UK: Selling The Emperor´s New Clothes

Last Updated: 28 November 2007
Article by Stephen Dooley

By now almost everyone will be familiar with the concept of online gaming, Massive Multiplayer Online Role-Playing Games (or MMORPGs) and virtual worlds. If you haven't played one then it's almost certain that you know someone who does, possibly a teenager, but more and more likely another lawyer, or an accountant or banker. Indeed there are "clans" existing on certain games who all work for the same investment bank or Docklands based law firm (for example).

The demographics of online gaming worlds are infinitely flexible, in July 2007 Blizzard Entertainment claimed that it had over 9 million subscribers to its online fantasy game "World of Warcraft" and Second Life claims a resident population in excess of 10 million, albeit with only a tiny percentage seemingly online at any time. It is, however undeniable that virtual worlds of every type engage a huge number of people who devote large amounts of time, energy and money to these pursuits. Small wonder, therefore, that lawyers are getting involved in this area on a professional basis.

One of the more contentious areas in online gaming has been the ownership of an individual's online persona (or avatar) and equipment. In the early days of online environments (principally MMORPG's) these were limited in nature and a player could choose an avatar from a limited number of templates and equipment was rigidly defined and either bought with virtual coin from virtual shopkeepers or found as virtual loot. Quickly, however interaction between players became sufficiently advanced that equipment was firstly swapped and then sold, both in game, and frequently outside the game, either through existing markets such as ebay and then more commonly on specially created sites such as those run by IGE (Internet Gaming Exchange), and independent market and most recently by Sony Online Entertainment for the Sony universe of online games (such as The Matrix Online, Star Wars and Everquest). The latter is of particular interest as most game developers initially took the view that since they had developed and owned the code on which both the virtual worlds and the online items were based then they were the owners of all these virtual goods, to the extent that these existed at all. Buying and selling items was perceived as "cheating", although this position became rather debatable as all the major players adhering to this view permitted ingame trading and actually facilitated it, reserving their wrath for sales on external markets such as ebay.

This position became increasingly untenable as the market, the nature of the games and the law all developed to recognize the concept of individual property rights in virtual items. The market changed as new players such as Second Life and Project Entropia came whose economic model encouraged creativity by their subscribers and stated that in game creations were the property of the possessor. Gameplay also evolved with even the most basic online world allowing for considerable individual creativity in creating highly customized items and where a person has expended time, money and creative effort on an item denying them ownership of that item by means of an end-user licence becomes less and less tenable. Finally, and inevitably, the weight of the law has come down firmly in favour of individual property rights, in China and South Korea in any event. However, just as American concepts of legality shaped many of the rules applicable to modern use of the internet it is my view that the legal principles that will govern online games will derive from these jurisdictions. America dominated early commercial use of the Internet and its courts were (largely) the most sophisticated when it came to understanding the complexities of e-commerce. China and South Korea have exactly the same advantages today in relation to virtual worlds. It's notable that the courts there have already acknowledged individual property rights in online items. In December 2003 a group of lawyers put forward a proposal to the National People's Congress a proposal calling for the formalization of rights in virtual property. In 2004 the Beijing courts awarded Li Hongchen 1,140 Yuan (£70) compensation and ordered restitution be made in respect of the theft of a virtual arsenal he has spent thousands of hours building up. It was accepted that to all intents and purposes the plaintiff owned these items even though they neither existed nor (in this case) were the items in question anything other than an in-game commodity rather than a crafted item.

As a point of reference, the real money market of virtual goods trading in secondary markets on ebay alone was estimated by Edward Castronova in 2001 at $5million. In 2004 Internet Gaming Exchange estimated the worldwide market (in all fora) to be $800 million. In 2006 the Korea Game Development & Promotion Institute estimated the Korean market to be $830 million and in the same year the Chinese government's estimate for the Chinese market was $901 million.

The jurisprudence of virtual worlds is still developing. The trend, however, is a clear one, virtual goods and virtual land (virtual real property being a step too far possibly) are worth real money and people will take legal action to enforce their rights wherever money is involved. How the law will evolve is as yet uncertain, but the strong indicator is that the principles will be set in Asia which has a firm lead in grappling with these issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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