal of a lawsuit instituted by Guardian Media Technologies Ltd ("Guardian"). It was reported that the Texas based plaintiff had alleged that Nintendo Co., in its Wii video-game system, had infringed its patent for a technology used to impose parental controls. The judge allegedly found that the Wii doesn't play movies or television programs, and it does not use a parental-control function that affects the playback of "video programs." Guardian reportedly sued other companies, retailers and electronics makers including Amazon.com Inc., Microsoft Corp., Apple Inc., RadioShack Corp. and Wal-Mart Stores Inc. The court allegedly found that the claims against Nintendo Co. were separate from the claims for relief leveled against the other defendants and that Nintendo Co. should not have to wait for the entire case to be completed for its dismissal.

Coverage at Bloomberg.com

Scratch DJ Game Itching for Damages and Injunctive Relief

It has been reported that Scratch DJ Game ("Scratch"), a joint venture between Genius Products ("Genius") and Numark Industries, has filed a lawsuit against publisher Activision, former partner and game developer California 7 Studios ("7 Studios") and its CEO Lewis Peterson, claiming that Activision has "engaged in intentional interference with contract, breach of contract, conversion and misappropriation of trade secrets obtained from Genius to purchase 7 Studios, which is under contract to develop the much anticipated new Hip Hop video game, Scratch: The Ultimate DJ." Scratch has also alleged that Activision and 7 Studios have deliberately hindered the release of Scratch: The Ultimate DJ in order to allow the future release of Activision's own prospective game, DJ Hero, to grab the spotlight.

Scratch has explained that while Activision had offered Genius to acquire Scratch: The Ultimate DJ, this offer was refused. It is at that point that Activision began to look to purchase Genius' product developer, 7 Studios, despite a non-disclosure and confidentiality agreement with Genius. Scratch has also alleged that Activision and California 7 studios conspired to impede the release Scratch: The Ultimate DJ.

It is reported that Trevor Drinkwater, President and CEO of Genius, has stated that "We believe that Activision and 7 Studios have improperly used confidential information obtained from Genius and 7 Studios to interfere with our efforts to complete the game. In short, we believe that Activision is attempting to sabotage the release of our much anticipated game and prevent it from getting to market prior to the release of DJ Hero."

Apparently, Scratch is not only seeking damages, but also an order to have the game returned to it immediately, as well as other injunctive relief.

Meanwhile, in response to these allegations, Activision has reportedly issued a statement, denying that there is any truth to these allegations and claiming that the Los Angeles Superior Court "found that there was no evidence of any wrongdoing by Activision and refused to grant any restraining order against Activision." Activision has also claimed that Scratch has made these allegations "to place blame for the game's delay, as well as to divert attention from the cash flow, liquidity and revenue challenges Genius detailed in its March 30, 2009, SEC filing." Finally, Activision also claimed that it acquired 7 Studios to increase its development capabilities, which did not interfere with 7 Studios efforts to complete the game, as it provided much needed financing to the developer.

However, it has been reported that Genius and Numark have claimed that they were the ones to prevail in Court, rather than Activision. The transcript from the Los Angeles Superior Court hearing has been made public by the companies and although the judge began by stating that there was no evidence against Activision and no reason to restrain it from doing anything, the judge went on to say that 7 Studios "has a duty to return the work product, source code, and software of the plaintiff [Genius]." The judge then stated that Activision had to turn over the source code and should it want it back, that it could argue its case during a hearing set for May 6. The judge also ordered a wall-off between 7 Studios and Activision, preventing the two companies from sharing any trade secrets that 7 Studios may have learned from Genius.

The next step in the case is a May 6 hearing, regarding the damages that Genius is seeking.

Coverage at GameDaily.com, Gamasutra.com, GameDaily.com and Gamespot.

"Kölner Dom" in Second Life: Copyright Infringement?

To the inhabitants of Cologne, their "Dom" is very dear – and legend says that tourists calling the building "Cathedral" have found themselves thrown into the Rhine. So the judges of the District Court of Cologne will have been very pleased that they have not just rendered what is probably the first German judgement on copyright of Second Life architecture, but that this case refers to the great Cologne landmark.

The applicant claimed copyright in certain textures of the virtual "Kölner Dom", which was partly designed by her, and partly designed by the defendant. While the textures were designed to make the virtual building look like the real one, and photos were taken to achieve this aim, the applicant claimed that her work was protected under copyright law, as she had to adapt colors, brightness, and perspective. After a rather long elaboration of the various types of "work" which can be protected under copyright law, the court found that the textures were not suffiently original for copyright protection.

The underlying contracts between the parties have not been part of the dispute, presumably because they were not very clear on the subject.

This article was kindly contributed by Andreas Lober at SCHULTE RIESENKAMPFF in Frankfurt.

Legal Battle Joined over WoW Bot

Vivendi, the parent company of Blizzard Entertainment (the creator of the popular World of Warcraft on-line multiplayer game), has sued the author of a software tool that automates certain in-game tasks such as fighting.

Vivendi and Blizzard claim that the software tool infringes its copyrights (because the tool copies game code into RAM in order to avoid cheat-prevention software) and also violates the game's end-user licence agreement.

The defendant, who claims to have sold more than 100,000 copies of his program, denies there is any copyright infringement.

Both parties have filed written submissions and are awaiting summary judgment in the case.

Coverage on the BBC and at the International Business Times.

Virtual worlds ripe for real-world lawsuits

Today the Financial Post published an interesting article entitled "Virtual Worlds Ripe for Real-World Lawsuits". It discusses topical online legal issues such as IP infringement in Second Life. And it even features a few choice words from one of our resident video game and intellectual property lawyers, Chris Bennett.

Online version is available here.

We're big rock singers and we've got golden fingers...

Dr. Hook would be proud: Davis LLP's Second Life office (and a few of our video game lawyers) just made the cover of the Canadian Lawyer magazine.

Check it out here.

Capcom sued by MKR over Dead Rising's "Thoughtful Social Commentary"

Submitted by Michael Mjanes

Despite Capcom’s pre-emptive attempt to have a court declare that the popular “Dead Rising” video game does not infringe any copyright or trademark, they were sued Monday by “Dawn of the Dead” owners the MKR Group. This follows a drawn-out dispute over whether the MKR Group holds the rights to the “zombies-in-a-mall” theme common to both works. According to Reuters, MKR’s legal filing states: “Both works are dark comedies. In both, the recreational activities of the zombies and absurdly grotesque 'kill scenes' provide unexpected comedic relief. Both works provided thoughtful social commentary on the 'mall culture' zeitgeist, in addition to serving up a sizable portion of sensationalistic violence."

In its earlier filings in support of its declaratory judgment action, Capcom has called the idea of humans battling zombies in a shopping mall “wholly unprotectible”.

Capcom Seeks Declaration over “Dead Rising”

Submitted by Michael Mjanes

Fans of zombie movies will undoubtedly recognize this old chestnut: a protagonist, barricaded in a curiously weapon-rich building, surrounded by zombies, must use any and all means available to stay alive. Sound familiar? Could be George A. Romero’s 1979 opus “Dawn of the Dead” (or its 2004 remake). It could be Peter Jackson’s 1992 gorefest “Dead Alive”, or 2004’s quietly brilliant “Shaun of the Dead”. In fact, it could be any number of re-tellings of that classic “man vs. the undead” narrative.

It could also be Capcom’s 2006 award winning game, “Dead Rising”. The game, in which a hero is stranded for three days in a mall infested with zombies, shares a number of similarities with Romero’s “Dawn of the Dead”. Too many similarities, charges The MKR Group, holder of the IP rights to “Dawn of the Dead”. Even prior to the release of “Dead Rising”, MKR approached Capcom and accused the game of infringing MKR’s copyright and trademark. The parties were unable to resolve the dispute and as a precaution, Capcom included a disclaimer on the front of its packaging stating: “this game was not developed, approved or licensed by the owners or creators of George A. Romero’s Dawn of the Dead.”

On February 12, 2008 Capcom filed for a declaratory judgment to prevent the MKR Group and New Line Cinema from asserting their intellectual property rights. In papers filed in the California District Court, Capcom claims that any similarities between the game and the movie are “based wholly on the unprotectible idea of humans battling zombies in a shopping mall.” Capcom goes on to say that there are “literally dozens of other video games featuring a protagonist battling hordes of flesh-eating zombies”, and neither MKR’s copyright in the film, nor any mark, is infringed by the game. Capcom further asserts that because of the disclaimer that accompanied the game, there was no confusion among consumers between the film and the game.

IGE Lawsuit Reveals Some Inner Workings

This is not breaking news, but it's interesting nonetheless. A lawsuit filed last summer shows that one of the founders of the IGE (a virtual property business which lets customers buy and sell virtual property -- in-game currency, characters and items) has sued the other over various business issues. Given that IGE is one of the most well-known virtual property dealers out there (not necessarily in a good way, as it is also the subject of a class-action lawsuit by WoW players -- see our previous post), this lawsuit offers some interesting insight into the operation of a virtual property business.

Coverage at Virtually Blind.

Who gets the virtual property when the marriage ends?

Business in Vancouver recently ran an interesting article about virtual property and divorce. It includes quotes from one of our Vancouver video game lawyers, Chris Bennett.

Article here.

Ginko Financial Could Be In Hot Water Again

Following its demise this summer, “self-styled” virtual bank Ginko Financial was thought to have disappeared into the ether - literally. It appears to have indirectly reared its less than popular head - on eBay no less. According to Ginko’s own site, it is selling a “1U Rackmount Xeon 5160 Server” on eBay to the tune of $3200USD. Apparently the“1U Xeon server works great”. No bids however had been received as of the day of this posting.

Many believe that Ginko’s failure in Second Life is the reason Linden Labs instituted its policy, to take effect today, regarding the removal of “virtual ATMs [and] other objects that facilitate the operation or in-world banking” (see previous post).

For those looking to collect on Ginko’s bad debts - chasing down hardware being sold off on eBay probably won’t bring them much joy. I also wouldn’t be comforted by the claim (on the eBay ad) that “hard disk drives will be erased”.

Coverage at Virtually Blind

Second Life Patent and Trade-Mark Office: It was only a matter of time really...

Two brave entrepreneurs have finally ventured into the frontier of virtual intellectual property protection and have opened a “Second Life Patent and Trademark Office” at www.slpto.com. It was only a matter of time really, so what are the real world implications? In some ways, it is anyone’s guess; however, I can’t resist being an armchair critic and throw out a few initial thoughts. Plus, as a lawyer and trademark agent in the real world, how could I ignore a comment like this:

“It is our goal to provide the tools to allow you to protect your intellectual property, without expensive attorney's fees or long, drawn out processes.”

But can they do what they claim and “protect your intellectual property?”

Seriously though, I promise I’m not being “sour grapes” about this. I have an avatar (albeit, I admit, with a totally lame handle) in Second Life who resides in our virtual Davis LLP office, so clearly I think this is really exciting stuff! I think the SLPTO project is quite provocative and has at the very least, sparked some interesting debate (amongst types like me anyway) if not opportunity for its creators. For instance, if I can sue for trademark and copyright infringement that takes place in Second Life, in the real world, on the basis of real-world registrations - why would I apply/register in Second Life when I can apply/register at say, the Canadian Intellectual Property Office (CIPO) or the United States Patent and Trademark Office (USPTO)? Apart from the fact that it is free of course. With no legal standing and no statutory rights to enforce, how big could the SLPTO’s teeth really be? On the other hand, could a registrant in Second Life rely on evidence submitted to the SLPTO to enforce real world rights? Surely, the question of common law rights (in Canada and the U.S. anyway) would arise because of use - even if it is use in the context of a three-dimensional virtual platform. So maybe it is worth a try - if only to create an evidence trail at common law - for free. And for fun of course… which is what this is really about, right?

For my part, I’m not convinced that “Real Protection for Virtual Assets” is much more than a couple of clever and adventurous guys trying to take advantage of a potentially lucrative opportunity in cyberspace. But hey - you can’t blame them for trying. It isn’t as though it didn’t cross our own minds.

Caveat Emptor - Or Not... Linden Labs To Shut Down "Banks" In Second Life

In the wake of the collapse of “Ginko Financial” in August 2007 and a significant number of Resident complaints that in-world “banks” are defaulting on their promises, Linden Labs has decided to break with its tradition of not interfering with “in-world” activities by prohibiting in-world companies from offering interest or any direct return on investments in Second Life.

Starting January 22, 2008, Linden Labs will be removing from Second Life “any virtual ATMs or other objects that facilitate the operation or facilitation of in-world “banking,” i.e., the offering of interest or a rate of return on L$ invested or deposited”. Linden Labs has indicated that after January 22, 2008, it will have the right to sanction companies offering so-called banking services by means of “suspension, termination of accounts, and loss of land”.

The policy does not appear to extend to companies that submit appropriate, approved documents from a regulatory authority qualifying them as a “[chartered or registered] bank” or to companies that do not accept payment in exchange for investments - but “who are merely conducting marketing or education”.

This is not the first time Linden Labs has stepped in. It took a similar position in the past with respect to gambling in Second Life. So what about in-world “lawyers”? Has this latest issue about in-world “banking” possibly brought to light issues of broader application, for instance, in respect of “professional” designations/organizations operating in Second Life?

Coverage at Second Life Blog

Answers to FAQs regarding Linden’s policy at Second Life

Virtual Property Lawsuit Settles

We reported back in November about a lawsuit by a group of Second Life merchants against Thomas Simon ("Rase Kenzo" in SL) and for making and selling unauthorized copies of the plaintiffs' virtual products (see our previous post).

The parties have now filed a consent judgment to end the lawsuit. The consent judgment, which still has to be approved and entered by the court, contains the following key points:

- The defendant will pay $525 as restitution for profits derived from the "unauthorized copying and distribution of plaintiffs' merchandise".

- The defendant represents, under penalty of perjury, that he acted alone in the unauthorized copying and distribution, that he derived a total of $525 from his activities, and that he has destroyed any remaining copies of the plaintiffs' merchandise in his possession.

- The defendant is permanently prevented from copying, displaying, distributing and selling any of the plaintiffs' merchandise without permission.

- If the defendant uses SL by way of an alternate account, he will tell the plaintiffs the name of that account.

The use of the term "merchandise" in the judgment is interesting, as it suggests that the virtual items in question are actual property. The lawsuit was based on trade-mark and copyright infringement, and the judgment still refers to "unauthorized copying", but the portrayal of the subject matter as "merchandise" rather than some form of copyrighted software could be an important development in virtual property law.

Coverage at Virtually Blind.
Virtually Blind also has a link to the consent judgment here.

Second Life Currency Open to Theft

A pair of white-hat hackers claim to have found a vulnerability in Second Life (through an issue with QuickTime, which is used to stream videos in SL) that allows them to lift Lindens (SL's in-game currency) from SL residents. This is important because Lindens can be bought and sold for real money, and many (real) people make decent (real) money through SL activities.

The hackers have reported the glitch to Linden Lab, and expect that a simple patch will fix things. Linden Lab has notified SL users, but the fix may depend on Apple changing the QuickTime software rather than Linden Lab fixing SL itself.

Coverage at the San Jose Mercury-News and at Game Politics.

Dutch cops crack down on teen "virtual thief"

The BBC is reporting that a Dutch teenager is in jail facing theft charges after stealing 4,000 Euros worth of virtual furniture from the teen networking site Habbo Hotel.

Habbo Hotel users create virtual hotel rooms which they personalize and decorate. Allegedly, the accused lured other users into providing him with their usernames and passwords, which he used to log into their rooms, steal their furniture, and then re-sell for real currency...

Another Real-World Lawsuit over Virtual Property

Back in July we mentioned a Florida lawsuit by Eros LLC, who sells "virtual adult-themed objects" in Second Life (see previous post). Eros sued someone for selling unauthorized copies of its SL products.

A number of SL merchants, including Eros LLC, have recently filed a similar action in the US Federal Court against Thomas Simon ("Rase Kenzo" in SL) and other unidentified parties for making and selling unauthorized copies of the plaintiffs' virtual products. The lawsuit is for copyright and trade-mark infringement.

Again, the mainstream media seems a bit perplexed by it all. "How can they sue over virtual property that doesn't actually exist?" is a common refrain. But IP is all about protecting intangible rights, and the fact that the SL lawsuits are couched in understandable IP terms means that the lawsuits aren't as crazy as some might think. Really this lawsuit is just an IP infringement lawsuit -- it's the setting that's unusual, not the legal principles involved.

The more interesting issue, and the one that hasn't really been addressed or resolved, is how do non-IP laws apply to virtual property? For example, do traditional causes of action like conversion or trespass to chattels apply to virtual property? Should they? If so, how? It's questions like these that drive video game lawyers.

Coverage at PC World, at Game Politics, and at the New York Post.
Lawsuit here.

Davis LLP opens Second Life office

Davis LLP is excited have opened its office in Second Life. The office was started by the firm's Video Game Law & Interactive Entertainment Group and currently focuses on intellectual property, technology and video game law. The Davis lawyers present in Second Life are represented by avatars, and the virtual office features a lobby, a library with topical legal information, a recruiting centre, and a secure boardroom.

Davis LLP lawyers that are currently residents on Second Life currently include Dani Lemon (avatar: Lemon Darcy), Sarah Dale-Harris (BarristerSolicitor Underwood), Pablo Guzman (PabloGuzman Little), Chris Bennett (IPand Teichmann), David Spratley (DaveS Blackadder), and Chris Metcalfe (IP Maximus).

"The virtual world of Second Life gives us the opportunity to interact with our current and potential clients in a unique way," stated Dani Lemon at Davis LLP. "We also aim to generate business leads and attract job candidates for our bricks-and mortar business through Second Life."

Davis LLP is a leading full-service law firm with more than 220 legal advisors and patent and trade-mark agents across Canada and in Japan. Davis LLP has Canada's first Video Games & Interactive Entertainment Law Group and the world's first Video Game Law blog, http://www.videogamelawblog.com, which has large and loyal international following.

For more information on Davis's presence in Second Life, please contact Dani Lemon in Vancouver at 604.643.6457, Sarah Dale-Harris in Toronto at 416.365.3510 or Pablo Guzman in Montreal at 514.392.8406, and visit http://slurl.com/secondlife/Zurich%20City/99/240/27

Linden Introduces Out-of-Court Settlement Procedure to Second Life to Head Off Resident Lawsuits

In the wake of several virtual property-related disputes in Second Life, Linden Lab has beefed up its Terms of Service to include an out-of-court settlement procedure in the hopes of reducing dispute resolution costs to both Linden and Residents. The new Terms of Service, which were announced September 18 and which all Residents will be required to agree to before their next log-in, provide that a Resident who has a dispute with Linden who is claiming less than USD$10,000 may opt for "binding, non-appearance based arbitration." In selecting this option, a Resident will have to indicate their choice of an Alternate Dispute Resolution provider (a list of accredited arbitration centres, such as the American Arbitration Assocation and the National Arbitration Forum, are provided, although a Resident may make any "reasonable" request with respect to their arbitrator), and must indicate whether they'd like to appear at the arbitration by telephone, online, or through written submissions. Once both parties agree to appear before the arbitrator, both Linden and the Resident will be bound by the arbitrator's decision.

Linden Lab is hoping this process will provide a "cost-effective" dispute resolution process for Second Life. Those Residents with a bone to pick with Linden who are not so hot on the arbitration mechanism (and cash for legal costs to spare) may still sue in a San Francisco court.

Source: Official Linden Blog

Chinese Editorial Condemns Virtual Property Trading

A recent editorial in the Shanghai Daily News calls for the Chinese government to ban trading in virtual property, mostly because that trade is fuelled by "an underground network of theft" and the gold-farming trade, where workers toil for long hours at low wages to collect virtual property and to level up characters.

The article suggests that video game players who "waste too much time" playing games become "losers" in school, and then often become online "criminals" because they have no other marketable skills.

Despite the over-the-top rhetoric (here's the best sample: "Numb and dull in real life ... who could make better slaves for this postmodern industry, whose motto is to turn persons into batteries for the matrix"), the editorial does identify the negative sides of the virtual property trade.

Coverage at GameSpot; editorial at Shanghai Daily News

Lawsuit over Second Life Furniture

Eros LLC, a US company whose business is selling "virtual adult-themed objects" in Second Life, has started a copyright infringement lawsuit relating to its products. According to the lawsuit (filed on Tuesday in Florida), Eros's products have developed a good reputation in Second Life, and one product (the "SexGen bed") is particularly popular. However, even though this virtual item is sold on a "no copy" basis -- i.e., Second Life users can buy and sell the items, but cannot copy them -- unauthorized copies are being made and sold on Second Life.

The defendant in the action is identified by his or her Second Life persona, "Volkov Catteneo". Eros does not know the defendant's true identity, and has stated that it will subpoena Linden Labs (which operates Second Life) and PayPal for Catteneo's identity, chat histories and financial records relating to the sale of unauthorized copies of Eros items.

This lawsuit demonstrates how existing laws can apply effectively to virtual property, or perhaps how virtual property can be considered just another form of digital content. Bringing copyright lawsuits against anonymous on-line personas for unauthorized digital copying is common in the music industry; the Eros lawsuit is a similar undertaking. And the lawsuit is based on well-known causes of action -- copyright infringement, trade-mark infringement, misrepresentation, etc. In other words, even though the context is one of virtual property in a virtual world, existing real-world laws seem well-suited for seeking a remedy.

Coverage at Reuters; copy of the lawsuit here.

Gold Farming: A day in the life

Gold farmers generally have a bad reputation in the world of on-line games. However, Julian Dibbell (the author of "Play Money: Or How I Quit My Day Job and Made Millions Trading Virtual Loot") has written an interesting and insightful article for the New York Times titled "The Life of the Chinese Gold Farmer", which takes a look at gold farming from the perspective of those who spend 12-hour shifts playing WoW to earn miniscule amounts of money. Regardless of where you stand on the issue, the article should be an eye-opener.

The article was published on the New York Times site on June 17, 2007. Registration is required to view the NY Times site.

CONTRACTS IN THE MMO WORLD

We recently co-authored an article on MMO contracts with German lawyer Andreas Lober. The article was published in the CBA National Magazine's Addendum. For your reading pleasure, here's the link: http://tinyurl.com/2yxrsz

FBI To Investigate Online Gambling

At the invitation of Linden Labs, creators of Second Life, the FBI has commenced an inquiry into whether virtual currency which can be bought with real money contradicts a U.S. statue introduced last year banning online casinos.

Coverage at: http://bloggeykong.blogspot.com/2007/04/fbi-to-investigate-second-life-gambling.html (Bloggey Kong)

CHINA MOVES AGAINST VIRTUAL MONEY

The Chinese government is cracking down on the use of virtual money from online games to buy real-world products. According to a government notice, there must be a “strict differentiation between virtual exchanges and online commerce in material products” -- virtual currency can only be used to purchase virtual products and services, and users are forbidden from exchanging virtual money for real money for a profit.

The notice goes on to say that the People's Bank of China will "strengthen management of the virtual currencies used in online games and will stay on the lookout for any assault by such virtual currencies on the real economic and financial order.”

Analysts are pointing at the Hong Kong-based online game provider Tencent, which issues virtual "QQ Coins" through its games, as one of the driving forces behind the new policy. Tencent's games are enormously popular in China, and QQ Coins have been accepted as payment by other businesses and have been exchanged for legal tender.

We wonder whether the Canadian government will soon follow suit and crack down on the use of Canadian Tire Money, which we've always thought might constitute an assault on Canada's real economic order.

Coverage at: http://shorl.com/brusihokibetre (GameSpot)
and at: http://shorl.com/preganokebrobro (Financial Times)

EBAY BANS (SOME) VIRTUAL PROPERTY

Online auction giant eBay has banned the trading of in-game property (e.g., characters, items, weapons, player accounts, etc.) from on-line games such as "World of Warcraft". eBay says that it has begun enforcing its rules against virtual property trading in order to protect its users and to provide them with a good eBay experience.

Other commentators suggest additional motives for eBay's decision. Some suggest that eBay is trying to avoid a 2-front battle against game companies and government regulators, both of whom have an increasing interest in virtual property trading. Others suggest that because there's a larger risk of fraud in virtual property transactions, eBay is eliminating the time and expense of dealing with fraudulent transactions.

Interestingly, eBay has specifically exempted trading in "Second Life" property. eBay says that it's not clear whether "Second Life" is a game. Further, "Second Life" involves a thriving functioning economy that depends on the trade of virtual property -- both in the game and in external forums like eBay.

Coverage at: http://tinyurl.com/2zmhqr (News.com)

SOUTH KOREA VIRTUAL PROPERTY LOBBY

Some time ago the South Korean government introduced a bill that would prohibit the real-world purchase and sale of MMO currency (although it would not affect transactions involving other in-game items, apparently). Now South Korean gold farmers have created a trade lobby organization (with the catchy title Digital Asset Distribution Promotion Association) to represent their interests. Given that South Korea's in-game item exchange market is estimated to be worth about US $1 billion, the new organization will undoubtedly have some political clout.

Coverage here: http://tinyurl.com/2cknsr and http://tinyurl.com/2tjj47 (GamePolitics)

SECOND LIFE GOES OPEN SOURCE

Second Life publisher Linden Lab has released virtual world's viewer as open source software, and intends to do the same with the server software that runs the virtual world itself. Linden Lab released the viewer software under the open source General Public Licence (GPL), which allows anyone to view, change and distribute source code, but requires anyone who distributes modified software to make the changes available as well. Linden Lab will require programmers to sign a contributor agreement which gives Linden Lab joint ownership of the software; Linden Lab will also maintain control of an official version of the viewer software.

This is a big step in the games industry, as most large game companies prefer to keep their code proprietary. However, Linden Lab believes that Second Life lends itself to an open source approach, and also believes that it still has significant income potential even if software is open source.

Coverage from News.com here .

Linden Lab press release here .

COPYING POSES THREAT FOR VIRTUAL ECONOMY?

Second Life is a popular virtual world with a thriving economy. Players design, create and sell of in-game items, including clothes, furniture, cars, etc. The items are bought and sold for in-game money, which can be exchanged for real-world money. Each player owns the rights in the content that he or she creates, and many players make modest (or not so modest) real-world profits from their Second Life businesses.

Therefore the creation and dissemination of a software program which can replicate any in-game object, including items created and sold by other players, is causing concern for Second Life's economy. The story sounds familiar to anyone following the digital copying controversy in the music and movie industries "? content owners are concerned that their content can easily be reproduced and distributed without any remuneration or acknowledgement. The same concerns apply in Second Life why should a player purchase a designer (virtual) suit in the game if that player can obtain and use a copy of it for free?

Second Life publisher Linden Lab has presented some solutions to the use of the copying software. First, it advises content creators to rely on the real-world Digital Millennium Copyright Act to prevent the unauthorized copying of their works. Second, it has stated that using an external application to make unauthorized duplicates within the game violates the terms of service, and those who engage in such copying may have their Second Life accounts closed.

This development should come as no surprise "? on-line games involve nothing but digital data, which is of course relatively easy to copy. But as the Second Life controversy demonstrates, the implications of such copying in the context of on-line games and virtual economies are far-reaching and challenging.

Coverage at http://shorl.com/dinatygrofregra (GameSpot)

More On MMORPG Liability

Backbone Magazine recently published an interesting article by Danny Bradbury regarding legal liability in the online gaming world. If it leaves you craving more, check out the more-detailed article by our own David Spratley.

Backbone article here http://www.shorl.com/dapryprijufugru
Spratley article here   http://www.davis.ca/community/blogs/video_games/files/virtual_property.pdf

THE TAX MAN COMETH!

Ever had the feeling that you pay too much tax? Ever escaped to your favourite MMO to avoid the realities of everyday life? Well, a taxing reality may soon catch up with gaming worlds and their economies at least in the US.

A senior economist for the Joint Economic Committee of the U.S. Congress has been quoted as stating that they are considering whether the sale of in-game goods should be taxed and that they are at 'the preliminary stages of looking at the issue and what kind of public policy questions virtual economies raise -- taxes, barter exchanges, property and wealth"?.

The MMO Second Life is cited in the GameDaily article referenced below as an example of a large in-game economy based on the purchase of virtual items like clothing and vehicles, which generates as much as a half million dollars in sales a day.

Will Canada follow suit? Stay tuned.

coverage at http://shorl.com/gevugrabebofro (GameDaily)

For more on the importance of MMOs' economies and the interest that they have generated IRL (both in business and with the tax authorities) you should read The New York Times article at  http://shorl.com/buvelidomapru (registration required)

PLAYERS LOSE VIRTUAL FORTUNES IN ON-LINE BANK SCAM

Here's another dispatch from the wacky world of virtual property. Various players in the on-line game 'Eve Online"? gave large amounts of in-game currency to another player who operated an in-game on-line bank. The purported banker then made off with all the money, which caused quite a stir in the Eve Online community. However, the game's terms of use and EULA are permissive, and allow all sort of cons, swindles and thefts.

The interesting question is whether in-game activities like the bank con (which are permitted by the game's EULA) should have any real-world consequences. Arguably they shouldn't, seeing as how it's all part of a game and doesn't involve real money. The flip side, of course, is that in-game items and currency (including Eve Online currency) can be bought and sold outside of the game for real-world money. Did the victims of the scam lose something with real-world value? Should they be entitled to seek real-world remedies? If so, from whom? We don't have quick answers for these questions, but this story is another good example of the issues raised by virtual property.

Coverage at  http://shorl.com/fefruminosapy (News.com)

Microsoft Security Engineer Warns "Those Of You Who Are Working On MMOGs, Organized Crime Is Already Looking At You!"

More than a little distress was caused this week when Microsoft security development engineer Dave Weinstein told developers at the Microsoft Gamefest that criminal elements are hacking into MMORPGs, stealing MMORPG account information, and selling it on the black market, effectively kidnapping and killing characters.

Weinstein outlined the following modus operandi taking advantage of chinks in a game's security software, criminals acquire account information and then illegally access accounts. Then, either the account information is sold on the black market or, more commonly, coveted in-game items and currency are stolen and turned into actual cash via online auction sites.

Virtual 'muggings"? also appear to be a problem in some MMOGs, where the aggressor uses software "bots" (thus making himself unbeatable) to beat up and then subsequently rob characters. The stolen virtual possessions were then exchanged for real cash. (see example here ). This, of course, is only possible in games where the victor of a fight can take the items of a fallen character, such is the case with Lineage II.

MMOG and MMORPG players spend at lot of time creating and building up their characters. With monthly subscriptions to games like World of Warcraft (paid) and Guild Wars (free) bringing an unending flow of new adventures, players spend hundreds of hours completing quests, accumulating experience, and acquiring gold and items. "For a lot of the customers out there, there is more store value on their MMOG characters than there is on the credit card with which they pay for the account.", Weinstein said.

Though most MMOG publishers are aware of such problems, Weinstein underscored the fact that real-world authorities are often unresponsive to in-game theft. "The police are really good at understanding 'Someone stole my credit card and ran up a lot of money,'" he said. "It's a lot harder to get them to buy into, 'Someone stole my magic sword.'"

Late last year, Square Enix dealt with a similar issue by banning 800 people from playing Final Fantasy XI, after it was found out that they were auctioning 'stolen"? items.  Another good way for online gaming companies to protect themselves is to ensure their license agreements and online terms of use agreements adequately deal with potential liability issues such as cheating, hacking, viruses and service interruptions.

Coverage at http://shorl.com/gigudatarudru

TABLE OF VIDEO GAME CASE LAW

We're pleased to report that our blog now contains a table of video game law cases.  It's a work in progress (we have a bunch more cases to add) but we're so excited that we just can't wait to share.  So here's the link  http://www.davis.ca/community/blogs/video_games/files/blogtable.htm

Keep checking back for updates.  There's also a link on the homepage of the blog. 

So Much For Virtual Inflation. EA Confiscates 15 Trillion Gold In Ultima Online

The video game publisher has announced that, along with the confiscation of the 15 trillion gold pieces, 180 user accounts have been cancelled for the long-running MMORPG. Electronic Arts claims that the virtual gold in question was obtained 'through the abuse of bugs or exploitation of game mechanics"? and that the cancelled accounts were connected to the accumulation of that 'dirty money"?.

Coverage at http://shorl.com/japuprubomika (Gamasutra)

SQUARE ENIX CRACKS DOWN ON REAL MONEY TRANSACTIONS

Square Enix is taking steps to stop the trading of in-game currency (called "gil") from Final Fantasy XI online multiplayer game for real money (artfully referred to as Real Money Trading, or RMT). The game's user agreements expressly prohibit players from engaging in RMT activities.

According to Square Enix, a detailed investigation identified a group of players who were using 'illicit methods"? to produce large amounts of gil and then selling that in-game currency for real-world money. As a result, Square Enix has terminated 250 user accounts and removed more than 250 billion gil from circulation.

Square Enix announcement at http://shorl.com/dotubrostutuse

Square Enix statement about RMT (December 2004) at http://shorl.com/fusafastosodra

Coverage at http://shorl.com/byrutogijusti (GameSpot)

VIRTUAL PROPERTY - RSS FEED

Our blog has over two dozen categories of video game law material, including advertising law, IP law, privacy law and more. We now have a new category and RSS feed for virtual property in video games. This is a hot topic in the video game law world, and we have lots to say about it. 

To prove it, here's a great overview of the subject written by our Dave Spratley (the guy who insanely believes that an Imperial Star Destroyer could take the USS Enterprise an in a one-on-one fight)  http://www.davis.ca/community/blogs/video_games/files/virtual_property.pdf

He's obviously off his rocker on Star Wars vs. Star Trek issues, but fortunately for him he's a great writer. An abbreviated version of the article was published in the April 21, 2006 issue of The Lawyers Weekly

GAMER SUES SECOND-LIFE PUBLISHER

A gamer has sued Second-Life publisher, Linden Lab, after his online game account was shut down. The gamer claims this resulted in the lost of $3,200 in virtual property. He is now demanding $8,000 in damages.  Linden Labs says it shut down the account after the gamer participated in a suspicious auction where he purchased several plots of land at very low prices. 

This move follows Blizzard's announcement last month that it had banned 5,400 World of Warcraft players and suspended a further 10,700 for participating in activities that violate the game's Terms of Use, including using third-party programs to farm gold and items. 

These cases raise an interesting issue for video game lawyers  to what extent can online gaming companies be held liable for damage or destruction caused to online players or their virtual property? The answer to this question will depend (at least in part) on whether the publishers' licence agreements and online terms of use agreements adequately deal with potential liability issues such as cheating, hacking, viruses and service interruptions.
Linden Lab coverage here http://www.shorl.com/filepedropifo (Joystiq)

Virtual Land Dispute Leads To Real World Lawsuit

A subscriber to the popular Second Life video game has filed a lawsuit in Pennsylvania seeking financial damages against the video game's publisher, Linden Research Inc., citing a breach of a virtual land auction contract and also for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law.   

Marc Bragg had invested thousands of real world dollars to purchase virtual land in an online auction, only to find that his account had been terminated without explanation. When his calls to customer service and to Linden's legal counsel went unanswered, he sought relief in the real world courts.

Coverage at http://shorl.com/hegrosigutemy

Topless Wizards More Modding Issues For Video Game Publishers

First there was the revelation that a mod (a downloadable software modification) for Grand Theft Auto San Andreas used hidden code in the video game to allow the gangster protagonist to engage in virtual sex. When that mod came to the attention of the Entertainment Software Rating Board, it imposed an 'adults only"? rating on GTA San Andreas, resulting in the publisher, Take-Two Interactive, having to pull the video game from shelves, edit the game and consequently incur millions of dollars in losses. Adding further insult to injury, Take-Two has been forced to defend itself in various resulting legal actions.

Now, there are reports by the ESRB that a mod for Elder Scrolls IV Oblivion, a highly popular fantasy-themed video game co-published by Take-Two and Bethesda Softworks, accesses an art file in the game to make female characters appear topless. Citing the 'topless"? mod, as well as the fact that the game publishers understated the detail and intensity of the blood and gore in the game, the ESRB has changed its rating on the game from 'teen"? to 'mature"? - i.e. unsuitable for those under 17.  A spokesperson for Take-Two said that he doesn't expect that the ratings change will have a financial impact.

From a legal standpoint, the fact that, in both cases, a third-party downloadable mod appears to have accessed hidden code in the game itself, raises interesting questions about a video game publisher's liability for the effects of that mod.

Coverage at http://shorl.com/defybrojemedu

 

CHINESE COURT UPHOLDS CONVICTION FOR STEALING VIRTUAL PROPERTY

Last year a Chinese court convicted a man for selling passwords and in-game property which he had stolen from players of the online game "Da Xihua Xiyou". Another court has just upheld the initial decision, stating that the robbed players had spent time, energy and money acquiring and adding value to their virtual property. The accused had sold the stolen (virtual) goods for about $500; he was fined about $620 for his illegal activities.

Coverage at http://shorl.com/henumuhyropri (ZDNet)

Don't Ask, Don't Tell - Sexuality And The World Of Warcraft

virtual gamer Sara Andrews has been instructed by Blizzard Entertainment, the publisher of the popular World of Warcraft online role-playing game, to stop her in-game recruitment activities for her WoW guild. If she continues, Blizzard has threatened to ban her from the game. the problem? in her recruitment messages, Andrews wrote that her guild was not ''glbt only', but we are "?glbt friendly'."? 

Blizzard claims Andrews' recruiting was a violation of WoW's harassment policy, though its unclear how this could be so since Andrews doesn't appear to be harassing gays, lesbians, bisexual or transgender players but, rather, making it clear that her guild welcomes such players. on this point, Blizzard has said that it is reviewing its harassment policy and that the policy will likely be broadened to include 'any language that could result in situations where players are going to break down into harassing debate"?. does this then mean that Blizzard accepts that Andrews' in-game recruitment activities don't violate the present harassment policy?though Blizzard insists that it is only trying to enforce a policy to protect WoW members from being harassed, its approach has been criticized as attempting to deal with potential harassment of gays, lesbians, bisexuals and transgender players by forcing such players to keep quiet about their sexuality.coverage at http://tinyurl.com/cxywe

WHAT HAPPENS IF YOU KILL AN MMO GAME?

EA Japan has decided to stop supporting Star Wars Galaxies in Japan. Gamers in Japan can apparently transfer their accounts to other servers; however, the shut-down still raises an interesting question what would happen if a game company were to completely kill an MMO game?

Game companies need to plan for this possibility before launching an MMO game. The concern is that gamers spend money on the games--expecting to be able to play them online. This expectation might be factored into the purchase price of the game. 

In addition, gamers spend money each month to gain access to the online portion of the game. They also spend countless hours building up virtual property in the game (which has a real world value and can be sold on online auction sites).

The loss of the MMO portion of the game could therefore result in the loss of gamers' time and money. And this could result in a damages claim against a gaming company.

That's why it's important for gaming companies to deal with this possibility in advance. End User Licence Agreements and Online Terms of Use should address MMO termination. It would also be a good idea to discuss this possibility in the user documentation for the game. 

Star Wars Coverage at  http://www.shorl.com/gygrestitejose

W.O.W. VIRUS AND MMO LIABILITY

Earlier this month, Blizzard added a new dungeon (Zul'Gurub) to World of Warcraft. Dwelling in the dungeon is a monster called Hakkar, who has the ability to infect players with a virus called 'corrupted blood"?. 

It appears that Blizzard intended to limit the infection to characters near Hakkar's corpse; however, the infection has spread to other parts of the game (through a virtual pet!) and has affected hundreds of players. 

Blizzard is attempting to resolve the problem, but this raises an interesting issue for video game lawyers to what extent can online gaming companies be held liable for damage or destruction caused to online players or their virtual property? 

The Blizzard case is probably not a big deal (players are resurrected in Warcraft), but there have been other cases where the potential for liability seemed much higher, such as when there's cheating or theft involved. 

Earlier this year, Square Enix dealt with these issues by banning 800 people from playing Final Fantasy XI. Another good way for online gaming companies to protect themselves is to ensure their licence agreements and online terms of use agreements adequately deal with potential liability issues such as cheating, hacking, viruses and service interruptions.

Coverage at http://www.shorl.com/bidobresiprofry

MAN ARRESTED FOR VIRTUAL MUGGINGS

We're all aware that people sometimes get mugged for their flashy possessions "? an iPod, say, or an expensive pair of shoes. This sad trend has now made its way into the virtual world. A Japanese man suspected of conducting on-line muggings in the game Lineage II has been arrested. The man allegedly used software bots to attack and rob characters in the game, then sold the virtual possessions for real cash through an auction website.

Coverage at http://shorl.com/banudryledryve

REAL-LIFE KILLING OVER VIRTUAL SWORD

A disturbing episode in China highlights how seriously some people take on-line games. Qiu Chengwei spent hours playing Legend of Mir III and eventually obtained one of the game's most powerful weapons, the dragon sabre. Qiu then lent the virtual sabre to Zhu Caoyuan, who proceeded to sell it for real money. Chinese police did nothing when Qiu complained, taking the position that the virtual sword was not property that could be stolen. Qiu eventually attacked and killed Zhu. He has been sentenced to death for murder, although the Chinese court has suspended that sentence for two years and the sentence may eventually be reduced to prison time.

This episode raises many questions, including the treatment of virtual "property" and the social consequences of excessive on-line gaming.

Coverage at http://shorl.com/fefustustidremu

And at http://shorl.com/babuhufryfrake

AND WATCH OUT FOR THOSE ANCIENT GREEKS!

There's more to watch out for online than upset ex-girlfriends. A new Trojan horse called "LegMir-Y" is also out to steal usernames and passwords for Lineage. And as it turns out, real-world crime is not new to the Lineage arena online gamers have been hacking into other users' accounts, stealing other users' online identities and fraudulently selling virtual weaponry for years.     

Coverage at http://shorl.com/jabralofrofije And at http://shorl.com/byfrylevobrifri