INTRODUCTION :: Disputes over virtual world items, such as virtual money, Second Life islands, and even “sex beds,” can inform property law generally. Rights in these virtual world items, such as rights in software and many other intangible assets, are transferred by standard form agreements that are often designated as licenses. Other intangible assets, such as internet domain names, are likewise transferred by standard form agreements that convey ambiguous property rights. In this Article, I suggest that a study of virtual world assets and the agreements used in their transfer can help us to better understand property law as applied to intangible assets. This better understanding of property law can, in turn, assist us in interpreting the contracts that purport to define property rights in intangible assets.
A virtual world is an online environment in which thousands of people can interact with one another on a persistent basis through their online personae known as avatars. For many readers of this Article, virtual worlds need no explanation; it has been hard to read a major newspaper in the past several years without encountering an article about them. For example, in the past several years, Second Life and other virtual worlds were featured in numerous articles in major American newspapers, including The New York Times, The Washington Post, and The Wall Street Journal.
Virtual worlds have captured the attention of legal and other scholars. The legal literature tends to focus on the application of “real world” laws to the virtual environment. Some have discussed how our property laws should apply in virtual worlds; others have questioned whether virtual worlds need their own governance institutions.
On the other hand, some scholars in disciplines other than law have sought to eradicate the distinction between the “real world” and the “virtual world.” Economist Edward Castronova labels virtual worlds “synthetic worlds,” which he defines as “crafted places inside computers that are designed to accommodate large numbers of people.” Rather than looking from the outside in to determine whether “real world” rules should apply in these synthetic worlds, Castronova argues that the true significance of synthetic worlds lies in the effects that “in world” activity will have on the outside, or “real” world. Anthropologist Thomas Malaby goes a step further, eschewing the term “virtual” in favor of Castronova’s “synthetic” because the former term “founders on the very distinction that animates it: the real and the virtual.”
In this Article, I take another approach. Rather than asking whether real world laws can or should apply to virtual worlds, I discuss the ways in which the study of virtual worlds can contribute to real world law. Specifically, I explain what the study of virtual world assets can do for property law. As I have discussed in previous articles, lawmaking institutions have difficulty properly classifying rights in intangible assets. Several years ago, Joshua Fairfield identified some significant characteristics of “virtual property,” explaining that such property can be experienced in ways that mimic the experiences that people have with tangible assets. In this Article, I argue that because of these unique characteristics, virtual world assets can help us understand the nature of property rights generally and rights in intangible assets in particular. This understanding can help lawmaking institutions fashion better rules governing transfers of rights in intangible assets. In this Article, I use the term “intangible assets” to include all personal property that cannot be transferred manually, such as intellectual property, Internet domain names, and electronically-delivered software.
In a previous article, I argued that “intangible” is not a significant property category for the purpose of creditors’ rights laws. In this Article, I expand my earlier analysis by arguing that virtual world assets graphically illustrate the different rights that persons can hold in an intangible asset. Once we see that intangible assets encompass the very same rights that are embodied in tangible assets, we can understand that the law should not permit the unfettered customization of property rights in intangible assets by standard form agreements, just as the law does not permit the unlimited customization of property rights in tangible assets and real property. My thesis is that a study of virtual world assets can help us understand why the numerus clausus principle should be more rigorously applied to rights in intangible assets and that the numerus clausus principle can, in turn, assist us in interpreting the standard form agreements that convey rights in intangible assets.
To frame the discussions in this Article, I use two disputes involving Second Life assets, Bragg v. Linden Research and Eros, LLC v. Simon. Although both disputes ended in settlements, they provide an excellent framework within which to discuss property rights. These cases illustrate that treating “virtual world assets” as a discrete and novel legal category is misleading, because the same property rights that exist in tangible, or “real” world assets exist in virtual world assets. Because these cases involve two distinct property issues, they can also illustrate why a study of virtual worlds can help us better understand property rights in intangible assets.
In Part II, I briefly describe the disputes in Bragg and Eros. In Part III, I explain virtual worlds and then parse the Second Life Terms of Service to illustrate the ambiguous nature of the rights granted by virtual world operators to participants in those worlds. In Part IV, I explore a traditional property principle, the numerus clausus principle, and explain why that principle, which prescribes a standard set of property forms, is a particularly useful tool for defining rights in intangible assets. In Part V, I discuss the pervasiveness of licenses today as well as the attempts by legislatures and courts to reclassify ambiguous or novel property grants. I conclude that an understanding of intangible assets, aided by an appreciation of virtual world creations, will assist us in interpreting the ambiguous property grants that many licenses currently convey.