Addressing legal issues with the latest technological developments and social media trends.
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As further evidence that Virtual worlds technology is useful to all types of entities, including the Federal Government, the USDA recently announced an award of a virtual world contract to four companies: Advanced Software Systems, INC; Avaya Government Solutions INC; Science Application International; and Three Wire Systems LLC.

The solicitation states that the purpose of the contract is to: “obtain a broad range of high-quality virtual world software products …. to foster enhanced participation from commercial and non-government entities to assist the agency in the development of virtual world solutions.” Sounds like this is just the beginning of what could be a multistage evolution and helps explain the four winners.

On a personal note, we would like to congratulate all the winners, but in particular, Three Wire which is a Pillsbury client. This contract award is another bit of good news for Three Wire which also recently won the U.S. Army Simulation & Training Technology Center’s Federal Virtual Worlds Challenge for best collaboration in a virtual world by a government contractor. The award was presented at the Defense GameTech Users’ Conference in Orlando in March for Three Wire’s VetAdvisor Virtual Room (VVR).

The overview of the project is pretty interesting. It states:

One or more software platform(s) is required that enables the Government to build, customize and host one or more interactive persistent virtual world(s) (VW) where users can operate over networks for the purposes of collaboration, training, rehearsal, analysis, simulation, experimentation, and socialization.

The required features are desired to be similar or better to what is available in public virtual world environments like Second Life, There.com, or World of Warcraft. The Government requires that it be able to build and host a highly reliable and available private world that unlike the public environments is able to operate using firewalled or classified networks and is capable of integrating with legacy and emerging technologies. In addition, the Government must completely control the hosting environment, software licenses, support contracts service levels, content, experiences, and user access.

The Government envisions a fully immersive, persistent 3D experience using avatars as the user interface rather than more traditional 2D web based experiences. The VW infrastructure, core components, and tools must provide a complete platform to support collaboration.

The Government envisions a solution that is extensible where specialized functionality shall be provided through the use of plug-ins developed by other Government programs and/or commercial entities that interface to the VW through open Application Programmer’s Interfaces (API) and non-proprietary data formats that provide access to the internal VW data model.

An open architecture solution is required to provide the level of interoperability and extensibility that will be necessary for the wide variety of use cases anticipated.

Three Wire’s Award Winning Project

Three Wire’s award winning VVR project was done in conjunction with the Department of Veterans Affairs and offers telehealth and virtual health delivery platforms for veteran mental health care. Providing a secure meeting place for veterans and Care Coaches (licensed behavior health professionals) to interact, the VetAdvisor Virtual Room features avatars representing both the veterans and Care Coaches. The avatars and the room can be personalized to the veteran’s hobbies and interests while providing real-time interaction. Virtual white boards and multi-purpose screens are used for presentations or accessing documents and websites. In comparison to relying solely on telephonic communication, the veteran is afforded a more personalized, visual and auditory experience.

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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

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On April 8, 2010, Zynga sued Playerauctions.com for operating a website that provides an unauthorized “Secondary Market” for enabling Zynga game users to post and sell “Virtual Currency” and “Virtual Goods” allegedly in violation of Zynga’s Terms of Service. According to Zynga, its Terms of Service prohibits users from selling “Virtual Currency” or “Virtual Goods” for real-world money or anything of value outside of its games.

A recent version of the Zynga Terms of Service states:

The Service may include a virtual, in-game currency (“Virtual Currency”) including, but not limited to coins, cash, or points, that may be purchased from Zynga for “real world” money if you are a legal adult in your country of residence. The Service may also include virtual, in-game digital items (“Virtual Goods”) that may be purchased from Zynga for “real world” money or for Virtual Currency. Regardless of the terminology used, Virtual Currency and Virtual Goods may never be redeemed for “real world” money, goods or other items of monetary value from Zynga or any other party.

It further states:

Transfers of Virtual Currencies and Virtual Goods are strictly prohibited except where explicitly authorized within the Service. Outside of the game, you may not buy or sell any Virtual Currency or Virtual Goods for “real world” money or otherwise exchange items for value. Any attempt to do so is in violation of these Terms and may result in a lifetime ban from Zynga Service and possible legal action.

Zynga alleges that the Playerauctions.com has committed copyright and trademark infringement (along with false designation of origin, unfair competition and other claims) by displaying and/reproducing images and code from the games and using various Zynga trademarks with authorization.

The Complaint identifies unlawful sales in connection with Zynga’s Poker, Mafia Wars and FarmVille games. A recent review of the Playerauctions.com site showed over 750 Mafia Wars related items alone available for sale ranging in unit price from 25 cents to $900 and 84 entire “accounts” for sale ranging in asking price from $30 to $5,000 with one listed at a whopping $492,000!

Interestingly, Zynga does not specifically allege impropriety with or seek to prevent the outright sale of accounts.

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Florida A&M University (FAMU) recently filed a law suit against the maker of a porn video that depicted multiple individuals engaging in sexual acts in a setting that allegedly represented a dorm room on the FAMU campus. FAMU claims that such association constitutes false or misleading descriptions and misrepresentations under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), federal trademark dilution under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(c), disparagement and injury to business reputation and trademark dilution under Florida Statute § 495.151(2009), and common law trademark infringement under Florida law.

Although this suit does not relate directly to virtual worlds, we are writing about it because this type of fact pattern commonly occurs in virtual worlds where famous brands are used in seedy portions of virtual worlds. Like this case, such uses can be actionable to prevent brand disparagement and tarnishment and other harms.

FAMU claiims that the defendant used FAMU’s trademarks in the registered mark “FAMU”, its tradename, “Rattlers,” and its orange and green color scheme, which was chosen to represent Florida’s major industry (citrus). FAMU alleges that it has produced and sold merchandise bearing the “FAMU” mark since 1953 and the “Rattlers” mark since 1985.

The Complaint alleges that Defendant RK operates the website “daredorm.com,” which depicts individuals engaging in sexually explicit activities in what appears to be dorm rooms at various college campuses throughout the United States and charges a fee to internet consumers who wish to view the videos depicted on its “daredorm.com” website.

The Complaint alleges that on or about March 1, 2010, RK posted a full-length video entitled “BigRattler77” on its “daredorm.com” website depicting no less than eight (8) individuals engaging in multiple acts of sexual intercourse in what is intended to appear to be a FAMU dorm room, that the video contains several visual depictions of and oral references to the FAMU and “Rattlers” marks and depicts the orange and green color scheme in connection with the “FAMU” and “Rattlers” marks. The Complaint further alleges that the caption for the “BigRattler77″ video states that it was filmed ‘at a historically black college in Florida” and that the individuals were FAMU students and contains derogatory and highly offensive racial innuendo and visual depictions of gang signs purportedly associated with FAMU.

FAMU complains that “BigRattler77” is a transparent attempt to trade on the good name and identity of Florida Agricultural and Mechanical University and its marks by wrongly insinuating that its students routinely engage in the debasing and degrading behavior depicted therein, that it is likely to deceive, confuse and mislead prospective purchasers and viewers of the video into believing that the video was produced, authorized or is in some manner associated with FAMU.

FAMU seeks a preliminary and permanent injunction to prevent such use.

The caption of the case is Florida Agricultural & Mechanical University Board of Trustees v. RK Netmedia Inc. et al., No. 10-0100, complaint filed (N.D. Fla., Tallahassee Div. Mar. 16, 2010).

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On April 28, 2010, a social game developer Crowdstar sued Wonderhill for copyright infringement based on similarities between Wonderhill’s “Aquarium Life” and Crowdstar’s “Happy Aquarium”. While copyright does not protect ideas (such as the idea for a fish-based game) it does protect expression of the idea. If this case should make it to court, it will provide an interesting test case for game developers that have developed social games that have been “cloned,” which tends to be quite common in the space.

Happy Aquarium is generally acknowledged as one of the first, if not the original, fish care-based social games. Happy Aquarium and Aquarium Life are not the only aquarium games. But in its complaint, Crowdstar alleges an especially high level of correspondence in the user interface, game play and other features between Happy Aquarium and Aquarium Life as being the impetus for the suit.

Starting with a relatively obscure game from 1 year old Wonderhill may increase the potential for a quick settlement. But is this a one off lawsuit or is Crowdstar chasing a minnow while it waits for a bigger fish to fry? Check back and we will keep you updated.

One interesting aspect of the complaint relates to the relief sought – or more accurately what is not sought. In the U.S., statutory damages of up to $150,000 per infringement, the potential for recovery of legal costs and attorneys’ fees, and certain legal presumptions regarding ownership and validity are available to a copyright holder for works that were timely registered with the Copyright Office. These benefits are typically available for works that were registered prior to infringement or within three months of first publication. It is notable that the Crowdstar copyright registration at issue was only recently registered (registration no. TX 7-117-794, registered March 25, 2010), while Happy Aquarium itself was published in September, 2009. Perhaps as a result of this, the relief sought by Crowdstar does not include statutory damages or recovery of legal costs and attorneys’ fees.

But, regardless of the result here, there can be no doubt that a game developer’s leverage over a clone can be increased significantly with a timely copyright registration For more on this topic see our advisory on the benefits of timely filing copyright registrations.

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Three Wire Systems, LLC recently announced its VetAdvisor Virtual Room (VVR) won the U.S. Army Simulation & Training Technology Center’s Federal Virtual Worlds Challenge for best collaboration in a virtual world by a government contractor. The award was presented on the final day of the Defense GameTech Users’ Conference in Orlando on March 31.

Three Wire’s VetAdvisor Virtual Room is an expansion of the successful VetAdvisor Support Program with the U.S. Department of Veteran Affairs, which offers telehealth and virtual health delivery platforms for veteran mental health care. The program is designed to provide support when and where the veteran chooses, thus supporting the Veteran Centered Medical Home Care Model.

Providing a secure meeting place for veterans and Care Coaches (licensed behavior health professionals) to interact, the VetAdvisor Virtual Room features avatars representing both the veterans and Care Coaches.

This tool is just one of a growing list of virtual world technologies used by government agencies.

Pillsbury’s Virtual Worlds team is proud to assist Three Wire on this and other projects.

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Pillsbury is proud to announce a writing competition on legal issues relating to virtual worlds. Participants can elect to write a paper on a topic within one of the categories listed in the document attached. The papers must be submitted by June 30, 2010 and will be judged by members of Pillsbury’s Virtual Worlds team. Judges will select a best paper in each of the five categories, including a best overall paper. The best overall paper will be awarded $2000. The best paper in each of the other categories will be awarded $500. Winning and other notable papers will be recognized right here on our Virtual World Law blog.

Please see additional details and rules and regulations here: Virtual Worlds Writing Competition.pdf.

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Worlds.com has reportedly settled its patent infringement lawsuit with NCsoft. The terms remain confidential and as of this morning neither company has a press release on its website. Worlds.com filed the suit on Christmas eve in 2008 after rattling its patent saber months earlier. To some, it is surprising the case lasted this long, due to the extensive amount of prior art that surfaced after the suit was announced.

In March 2009, Worlds.com CEO Tom Kidrin also boldly proclaimed that if the litigation was successful it would also sue other industry leaders. If Kidrin remains true to his word, we will likely know soon if they deemed the litigation successful.

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In what will be the first such case heard by the Supreme Court, the highest court in the land will address in its October term whether a California state law that bans the sale and rental of violent video games to minors runs afoul of the First Amendment right to free speech and the Fourteenth Amendment protections. A petition for certiorari was filed by the State of California after the Ninth Circuit Court of Appeals nixed the law as being unconstitutional.

At issue are California Civil Code Sections 1746-1746.5, which if enacted, would have imposed restrictions and labeling requirements on the sale of “violent” video games to kids under 18. According to the statute “Violent video game” means a video game in which the range of options available to a player includes killing, maiming, dismembering, or sexually assaulting an image of a human being (subject to certain limitations). On December 21, 2005, Judge Ronald Whyte ruled the law unconstitutional, preventing it from going into effect, as scheduled, on January 1, 2006. On appeal, the Ninth Circuit also declared the law unconstitutional.

The case is Schwarzenegger v. Video Software Dealers Association (08-1448).

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In what turned out to be an April Fool’s prank, Gamestation modified its Terms of Service to include a provision that required users to sell their soul to Gamestation before they could make any online purchase. Pretty amazing prank! What’s more amazing is that nearly 90% of the users agreed! One can only speculate as to whether these user’s didn’t care about their souls or didn’t read the Terms of Service. But it is likely a safe bet that many didn’t bother to read the terms.

Gamestation of course announced the prank and stated that it does not intend to enforce the so called “immortal soul” provision. So these users got off easy. But such may not be the case if there was a real dispute. As Blizzard demonstrated when it successfully sued MDY (for use of a bot that helped users level up in World of Warcraft without actually playing, the Terms of Service can be outcome determinative in the event of a real legal dispute.

All pranks aside, it is critical for Virtual World and Online game companies to protect themselves and users through effective Terms of Service. It is also important for users, and businesses operating in these online spaces to understand the terms.