Second Life Gets Action…Class Action That Is

Linden Research Inc. and its CE Philip Rosedale have been named as defendants in a class action lawsuit relating to the ownership status of virtual property in Second Life, the popular virtual world in which users can realize significant gains from buying and selling virtual real estate (land and buildings), virtual clothing, and other virtual goods. In Second Life, transactions are implemented using virtual currency provided by Linden called Linden Dollars. These dollars can be earned and bought and sold, including via the LindeX, the official Second Life Linden Dollar exchange.

A significant issue in this case is the status of ownership of virtual goods and virtual currency and the conditions, if any, upon which a user may be denied access to them for violations of the terms of service agreement.

The class members allege that Linden and Rosedale duped users into spending vast sums of money to acquire virtual real estate and other goods, by representing that they would own all rights in the virtual items that they acquired, alleging that users could make real money and that the virtual items would have real value. The complaint alleges that Linden has modified its statements over time and at some point terminated the class members accounts, taking virtual items and currency (both virtual and real) in their accounts without compensation to the members and denying them access thereto.

The complaint goes beyond just alleging property rights violations. It alleges the members were falsely induced into investing in virtual items by defendants. And it alleges that these actions were part of a “continuing and systematic plan and scheme using the national wires and mail intended to, and in fact causing to, defraud Plaintiffs… out of thousands of dollars…”

Of course, one significant issue here will be the Terms of Service (TOS) to which the complaint acknowledges users must click “I Agree” to use Second Life. The Complaint recognizes the TOS, which Defendants will likely fall back on, but alleges that it is “nothing more than a contract of adhesion” that is not read by consumers and that Linden can change the terms at will, even after a user has invested thousands of dollars.

A recent version of the Second Life TOS includes the following non-exhaustive list of provisions, at least some of which may come into play here:

You agree that Linden Lab has and may exercise the right in its sole discretion to pre-screen, refuse, or delete any Content or services from the Service or disable any user’s access to the Service without notice or liability to you or any other party, including upon our belief that such user’s conduct, Content, services, or use of the Service is potentially illegal, threatening, or otherwise harmful to any user or other person or in violation of our Terms of Service, Community Standards, or other policies.

The Service includes a component of virtual tokens (“Linden dollars” or “L$”), each of which constitutes a limited license permission to use features of our Service as set forth below.

When you acquire a Linden dollar, Linden Lab hereby grants you a limited license (“Linden Dollar License”) to use the Linden dollar as a virtual token to be held, bartered, traded and/or transferred in Second Life with other users (and/or Linden Lab), in exchange for permission to access and use Content, applications, services, and various user-created features, in accordance with these Terms of Service. The Linden Dollar License is transferable by the holder to any other user, provided that both users comply with these Terms of Service, maintain their Accounts in good standing, and are not delinquent on any Account payment requirements.

Linden Lab may revoke the Linden Dollar License at any time without notice, refund or compensation in the event that: (i) the Linden dollar program is suspended or discontinued; (ii) Linden Lab determines that fraud or other illegal conduct is associated with the holder’s Account; (iii) Linden Lab imposes an expiration date on usage of Linden dollars in compliance with applicable laws and regulations; (iv) the holder’s Account is terminated for violation of these Terms of Service; or (v) the holder becomes delinquent on any of that user’s Account payment requirements, ceases to maintain an active Account or terminates this Agreement.

You acknowledge that Linden dollars are not real currency or any type of financial instrument and are not redeemable for any sum of money from Linden Lab at any time. You agree that Linden Lab has the right to manage, regulate, control, and/or modify the license rights underlying such Linden dollars as it sees fit and that Linden Lab will have no liability to you based on its exercise of this right. Linden Lab makes no guarantee as to the nature, quality or value of the features of the Service that will be accessible through the use of Linden dollars, or the availability or supply of Linden dollars.

The complaint makes numerous references to a prior suit by Marc Bragg against Linden, over termination of his account for allegedly using an exploit to acquire land more cheaply in violation of the TOS.

If this case does not settle, it could provide some legal guidance on numerous issues relating to the scope and enforceability of Terms and Service and ownership of virtual goods and property.

A copy of the complaint can be found here Evans v Linden Research.pdf