With the popularity of virtual worlds such as Second Life firmly on the rise, legal issues both esoteric and long dormant may be ripe for analysis.

The “In” World

There is a place you can travel to right now, without leaving your desk. With a click of your mouse you can go there and you can live, work and play. You can socialize, meet people and date them. After converting your money to the local currency, you can buy items and property; you can even buy an island! You can rent a storefront, start your own business, invent things, sell things, engage in all manner of commerce. You can pretty much make a life, and a living, in this place.

Also, without too much effort, you can turn yourself into a giant, flying, purple octopus named Flim and recite poetry while dancing on an active volcano. Other folks might even pay to watch.

The place where such powers are enabled is the computer-mediated world of virtual reality (VR).2 A VR is a simulated, three-dimensional world that approximates, to varying degrees, the audiovisual fidelity and physical properties of reality. Users can join a VR and move about therein using a standard personal computer. Each user is represented in a VR (“in-world,” in the parlance) by a fully motional simulacrum called an avatar, a sort of digital marionette under the user’s control. Your avatar can be physically similar to your real-world appearance or more akin to Flim the octopus, as you see fit.

From its inception in the early 1980’s until very recently, VR has achieved measured success as an industrial technology, 3 but has largely failed to gain widespread consumer acceptance, despite the often religious enthusiasm of its proponents. The hype gap has begun to narrow, however, with the recent hyper-popularity of Second Life, a VR system operated by Linden Lab of San Francisco, the technology press’s phenom du jour.

Unprecedented Success

By any account, Second Life is the most successful VR ever created. Some statistics:4 As of this writing, Second Life claims over 3.5 million registered users, with roughly 350,000 active residents.5 At any given moment, anywhere from 12,000 to 25,000 simultaneous, worldwide users are present. A cohort of real-world companies, from the marketing company crayon to W Hotels, have opened inworld stores or offices; IBM personnel take in-world corporate meetings; Wal-Mart and Amex are exploring inworld possibilities for hiring and training. It’s hard to call yourself too terribly hip in corporate America these days unless you’ve held at least one in-world press conference.

This frenzy of attention makes Second Life a fairly reliable record of current events, albeit one seen through the eyes of Second Life residents, who are nothing if not expressive. Two very recent additions, for example: the John Edwards for President ‘08 kiosk and the Virtual Anna Nicole Smith Memorial.

In what may be the ultimate validation that Second Life is a force to be reckoned with, earlier this year the Swedish foreign ministry established diplomatic relations with it. The official, in-world Swedish embassy opened on May 30, 2007.

One important property distinguishes Second Life from its competition: commerce. Linden Lab provides Second Life users with the tools to create just about anything, and with the means for trading their creations with others for money.6 The in-world economy is hot, as online properties go. On average, more than US$1 million changes hands among Second Life’s residents every day, generated largely from the sale of avatars and their clothing, hairdos and accessories, as well as software tools to make avatars do things. 7 Virtual real estate development is also big business; the in-world real estate market has already spawned at least one real-world millionaire.8

A Modern Crucible

As the first VR to obtain widespread popularity, Second Life is destined to become a testing ground for a host of legal issues that have been waiting for prime time for two decades. What follows are some of the more immediately tantalizing issues.9

1. Ownership and Fair Use – Do real world intellectual property legal principles apply to in-world creations?

Linden Lab’s terms of service10 include provisions that grant Second Life users the intellectual property rights to the works they create in-world. This is an unprecedented move. 11 Most cyber properties have traditionally assigned ownership in such materials to the hosting company, not the user. With individual ownership of users’ works comes the right to exploit them, and voila, there’s your US$35 million per month economy.

Linden Labs has, however, implemented its intellectual property ownership regime with more than a few words in a contract. In the wake of a recent dustup over a spate of unauthorized copying of inworld assets,12 Linden Lab modified the software code that runs Second Life to give users a full suite of digital rights management options including the ability to prevent their assets from being copied by others for any reason. It remains to be seen whether this maneuver will withstand scrutiny under a fair use analysis, the US copyright doctrine that makes copying lawful under certain circumstances.13

2. Can real world trademark and trade dress rights be infringed in-world?

Trademark infringement would appear to run rampant in Second Life,14 but are these virtual uses actionable in the real world? The merits of such a suit would necessarily depend on showings of likelihood of confusion or dilution. How realistic does VR have to get before one can claim likelihood of confusion without getting red-faced? On the other hand, with more real-world businesses setting up shop in Second Life every day, a trademark clash would seem to be inevitable. Likewise with trade dress, which by its very nature is an audiovisual experience 15 eminently susceptible to infringement in a VR.

3. Is Linden Labs like a government?

Note the phenomenal power wielded by Linden Lab in its response to the copying problem above. The company modified the code to prohibit an unpopular activity. In the real world, when the US Congress wants to prohibit something, it enacts a law, which, to be completely enforced, must be policed and litigated, always at great expense. Not so in a VR. To prohibit something in a VR, you just modify the code to prevent it from happening, literally. You make unlawfulness physically impossible.

One gets to be a Second Life resident only through the use of software, and that software defines the terms of the relationship between the user and the environment. That software is the law and the law can be enforced by the software itself. The design and operation of that software is totally in the hands of Linden Lab. If Linden Lab were to abuse this kind of power, it could risk being labeled a latter day Big Brother or, worse yet, being adjudicated a quasigovernment similar to a condominium co-op board. With 350,000 active residents, is Second Life a municipality? A nation state?

The perfectly reasonable counterargument is, of course, that Linden Lab’s authority over Second Life residents derives entirely from the plain language of the Second Life terms of service and any dispute as to the company’s power is, therefore, purely a contractual issue. Again, however, all such contractual obligations are susceptible to being “enforced” through Linden Lab’s software code, with no interpretation or construction other than the one Linden Lab may choose. Under the terms of service, Linden Lab has broad contractual rights to modify the system at will, and to eject users for bad behavior. The extent to which these and the remaining terms of service would be construed and enforced by a real-world court in light of particular facts and circumstances remains in question. Will the company be saddled with the obligation to provide residents with some form of due diligence? A current lawsuit brought by an ejected user may test that very issue.16

4. What legal jurisdiction is Second Life in?

This question is similar, in many respects, to the broader matter of legal issues on the Internet-at-large. People from all over the world login to Second Life every day, from every legal jurisdiction. Can any one of those places claim the right to regulate what happens in-world? Moreover, if one user wants to sue another for harm arising from in-world conduct, where do they go to seek redress? Should Second Life establish its own internal courts or other dispute resolution forums? What would be the normative basis for their authority; what law would they apply?17 Can crimes be committed in-world? If so, who determines whether a crime has been committed, and who defines what a crime is in the first place?

Conclusion

It is inevitable that Second Life’s growing popularity will occasion the resolution of these, and many other, interesting legal questions of first impression.