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A real-world battle over virtual-property rights

Second Life ‘residents’ pay genuine cash for online real estate. Some are suing its creator, saying it has quietly removed the idea of ownership and confiscated some property without compensation.

April 30, 2010|David Lazarus

Architect David Denton spends much of his time on a lush tropical island, where he experiments with cutting-edge building designs and creates spaces for artists to showcase their work.

Never mind that the island only exists in the virtual-reality world of Second Life, a popular online venue where people interact via digital avatars. Denton, 62, said he purchased the island for about $700 — real money, not virtual cash — from its former owner, and considers it his property.

"I own it," he told me. "I have the exclusive right to develop it. It's mine."

Maybe not. The creator of Second Life, a San Francisco company called Linden Lab, is being sued in federal court by some of the virtual world's "residents," who claim that their property rights have been taken from them.

The lawsuit, which was filed this month in Pittsburgh and seeks class-action status, could have broad ramifications for similar online worlds that offer users open-ended adventures in cyberspace. Its backers see it as a first step toward defining actual rights in virtual places.

"It's a unique case," said Robert Bracken, an attorney at the Pittsburgh law firm representing plaintiffs in the lawsuit. "It shows how the Internet has come to dominate our lives."

The lawsuit alleges that Linden Lab tried to differentiate Second Life from other virtual worlds by repeatedly emphasizing that users would have indefinite ownership of any property purchased online.

"What you have in Second Life is real and it's yours," the suit quotes Linden founder Philip Rosedale as saying. "It doesn't belong to us. We have no claim to it."

The lawsuit alleges that Linden Lab induced up to 50,000 Second Life users to spend as much as $100 million — again, in real money — buying and developing virtual property, and maintaining that property through monthly fees that the company likened to property taxes.

But, it says, Linden quietly changed its contract terms to remove the concept of ownership and has confiscated the property of some users without compensation. The lawsuit seeks more than $5 million in damages for what it says was fraud and violations of California consumer protection laws.

A spokeswoman for Linden said the company doesn't comment on pending litigation. She declined to answer any questions about ownership of Second Life property.

I don't mind saying this is all a bit weird. Spending real money on make-believe property strikes me as a pretty dubious investment, like playing Monopoly with actual greenbacks.

But I'm sympathetic to the central point of the lawsuit: If a company makes promises about a product, even if that product exists only online, then users of that product are entitled to certain protections.

"There are laws that protect consumers from deceptive practices," said Bracken, the Pittsburgh lawyer. "You can't tell people that they can own something and then turn around and snatch it back. In this day and age, virtual property rights are important."

The lawsuit cites a 2003 press release issued by Linden in which the company acknowledges the role played by Second Life users in developing the virtual world. It says users "should be able to both own the content they create and share in the value that is created."

"The preservation of users' property rights is a necessary step toward the emergence of genuinely real online worlds," it says.

But "at an unknown date," the suit says, Linden began removing references to ownership from its website and began characterizing Second Life users as having "a license to computing resources," not actual ownership of virtual terrain.

A new Second Life user contract took effect Friday. It specifies that "virtual land is available for purchase or distribution at Linden Lab's discretion" and that "Linden Lab may revoke the virtual land license at any time without notice, refund or compensation."

Aside from millions of dollars in damages, the lawsuit seeks a judge's determination that Second Life users do indeed own the property they purchase online, and as such they enjoy the same rights as real-world property owners.

I have no idea how all this will shake out. But if I owned any virtual real estate, I'd be kind of freaked by the notion that my cyber-holdings were actually a license to someone else's servers.

Denton, the architect, is now in the process of moving from Santa Monica to Tennessee, where he plans to retire from brick-and-mortar building projects but to remain active in virtual property development.

He isn't a plaintiff in the lawsuit — at least not yet — but he says he'll fight to protect his island, which he views as an ideal (albeit unreal) location to confab with avatar-equipped clients and demonstrate design ideas.

"As long as Second Life exists, that property is mine," Denton said.

I imagine he'll be keeping a close watch on the virtual horizon from now on.

Lines of credit

I wrote last week about a pair of West Hollywood homeowners who were among potentially millions of former Countrywide customers whose home equity lines of credit weren't being renewed by Bank of America. The bank had sent out letters saying it was taking the action not because of anything the homeowners did, but because of "current conditions in the financial markets."

Michelle Mindlin, 55, told me she was flabbergasted that BofA would pick on her and her partner. She said they'd never missed a mortgage payment on their condo and had never been late with an interest payment on their credit line.

Here's an update: Mindlin said that after the column ran, she received a call from a BofA rep. "The bank now wants to help us," she said. "They've decided to unfreeze our credit line."

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com.

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