The Law of virtual worlds – Operator-Resident relationship

1. The Law of virtual worlds – Operator-Resident relationship Dan Or-Hof, Partner dano@pczlaw.com

2. Marc Bragg (‘Marc Woebegone’) LL: “An exploit to purchase land below market value.” (‘URL-hacking’) Allegedly Accessed land auction pages for property not yet released for auction => acquired land below cost. $300 instead of $1,000 $4,000 to $6,000 investment Dan Or-Hof

3. Bragg’s account terminated without warning; ALL of Bragg’s virtual assets Dissolved; Calls to customer service left unanswered. Dan Or-Hof

4. May 1st, 2006 Bragg v. Linden Labs and Rosedale Claims: Breach of contract Unfair trade practices Injunction preventing Linden from denying residents the right to access Second Life (suspensions, bans, account cancellations( Dan Or-Hof

5. Compelling arbitration clause v. Unconscionability: i) Procedural (surprise/hidden terms- adhesion) ii) Substantive (one sided/shocks the conscience) Dan Or-Hof

6. “This case is about virtual property…” Dan Or-Hof

7. Procedural unconscionability • “no reasonably available market alternatives [to defeat] a claim of adhesiveness.” • Linden buried the TOS’s arbitration provision in a lengthy paragraph under the benign heading “GENERAL PROVISIONS.” Dan Or-Hof

8. Substantiveunconscionability- jurisdiction

9. Substantiveunconscionability - termination

10. Substantiveunconscionability - changes

11. “Linden has the right at any time for any reason or no reason to suspend or terminate your Account, terminate this Agreement, and/or refuse any and all current or future use of the Service without notice or liability to you.” 4(1) תנאי הפוטר את הספק, באופן מלא או חלקי, מאחריות שהיתה מוטלת עליו על פי דין אילולא אותו תנאי... Dan Or-Hof

12. Dan Or-Hof

13. SL changes arbitration clause DISPUTE RESOLUTION “If a dispute arises between you and Linden Lab, our goal is to provide you with a neutral and cost-effective means of resolving the dispute quickly… Accordingly, you and Linden Lab agree to resolve any claim or controversy at law or in equity that arises from or relates to this Agreement or our Service (a "Claim") in accordance with one of the subsections below…” Dan Or-Hof

14. Harvard Law Mock Trial The nine-member mock jury held: • 8-1 that Bragg was the owner of the virtual property he purchased; • 7-2 that Bragg’s exploit was improper, justifying Linden Lab’s decision to take the property that he acquired using the exploit; • 6-3 that Linden Lab was not justified in taking property that Bragg had acquired without using the exploit.

15. What does it mean? What can we learn from it? Dan Or-Hof

16. The legal system No 3 branches! Dan Or-Hof

17. Is it a service or a world? • Is it a private sphere (mall) or a public sphere (market)? • Is an external legal oversight sufficient? Is it appropriate? • Are a three branch system/elections/rebellion on its way? • Rules for banishment and expulsion. Dan Or-Hof

18. Absolute control –TOS are the law “Linden Lab has the right at any time for any reason or no reason to suspend or terminate your Account, terminate this Agreement, and/or refuse any and all current or future use of the Service without notice or liability to you." Dan Or-Hof

19. Possible new legal issue: Can an avatar be an independent legal entity? Dan Or-Hof

20. Assumptions • Virtual identity can be much more significant than the physical identity; • An avatar can represent more than one natural person (currently not in SL); • An avatar’s decision making and actions do not necessarily represent a single person. Dan Or-Hof

21. Suggestions / ideas • Agent – principal / corporation • Should avatars be given constitutional rights - Speech, privacy, bodily integrity, equal protection, due process, political voice?… • Can an avatar sue? Be sued? (application of tort, criminal and IP law) • Can it own property? • Can it have rights against its physical principal? Dan Or-Hof

22. Thank you! Dan Or-Hof Dano@pczlaw.com