To Catch a Virtual World Thief

Too strict a definition of intellectual-property theft in places like Second Life could have a chilling effect on entrepreneurialism and innovation

by David H. Holtzman

Second Life has been stalked by the tech paparazzi for the last few years. Almost anything that happens to the company becomes fodder for a story—it even made the cover of BusinessWeek (BusinessWeek, 5/1/06) last year. A Google (GOOG) search garners a diverse list of Second Life stories: Estonia opening a virtual embassy, a synagogue conducting online religious services, IBM (IBM) employees in Italy striking virtually, and, of course, oodles of cybersex stories.

Why is Second Life so newsworthy? It's not like the Linden Research creation is heavily used. Of the almost 10 million people who have signed up for a free account, less than 10% are still active within 30 days—the paying crowd is smaller. It's not clear yet whether regular people are using the service; the volume and tenor of the news stories make me wonder if all Second Lifers are actually reporters, IBM executives, or online sex workers.

Hype notwithstanding, much of the interest is warranted. Many knowledgeable people suspect that avatar-based cyberspace is the next new thing. The idea is that in the future, people will interact online using 3D avatars (BusinessWeek.com, 4/16/07) in place of the flat messaging, chat rooms, and message boards of today's two-dimensional Web. (For a good description of how Second Life might evolve, read Neal Stephenson's seminal novel Snow Crash.)

Moneymaking and Legalities

The financial potential of virtual technology is a magnet for entrepreneurs, who see an opportunity to create new businesses. Second Life has sparked many interesting new moneymaking ventures. But startups that push the envelope of applied technology often do so by leaping into legally ambiguous areas. Since the service is intangible, the commodities offered by these companies are likewise ephemeral. They are selling things that have not been sold before—representations of objects rather than the objects themselves.

The legal questions become especially thorny in Second Life, where subscribers retain full intellectual-property rights to their designs. Houses, clothing—even the look and feel of avatars' skins—are owned by their creators. These copyrights form the basis for startup businesses, but they exist in a legal wilderness because there is very little relevant case law.

The assertion of copyright by users instead of the hosting company has already resulted in one lawsuit and will undoubtedly be followed by others. Eros, run by Kevin Alderman, is an unusual product line: pixilated genitalia and code that animates sexual movements inside Second Life. Although the payment is made with in-world "Linden dollars," the funny money is convertible to greenbacks, making Eros a real, paying business.

Virtual Lawsuit

A virtual guy named Volkov Cattaneo (real name unknown) is spiking Alderman's turf; to his dismay, Cattaneo has snitched the code that Eros uses for its products and has been reselling it at a reduced price. When confronted by Alderman, the avatar Cattaneo allegedly replied: "Sue me." So Eros tried, but there was a wrinkle—you can't serve legal documents to an avatar…yet. So the attorney's solution is to go after Second Life and eBay's (EBAY) payment service, PayPal, to force them to out Volkov.