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In March 2005, Chinese newspapers reported that Qiu Chengwei, a 41-year-old player of the online game “Legend of Mir III,” called the police to report that a friend to whom he had loaned his Dragon Sabre (a video game generated, enchanted virtual sword) had sold the virtual sword to another gamer for real money. When the police refused to act on the complaint because “virtual property doesn’t count,” Qiu killed his friend. The incident highlights a growing debate over the “virtual property” that gamers can accumulate in online video games, and how this new form of property should be dealt with by legal systems. This article will discuss some of the novel legal issues that are raised by this unique species of property, and how those issues are beginning to be dealt with by major gaming companies such as Electronic Arts and Mythic Entertainment. ONLINE VIDEO GAMES The world of video games once was comprised primarily of free-standing video machines featuring PacMan and Space Invaders, and television-based (or “console”) games produced by Atari and Nintendo, that provided limited opportunities for interactive play between gamers. Gaming was transformed dramatically by the introduction of “massive multiplayer online role-playing games” (MMORPGs). These Internet-based video games allow hundreds or even thousands of players to interact simultaneously in multimedia, online virtual environments. Gamers are typically able to create an online “avatar,” a human-like character with a unique, game-related appearance and attributes that can be saved and used over a period of time. WHAT IS VIRTUAL PROPERTY? Generally speaking, virtual property is defined as an asset collected within an MMORPG, such as money, weaponry, clothing, land, or other goods that have “value” inside the particular game’s virtual world. Each of these items is used, traded or sold within the virtual world to increase the status and power of the gamer’s avatars. The nature of these assets and the manner in which they are acquired vary with the type of online game being played. For example, in the fantasy-based virtual world “Ultima Online,” [FOOTNOTE 1] power and status are achieved by slaying monsters, which either drop valuable tools or relinquish experience points to the player’s avatar. Conversely, in the real-world simulation game “There,” characters purchase homes, cars and other everyday items with the use of “Therebucks,” the game’s currency. Some game developers view ownership of virtual property as rights arising from the underlying computer code or data that produces the desired output which is seen as an object on the video screen when the game is played. Therefore, according to this formalist view, the display of a picture (e.g., a magical sword) without the underlying software-based attributes has no real value worthy of protection. Unlike the game developers’ broad view, many players see virtual property in terms of functionality, both in the virtual world and in the real world. In the virtual world, each item has a purpose and function within the video game and can be traded for another item to be used for a different purpose. Players spend time and money (both real and virtual) acquiring assets. Most expect that these assets will be protected within the game environment against theft or destruction. Moreover, players have established real world trading blocks through Web sites and online auctions such as eBay, as well as virtual world trading blocks at various locations within the game where items may be traded and delivered to the player’s avatar inside the virtual world. THE MARKET FOR VIRTUAL GOODS There are benefits to possession of the virtual goods by the gamers’ avatars. A rare tool or object in the virtual world generates status and revenue within the virtual community. The demand for legal protection arises from the fact that these virtual goods are now routinely bought and sold among gamers for cash. Although many game companies, such as Mythic Entertainment, expressly prohibit real-world trading and selling of virtual assets, the use of online auction sites has generated a lucrative business for these goods. Gamers and entrepreneurs alike have established a marketplace for selling their goods in the real world and delivering them in the virtual world. The value of virtual property is reflected in the fact that some individuals have hired employees for the sole purpose of playing to acquire game assets for later sale. Most infamously, a virtual island in the game Project Entropia sold for $26,500. In some instances, these professional gamers have even parlayed the sale of virtual goods into six-figure incomes. [FOOTNOTE 2] Game companies and economists estimate that in recent years over $100 million per year has been spent on virtual goods. [FOOTNOTE 3] Not all game producers are opposed to the trading of virtual assets for real world cash. In fact, some game companies have chosen to attach a real world monetary value to virtual items and sell them. For example, advanced characters for Ultima Online can be purchased by players through the Electronic Arts official Web site for the game, but the company’s end user license agreement does not encourage the sale and purchase of virtual property through external or online auction sites. [FOOTNOTE 4] Further, another major corporation has recently decided to act as a broker of virtual goods for its popular online game. Moreover, marketing departments of real world companies are aware of the substantial market for virtual goods. McDonald’s and Levi Strauss have placed their products inside of these virtual worlds for characters to showcase. The English band Steadman even performed a “live” concert in the virtual world “There.” REGULATING THE INTANGIBLE The concepts upon which video games are built require the regulation of intangible intellectual property rights (e.g. copyrights in the visual components and trademarks in the game characters of video games). Although property rights are generally thought of in terms of tangible items with physical characteristics, regulating intangibles is not an unfamiliar concept. In fact, the law deems the owners of certain types of intellectual property, i.e., patents or copyrights, to hold exclusive ownership rights for only a limited period of time. Owners of intangible rights are able to, among other things, sell, license, or transfer their property, but in some situations are required to allow public use at the conclusion of the term. For example, a patent holder for a new video game controller, would have no right to stop somebody from making or using similar controllers at the expiration of the patent term. Some have suggested that the same should occur for virtual property, though for shorter periods than traditional intellectual property. [FOOTNOTE 5] As subscriptions to many virtual worlds are time-limited and contingent upon payment, the case may be made that virtual property rights should be given to players for similar restricted periods. Within the virtual world context, the contention is that the player cannot claim property interests in the entire world, but might legitimately claim interests in each small entity of the virtual world where her labor composes the greatest part of the value of that entity. [FOOTNOTE 6] Therefore, some may reason that an extension of time-limited property rights for these items may not only enhance the individual’s play for the current time but also enhance the overall virtual world upon the item’s public release at the end of the term. However, those opposed to the extension of legal rights to virtual property owners express concern over possible liabilities. Gaming companies worry that they could be held liable for economic losses suffered by players when the company chooses to discontinue the game. Moreover, companies fear that if players are given legal interest in virtual property, their profits will be depleted by an influx of demands for restoration of property or compensation for permanent losses. In addition, extending property rights to virtual items creates additional incentives for system hacking and game manipulations. When hackers or pirates enter the virtual world to sell property in the real world, they often prevent dedicated players from being able to acquire or keep these assets through play alone. These acts potentially could make the virtual economy unstable and wipe out virtual fortunes, which might leave the game companies responsible for compensating their players. Individual players of MMORPGs often feel that the time and money spent to acquire virtual property is substantial enough to warrant legal protection for these items. Some gamers maintain that playing the games comprising these virtual worlds can involve at least as much effort as real world work, with some gamers spending a substantial amount of real world money to improve their avatars in the virtual world. These gamers believe that the real world markets for virtual items shows that these goods possess value and deserve protection under the law, particularly in cases of virtual theft. FOREIGN LEGAL DEVELOPMENTS Though virtual property presents a set of novel legal issues, a number of countries have responded by enacting legislation. In late December 2003, a group of 19 lawyers in China submitted a proposal to the Law Committee of the National People’s Congress seeking a law to protect virtual property. [FOOTNOTE 7] These lawyers suggest that virtual property legislation is essential to protect the development of the online video game industry. In December 2003, the Chaoyang District People’s Court in Beijing ruled that the game company Arctic Ice Technology Development Co. Ltd. (AITD) should restore to gamer Li Hongchen a virtual arsenal stolen from him when the game Red Moon was hacked. Li claimed that he had accumulated these weapons after spending tens of thousands of Yuan and playing for thousands of hours, and the company failed to protect his property. The court agreed and determined that AITD should restore the weapons at a cost of 1,140 Yuan (about US $138) and pay most of Li’s court costs. [FOOTNOTE 8] Although China seemingly is leading the way in litigation and decisions involving virtual property, the concept is not new to other countries. Legislatures in the Republic of Korea (ROK) and Taiwan have also addressed the issue. Both countries have enacted laws that make infringement upon virtual property a crime. [FOOTNOTE 9] The ROK law instructs that online virtual property holds value independent of the game’s parent company/creator. The lawmakers reached the conclusion that there is no fundamental difference between virtual property and money deposited in the bank. Alternatively, Taiwan decided that virtual property qualifies as electromagnetic records and should be considered movable property in cases of fraud and theft. Under Taiwanese law, the looting of virtual property can carry a maximum sentence of up to three years imprisonment. THE DEBATE CONTINUES As of July 2005, it appears that there was only one documented case in the United States regarding rights in virtual property. In 2002, BlackSnow Interactive, the founders of a specialty barter and auction site, CamelotExchange, sued Mythic Entertainment, the creator of the virtual world game Dark Age of Camelot, for unfair business practices. BlackSnow employed workers who played the video game around the clock to acquire virtual items to be later sold on its Web site. Taking a different position than Electronic Arts against the sale of virtual goods on online auction sites, Mythic Entertainment initiated the shutdown of several BlackSnow auctions. BlackSnow then filed suit in the U.S. Court for the Central District of California, claiming that the actions constituted an interference with “prospective economic advantage” and unfair business practice. [FOOTNOTE 10] Although the case was ultimately dismissed before trial, it is likely that virtual property claims will resurface in the near future. As the idea of granting online gamers property rights over virtual property progresses, additional legal issues will likely surface. Courts may be faced with jurisdictional questions never before posed. For instance, gamers from across the globe engage simultaneously in virtual worlds. Should there be a theft within this virtual world, the legal systems of at least two nations (e.g. the home countries of the victim and the thief) might then grapple with conflict of law issues. The court will have to decide if there is agreement as to the jurisdiction for virtual world infractions or whether each citizen should assume that the laws governing their home country apply. Virtual claims also raise intellectual property issues. Game developers have a continuing interest in preserving the copyrights and trademarks in their games. An exercise of law respecting property interests in virtual property must consider whether ownership in an item acquired within the game violates the rights of the game’s copyright. In the end, both the legal and gaming communities must decide how the delicate balance between property rights and play should be achieved. Richard Raysman and Peter Brown are partners at Brown Raysman Millstein Felder & Steiner. They are co-authors of “Computer Law: Drafting and Negotiating Forms and Agreements” (Law Journal Press). Kyana R. McCain, a summer associate at the firm, assisted in the preparation of this article. :::::FOOTNOTES::::: FN1 Ultima Online is a trademark of the Electronic Arts company. FN2 Dibbell, The Unreal Estate Boom, Wired, Issue 11.01 (January 2003). FN3 Alex Pham, Virtual Power Brokers, Los Angeles Times, Column 1 (May 2005). FN4 See Electronic Arts Terms of Service. FN5 Lastowka, F. Gregory and Hunter, Dan, The Laws of the Virtual Worlds FN6 Id. at 63. FN7 Li Jianguo, Virtually Mine, Bejing Review, Vol. 47, No. 12 (March 25, 2004). FN8 See Online Gamer in China Wins Virtual Theft Suit, CNN.com (Dec. 20, 2003). FN9 Zhang Tingting and Daragh Moller, Legislation Proposed to Protect Virtual Property, China Internet Information Center, (Jan. 26, 2004). FN10 David Becker, Game exchange dispute goes to court, Cnet News.com (Feb. 7, 2002).

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