Bragg v Linden Lab

Following on from my post about MDY v Blizzard, Bragg v Linden is another of the tough questions that will frame my thesis.

Screenshot from showing Linden advertising claim: "Own Virtual Land"

Second Life is a three-dimensional free-form virtual world constructed primarily by its participants. Unlike some other virtual worlds, Second Life is not a 'game' – it has no central narrative or defined goals. Participants have the relative freedom to own land, customise their avatars' appearance, build objects and create clothing, socialise and express themselves as they wish (within limits). Importantly, Second Life is backed by a fully integrated economy – participants can trade goods and services between themselves for virtual currency, and that virtual currency can be easily bought and sold for US dollars. Second Life is free to join, but extracts monthly subscription fees from participants who wish to own their own virtual land.

Because of the way that Second Life is structured, land is highly desirable to participants. Owning land allows participants a place of their own to build objects or buildings and design as they wish. Land also grows in importance as one's participation in Second Life increases, as the total number of objects that a participant can build is limited by the amount of land that she owns. So whilst ownership of land is not necessary to participate in Second Life, in a very real way, land ownership is closely linked to the economy, and land sales and taxes are the predominant income streams for Linden Lab.

The importance of land in Second Life has resulted in a substantial secondary market for land. Some real estate speculators purchase land at low values with the hope of selling it for a profit in the future. Others buy large blocks of land directly from Linden Lab and subdivide them, leasing them to participants who do not own their own land. Still more act as property developers, creating housing or commercial estates that they are able to sell or rent to others. A number of participants have received considerable success buying, selling, and renting virtual land in Second Life – including some self-proclaimed Second Life millionaires.

This convergence between real and virtual economies contributes significantly to Second Life's appeal. But it is also the cause of substantial tension within the community. The 'virtual' economy in Second Life is fluidly convertible to 'real' currencies, like the US dollar, and participants clearly feel a sense of entitlement to their virtual property and currency. Linden Lab clearly encourage this behaviour – their slogan is “Your world. Your imagination.”; their promotional material refers to the possibilities of 'owning' virtual land and generally stresses the fluidity of the market. The Terms of Service for Second Life, however, explicitly deny that participants have any right over the in-world currency and that it is in fact a currency at all. Instead, Linden Dollars are purported to be a 'limited licence right' granted by Linden Lab – and revocable at any time. Similarly, Linden Lab asserts that participants never 'own' 'land' – rather, they merely lease the right to use certain computing resources that generate the virtual environment. This contradiction between the internal norms of Second Life and the literal interpretation of the contract results in significant uncertainty and tension in the community.

The best example of this tension is the case of Bragg v Linden Lab. Marc Bragg was a US attorney who invested in Second Life, purchasing land for resale. Bragg discovered a loophole in Linden Lab's official land auction system that enabled him to purchase land that was not advertised for sale at significantly under market prices. When Linden Lab discovered this, they immediately suspended Bragg's account, preventing him from accessing Second Life and effectively confiscating what he claimed amounted to approximately USD$5000 of his in-world virtual property – not only the land at the centre of the dispute, but also the land that he had previously bought and any objects in his possession. Bragg complained, alleging that he had been wrongfully disconnected and that Linden had unlawfully confiscated his virtual property. Linden responded that it was acting within its power to enforce its rules – having caught Bragg cheating, they suspended his account and terminated his right to access and hold their property.

Bragg filed suit against Linden Lab, alleging that Linden had unlawfully confiscated his property and denied him access to Second Life. Linden responded with a motion to compel arbitration, as per their dispute resolution policies in the Second Life Terms of Service. The US District Court for the Eastern District of Pennsylvania held that the dispute resolution policies were procedurally and substantively unconscionable, and refused to grant the motion to compel arbitration. At this point, Linden Lab settled with Bragg on undisclosed terms. Bragg has now had his Second Life account restored and his virtual property returned.

This case, for the relatively short period in which it was active, generated significant interest both within Second Life and from external commentators. It promised to deliver a judicial opinion on whether participants in Second Life were entitled to own virtual property. As Robreno J held in dismissing Linden's application to compel arbitration,

This case is about virtual property maintained on a virtual world on the Internet. Plaintiff, March Bragg, Esq., claims an ownership interest in such virtual property. Bragg contends that Defendants, the operators of the virtual world, unlawfully confiscated his virtual property and denied him access to their virtual world. Ultimately at issue in this case are the novel questions of what rights and obligations grow out of the relationship between the owner and creator of a virtual world and its resident-customers. While the property and the world where it is found are “virtual,” the dispute is real.

The dismissal of the motion to compel arbitration signaled that the US District Court was prepared to examine the terms of the Second Life terms of service and to rule on the complicated issue of property rights within the virtual world. There was palpable disappointment from commentators when the case settled before such a precedent could be handed down.

Despite the case settling, it still provides a very interesting factual scenario through which we can evaluate potential regulatory regimes. It poses an interesting question, and represents a legitimately hard case: if Linden was right, and Bragg cheated by exploiting a bug in the auction code, are there limits to how Linden can enforce the rules and impose sanctions on Bragg? On the other hand, if Bragg is to be believed and he did not break any rules, are Linden Lab obliged to maintain his access to Second Life and his interests in what he asserts is his property?