Regulating Virtual Property

by

Javed Mazhar, BBA MS HHPCandidate for the

LL.M. Degree in International Taxation And Financial ServicesWalter H. & Dorothy B. Diamond Graduate International Tax Program

Thomas Jefferson School of Law

Presented to

Professor William H. Byrnes, IVDirector and Founder,

Walter H. & Dorothy B. Diamond Graduate International Tax ProgramThomas Jefferson School of Law

2121 San Diego Avenue San Diego, California 92110 U.S.A.

and

Professor Robert MunroThesis II

Walter H. & Dorothy B. Diamond Graduate International Tax ProgramThomas Jefferson School of Law

August 15, 2010

Copyright 2010 by Javed Mazhar, BBA MS HHPAll rights are Reserved. No part of this document may be reproduced in any form, stored in a retrieval system, or transmitted, in

any form, or by any means, inclusive of, but not limited to the following: electronic, mechanical, photocopying, recording, digitizing, or otherwise, without the express written acknowledgement, consent and permission of the author,

Javed Mazhar, BBA MS HHP Phone: 614-516-8021

Javed.mazhar@gmail.com

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Regulating Virtual Property

by

Javed Mazhar, BBA MS HHP

Table of Contents

I. Introduction 3

II. Virtual Worlds 5

A. History and Definition 5B. Examples of Virtual Worlds 6

III. Virtual worlds' legal issues 7

A. Virtual contract 8B. Virtual criminal laws 8C. Rights of players, users and avatars 9D. Virtual torts 10E. Virtual evidence and virtual civil procedure 11F. Virtual Privacy 12

IV. Property 13

A. Types of Property 141. Real Property 142. Personal Property 17

B. Regulation of Property 181. Real Property 192. Personal Property 20

C. A new type of property-----Virtual Property 241. Definition and theory 272. Issues arising in Virtual Property 30

V. Model principles for Virtual Property regulation 40

VI. Conclusions 41

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Regulating Virtual Property

By

Javed Mazhar, BBA MS HHP

I. Introduction

Anshe Chung is the first avatar1 to become a real world millionaire. The Anshe Chung avatar is owned by Ailin Graef. Anshe buys, develops and sells virtual real estate in Second Life2, among other things. Virtual real estate equivalent to thirty six square kilometers of real life land is supported by land simulators or servers at Linden Labs3. This may be considered an internet based game, rightly so, the significant difference is that the Linden $ used in Second Life can be converted to real US$. The exchange rate4 is fairly stable at approximately 250 L$ to 1 US$. Avatars are owned by real life people and therefore the interactions between avatars translates to interactions between real life people who are connected via networked computers.

There are various types of users of virtual worlds. Each user will have their own definition of virtual worlds. A recent survey5 conducted on random population revealed that real life people had a varied view of virtual worlds. Entepreuners wanting to create a presence in virtual worlds responded by citing Gartner's report6 that predicts that eighty percent of internet users will use virtual worlds by 2011. Third grade school students viewed virtual worlds as internet based games. Housewives who had heard of virtual worlds were already making money by developing stores and selling services, they viewed the virtual worlds as a place where the ordinary and the rich can have a fair chance of monetary success. Musicians thought of virtual worlds as a medium where they can advertise their music. Finally, lawyers viewed virtual worlds as an emerging area of law.

Virtual world users can be divided into three types: augmentationists, immersionists and experimentalists. Henrik Bennetsen7 first described the first two types of users while the third type is an addition by Professor Robert Bloomfield8. Other classifications may also be possible but a discussion of classification of users in virtual worlds is not the topic of this thesis. Although it is useful to understand the above classifications. Augumentationist use the virtual worlds as a supplement to their regular world. They usually set up an avatar resembling themselves in real life and they use the social interactions in virtual worlds in a similar manner as they would use an electronic system such as an e-mail system. Immersionists believe that virtual worlds are real and they are part of it. For example, a

1 The word avatar (to mean online virtual simulations) was first used by Neal Stephenson in his novel: Snow Crash. http://books.google.com/books (accessed 7/24/2010).

2 http://www.secondlife.com (accessed 7/25/2010).3 http://lindenlab.com/ (accessed 7/24/2010).4 http://secondlife.com/whatis/currency.php (accessed 6/27/2010).5 Survey conducted in New York and New Jersey by Javed Mazhar in June 2010.6 http://www.gartner.com/it/page.jsp?id=503861 (accessed 7/26/2010).7 http://slcreativity.org/wiki/index.php?title=Augmentation_vs_Immersion (accessed 7/28/2010).8 http://terranova.blogs.com/terra_nova/2007/05/studying_realw (accessed 7/23/2010).

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judge might create an avatar of a murderer and commit murder in virtual worlds as an immersionists. There real life and virtual world life identities are usually separate. The assumption by immersionists is that real life laws do not apply in virtual worlds and anything that the software allows is not illegal. Experimentalists, as the name implies, use virtual worlds to experiment with various ideas and hypotheses. They are usually teachers, professors and researchers. A good example of experimentalists using virtual world is the creation of a virtual world avatar, Noorelhuda Beb, to study how the cultural identity of a muslim women with a hijab9 is viewed by Second Life inhabitants10. The author tried to experiment with the issue of cultural identity and specifically set up an experiment to answer the following questions: how is cultural identity perceived in SL11?, How are muslim women with hijab perceived in SL? and how does SL experience(s) affect RL12 attitudes and practices and vice versa? These serious questions were studied and answered by the author, thus the role of experimentalists is virtual worlds is an important role. It would have been extremely difficult for the author to go out and conduct this experiment in the real world.

Serious and not so serious interactions in virtual worlds bring about a plethora of legal issues. These issues are similar to real life issues with many new issues solely relating to virtual worlds. In 2007, a Second Life avatar was raped by another avatar13. Although no physical rape took place in real life and most bloggers on this subject dismissed it as just fiction, the effect on the victim was real. No one is going to suggest to jail such offenders but certainly there has to be a code of conduct to avoid such activity. Most of the crimes that occur in virtual worlds involve financial crimes such as money laundering, gambling, data theft and financial fraud. These crimes are covered under the real life criminal laws and have been modified to involve internet based activities. As the virtual fraud and other crimes increase in numbers, U.S. authorities will be able to use wire fraud and other laws, that may be applicable to virtual worlds, to prosecute criminals. Cyber-harassment and bullying are already covered under existing state laws in the United States14. These laws can easily be adopted and be used for harassment and bullying in virtual worlds. Other virtual life criminal acts can easily be prosecuted in virtual worlds, virtual prostitution is an exception since no laws exist in real life that can apply to virtual prostitution. There are many other issues that occur in virtual worlds such as defamation, rights of players, avatars and users, property ownership, privacy, taxes and other issues. Each on of these issues requires a detailed study and creation of appropriate laws. Many times existing real life laws can be modified to accommodate virtual world issues, other times new laws have to be created for the virtual worlds.

This thesis poses the following questions: (1) should virtual property be regulated and (2) if it should be regulated then what are the principles on which virtual property laws should be based on?

9 Traditional covering for the hair and neck that is worn by Muslim women. http://www.merriam- webster.com/dictionary/hijab (accessed 7/28/2010).

10 Methal R. Mahammad, Cultural Identity in Virtual Reality(VR): A Case Study of a Muslim Women with Hijab in Second Life, 2 JVWR. 3, 3-10 (2009) ( discussing the reaction of SL users).

11 SL is short for Second Life. A well known virtual world.12 RL stands for real life.13 http://gsa-ada.org/2009/articles/110/virtual-rapeis-it-a-crime-or-just (accessed 7/23/2010).14 http://www.cyberbullying.us/ (accessed 7/23/2010).

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The originality and novelty of this thesis is that since no virtual property laws exist it defines the guiding principles for such laws.

II. Virtual Worlds

A. History and Definitions

In order to understand the concept of the virtual worlds it is important to understand the history of the enabling technology that made it possible to create virtual worlds. In 1962, J. R. Licklider envisioned a globally connected network through which data and programs could be accessed. Kleinrock's research led to the feasibility of using packets rather than circuits for communications. In 1965, a TX-215 computer in Massachussets was connected to the Q-3216 in California using telephone lines. Since the circuit switched communication was not adequate for computer communications, it was too slow, the need for packet switched network was confirmed. The plans for “ARPANET” 17was put together by Roberts. After a lot of technical work, in September 1969, BBN installed the first IMP18 at UCLA and connected to a host. This was the first node, Stanford Research Institute soon provided a second node. SRI was connected to the ARPANET and the first host-to-host message was sent from Kleinrock's laboratory to SRI. Soon more and more nodes were added. Skipping the technical developments, in the 1980's LANS and PCs became widespread. Federal agencies invested in the development of infrastructure such as the trans-oceanic circuits, FIX-E19

and FIX-W were built to support “managed interconnection points” for interagency traffic. The network access points are important features of today's internet architecture.

The first MUD20 was developed in 1978. Two years later a hypertext based system was developed by Tim Berners-Lee21. ARPANET was split into a public ARPANET and a classified MILNET. Islands of Kesmai22, a commercial MMORPG, was launched on Compuserve. Later a graphical user interface based MMORPG, Habitat23, was launched by LucasFilm24. The first 3D game25 appeared around 1980. In 1992 Neal Stephenson published a novel that created a new vision for virtual worlds. In 1993 the world wide

15 http://www.billbuxton.com/Lincoln.html (accessed 7/23/2010).16 http://en.wikipedia.org/wiki/AN/FSQ-32 (accessed 7/21/2010).17 http://www.dei.isep.ipp.pt/~acc/docs/arpa--1.html (accessed 7/21/2010).18 http://www.horde.org/imp/ (accessed 7/26/2010).19 http://www.webopedia.com/TERM/F/Federal_Internet_Exchange.html (accessed 7/20/2010).20 MUD is multi-user dungeon, it can be played at www.british-legends.com. (Accessed 7/23/2010).21 http://www.w3.org/People/Berners-Lee/ (accessed 7/26/2010).22 Islands of Kesmai was the first-text based commercial MMORPG. http://www.1up.com/do/feature CID=3145358

(accessed 7/21/2010).23 http://www.dsgames.net/qlink/habitat/pictures1.htm (accessed 7/20/2010).24 http://www.lucasfilm.com/ (accessed 7/20/2010).25 The 3D game was called Ultima Underworld.

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web program and code became public, thus allowing users all over the world to experiment and profit from this technology. Cybertown26 was launched in 1995. Later in 2002, The Sims online was launched followed by Second Life, There27, World of Warcraft28 and Multiverse29.

There is no solid definition of a virtual world. In the introduction it was made clear that different people have different definitions of virtual worlds. Richard Bartle defines the world of virtual worlds as ''a world is a environment that its inhabitants regard as being self-contained. It doesn't have to mean an entire planet: It's used in the same sense as ''the Roman World'' or ''the world of high finance''''.30 The definitions lacks any notion of ''virtual'', which is key to any definition of a virtual world. Later in 2004, Koster defined virtual worlds as ''a spatially based depiction of a persistent virtual environment, which can be experienced by numerous participants at once, who are represented within the space by avatars''. This definition is more in line with a viable definition of virtual worlds but it lacks to mention the use of technology31. Castronova's definition32 lacks the persistence and synchronous communication aspects of virtual worlds. How should the virtual world be defined? There are many commonalities in all virtual worlds and this can be analyzed to develop a working definition. The virtual world is always present even when the user is not present. For example, a store in Second Life is always present and selling goods even when the creator is not present. This can be termed as persistence. Persistence differentiates other video games from virtual worlds. Avatars are present in virtual worlds. An avatar is a simulated representation of a character. It is different from the user who created it. Avatars work as a proxy to its creator. Virtual worlds are connected by global networks. They allow multiple users to participate at any given time. Thus, allows multi-dimensional communications, such as text and voice based chat, many actions can also be communicated through animations. For example, in Second Life, an avatar can hug each other, shake hands, shop goods etc. Lastly, there is a functional virtual economy that flourishes. Many virtual worlds offer the conversion of virtual currency into US$, Second Life is a prime example. Extracting from the above discussion a virtual world can be defined as an interactive computed simulated environment containing avatars which represent users globally via a persistent33 networked environment.

B. Examples of virtual worlds

26 http://www.cybertown.com/main_nsframes.html (accessed 7/23/2010).27 http://www.there.com/info/homepage (accessed 7/22/2010).28 http://www.worldofwarcraft.com/splash-sc2launch.htm (accessed 7/2/2010).29 http://multiverse.net/index.html (accessed 6/28/2010).30 Richard Bartle, Designing Virtual Worlds, New Riders Publishing (2003).31 Http://terranova.blogs.com/terra_nova/2004/06/a_virtual_world.html (accessed 7/23/2010).32 Edward Castronova, Synthetic Worlds, The University of Chicago Press (2004).33 Persistence means that once content is created, it still remains and is accessible to other users even after the creator

has logged off.

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There are many different types of virtual worlds. Each has its own rules, designs and audiences. Social virtual worlds such as Kaneva34, There35 and others allow communications among users, goods can be bought and sold, communication spaces can be customized. Casual games can be played in some social worlds such as Habbo36 and Club Penguin37. There are many virtual worlds that can be specifically classified as virtual worlds for children. An example is Whyville38, it is an educational virtual world specially made for children 10-16 years of age. It encourages its users to participate in virtual science projects. This virtual world has a language filter to monitor chat. Real world image websites are built to promote tourism. An example is Twinty39. There are virtual worlds such as Second Life and HiPiHi40 which allow users to create their own content. Although Second Life is the only known virtual worlds that allows intellectual property rights to the creations of the users. Virtual worlds like Muse41 allow artists and creators to develop virtual worlds. There are many other virtual world platforms42 where users can create their own virtual world. Role playing virtual worlds include World of Warcraft43, Gaia online44 and Ultima Online45. These virtual worlds allow users to assume a role in a themed environment.

There are a growing number of virtual worlds, more and more types and classifications are emerging. There seems to be a need to improve the avatar appearance and animations to represent more human like features.

III. Virtual worlds' legal issues

There are real people interacting with other real people in virtual worlds, therefore there are going to be social, technological and legal issues that will arise. Contracts are formed and broken by avatars, theft of property exists, gang violence is prevalent, the rights of players, users, and avatars are to be defined, issues of defamation and cyber-bullying arise, how is evidence to be collected to prosecute avatars and when should the avatar owner be punished in real life. Property ownership and rules and regulations regarding confiscation of property by virtual world administrators are important legal issues which are only going to escalate as more and more users join virtual worlds. A full discussion of the above and related topic is beyond the scope of this thesis, it is useful to look deeper into a few of these issues as they do play a part in the regulation of virtual property which shall be discussed in depth. The

34 http://www.kaneva.com/ (accessed 7/23/2010).35 h ttp://www.there.com/ accessed 7/21/2010. There.com is officially closed to the public as of March 9th 2010.36 h ttp://www.habbohotel.com (accessed 7/23/2010).37 http://www.clubpenguin.com (accessed 7/21/2010).38 http://www.whyville.net/ (accessed 7/28/2010).39 http://www.twinity.com (accessed 6/12/2010).40 http://www.hipihi.com/ (accessed 7/23/2010).41 h ttp://www.musecorp.com/ (accessed 7/23/2010).42 Such as OLIVE, WebFlock, OpenSim and others. 43 http://www.worldofwarcraft.com/ (accessed 7/23/2010).44 http://www.gaiaonline.com (accessed 7/22/2010).45 http://www.uoherald.com/stygianabyss/launch/ (accessed 7/27/2010).

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global nature of these interactions in virtual worlds makes it even more challenging to address legal issues.

A. Virtual contract law

Contracts are formed in every online game and in virtual worlds. Most users have to read a certain text (usually called ''TOS'' or terms of service46 ) and then click on a button entitled ''click to agree''. Software installation on a computer usually requires a user to agree to an ''End User License Agreement''. 47 Second Life is the only virtual world that currently provides intellectual property rights.48 Contract disputes between users and providersoccur quite frequently. EULAs and TOCs are generally considered unconscionable.49 There are many contract issues that occur between users.Real estate rental is quite common and contractual issues arises between users. According to Prof. Fairfied, the EULAs and TOCs are usually not well suited for user to user relationships.50 The reason being that the rights of users are protected based on the contractual agreement but the broader community is not taken into account. Thus many rights that are based on broader community being involved are simply not enforceable.

B. Virtual criminal law

Many people have suggested various arguments for application of real life criminal laws to virtual worlds. 51 Various types of crimes do occur in virtual worlds. It is vital to differentiate crimes that occur purely in virtual worlds and have no consequences in the real life world. For example, an avatar can ''murder'' another avatar. No real physical murder has taken place, a set of digital bytes have been removed. This behaviour may be termed criminal in the virtual world and a legal system can be developed which includes a law enforcement force, a judiciary with a court and lawyers who prosecute and defend the avatar. The trial can be held virtually and the punishment can awarded in the virtual world. There are instances where a

46 Also called terms of use.47 TOS and EULA usually contain the following clauses:

1. Warranty.2. Forum selection.3. Dispute resolution and arbitration.4. Liability.5. IP rights.6. Closure of account procedures.7. Virtual Property ownership.8. Privacy issues.9. Acceptable behaviours and actions.10. Prohibited actions and penalties.

48 h ttp://secondlife.com/corporate/tos.php (accessed 7/28/2010).49 A contract is unconscionable if it is a contract of adhesion. See Flores v. Transamerica HomeFirst, Inc.,

113 Cal. Rptr. 2D 376, 381-82 (Ct. App. 2001).50 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1002997 (accessed 7/21/2010).51 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1418492 (accessed 7/21/2010).

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real life crime happens outside the virtual world based on certain actions inside the virtual world. In such cases real life laws as well as virtual world laws will apply. A Japanese woman was arrested for murdering her avatar husband virtually.52 She had illegally accessed a computer and deleted her virtual husband (a character). Here in this case, there can be two prosecutions, one for virtual murder in the virtual world and another for illegally accessing a computer in the real world. The global nature of users may be resolved by prosecuting the real world crime where the perpetrator resides and commits the crime regardless of the jurisdiction where the victim is. Practically, this may pose some issues for the victim in terms of gathering of evidence and filing complaints in a far away jurisdiction. An international body of law will be needed to be developed with a supranational court who will handle all such complaints. Most of these crimes will be financial in nature where victims fall prey to fraud and deceit.

C. Rights of players, users and avatars

Ralph Koster53 gave a set of player rights in his ''Declaration of the Rights of Avatars''.54 These include various principles that virtual world designers, users and providers should follow voluntarily. The principles include ideas of privacy, free speech, sovereignty, due process, property rights, and other rights. Without rules, whether they are adhered to voluntarily or through force of law, a virtual society will degenerate into despotism55. These principles combined with TOS and EULAs will not be enough to define the rights and obligations of the virtual world community. The community is changing at a fast pace and without the force of law, virtual world community members will not be obliged to follow them. When rules will be enforced by providers there will be court challenges. For example, Marc Bragg, a second life resident, illegally bought land in an unauthorised auction, when the provider, Second Life, confiscated his land based on the rules, Mr. Bragg went to real life court. If a law had existed (through legislation or court created) then Mr. Bragg would have little choice but to obey the rules he clicked to obey.56 Castronova57 has described the concept of “interration”. Interration is an idea that is parallel to “incorporation”. Interration will create a closed world. There will be no policing and prosecution by the state in such close worlds, if nothing goes into or out to the real world. This is not acceptable as it make virtual worlds nothing more than a game and hence reduces the status of a truly virtual world to a mere virtual game.

52 http://www.foxnews.com/story/0,2933,443767,00.html (accessed 7/21/2010).53 http://www.raphkoster.com/cv.shtml (accessed 7/20/2010).54 http://www.raphkoster.com/gaming/playerrights.shtml (accessed 7/21/2010).55 Despotism is the rule of the strong and violent over the weak and non-violent. http://www.merriam webster.com/dictionary/despotism (accessed 7/21/2010).56 Bragg v. Linden Research, Inc., 487 F. Supp. 2d 593 - Dist. Court, ED Pennsylvania 2007. Available at

http://scholar.google.com/scholar_case?case=583434033289222111&hl=en&as_sdt=2&as_vis=1&oi=scholarr (accessed 7/21/2001).

57 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=733486 (accessed 7/21/2010).

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D. Virtual torts

A negligent or intentional civil wrong not arising out of a contract or statute.58

Torts occur in real life worlds and in virtual worlds. With current technology, the torts of assault and battery are not really possible. The tort of assault and battery require actual contact and there is no actual contact in virtual worlds. Although a virtual tort can be defined and sued in virtual courts inside a virtual world. Business related torts such as conspiracy, unfair trade practices etc. can easily be applied to virtual worlds, an action can be brought in real life and in virtual world courts. An important tort that occurs often in virtual worlds is the tort of ''intentional infliction of emotional distress(IIED)''.59 IIED occurs when a plaintiff intentionally or recklessly causes a victim severe mental distress by extreme and outrageous conduct. This tort is particularly useful in virtual worlds. Virtual rape cannot be considered a crime and hence the only real life relief is IIED. The psychological impact of a virtual rape can cause IIED. The facts of the virtual rape in second life are as follows:

[T]he facts begin (as they often do) with a time and a place. The time was a Monday night in March, and the place, as I've said, was the living room -- which, due to the inviting warmth of its decor, is so invariably packed with chitchatters as to be roughly synonymous among LambdaMOOers with a party. So strong, indeed, is the sense of convivial common ground invested in the living room that a cruel mind could hardly imagine a better place in which to stage a violation of LambdaMOO's communal spirit. And there was cruelty enough lurking in the appearance Mr. Bungle presented to the virtual world -- he was at the time a fat, oleaginous, Bisquick-faced clown dressed in cum-stained harlequin garb and girdled with a mistletoe-and-hemlock belt whose buckle bore the quaint inscription "KISS ME UNDER THIS, BITCH!" But whether cruelty motivated his choice of crime scene is not among the established facts of the case. It is a fact only that he did choose the living room. The remaining facts tell us a bit more about the inner world of Mr. Bungle, though only perhaps that it couldn't have been a very comfortable place. They tell us that he commenced his assault entirely unprovoked, at or about 10 pm. Pacific Standard Time. That he began by using his voodoo doll to force one of the room's occupants to sexually service him in a variety of more or less

58 http://www.lectlaw.com/def2/t032.htm (accessed 7/21/2010).59 First started in California in 1950s. State Rubbish etc. Assn. v. siliznoff, 38 Cal. 2D 330(1952).

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conventional ways. That this victim was legba, a Haitian trickster spirit of indeterminate gender, brown-skinned and wearing an expensive pearl gray suit, top hat, and dark glasses. That legba heaped vicious imprecations on him all the while and that he was soon ejected bodily from the room. That he hid himself away then in his private chambers somewhere on the mansion grounds and continued the attacks without interruption, since the voodoo doll worked just as well at a distance as in proximity. That he turned his attentions now to Starsinger, a rather pointedly nondescript female character, tall, stout, and brown-haired, forcing her into unwanted liaisons with other individuals present in the room, among them legba, Bakunin (the well-known radical), and Juniper (the squirrel). That his actions grew progressively violent. That he made legba eat his/her own pubic hair. That he caused Starsinger to violate herself with a piece of kitchen cutlery. That his distant laughter echoed evilly in the living room with every successive outrage. That he could not be stopped until at last someone summoned Zippy, a wise and trusted old-timer who brought with him a gun of near wizardly powers, a gun that didn't kill but enveloped its targets in a cage impermeable even to a voodoo doll's powers. That Zippy fired this gun at Mr. Bungle, thwarting the doll at last and silencing the evil, distant laughter.60

To prove IIED, a plaintiff must show four elements: (1) that a defendant acted intentionally or recklessly; (2) that the defendant's conduct was extreme or outrageous; (3) that the extreme or outrageous conduct caused severe emotional distress. The standard required to prove IIED is found in Second Restatement of Torts. The conduct must be ''so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and be regarded as atrocious, and utterly intolerable in a civilized community.''61 The virtual world has enough ''outrageous'' conduct that the courts may be able to apply the extreme standard and allow the claim to proceed under IIED.

E. Virtual evidence and virtual civil procedures

Evidence is particularly well preserved in virtual worlds. Back up of virtual worlds is conducted by the service provider and the evidence is stored. Various types of evidence stored are as follows:

60 http://www.juliandibbell.com/texts/bungle_vv.html (accessed 7/21/2010). 61 RESTATEMENT (SECOND) of TORTS § 46 cmt. D (1965).

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1. Instant message chats2. Screen-shots3. Webcam captures4. Chat logs5. Friend lists6. Object histories7. Authenticated documents8. Audio recordings9. Other sources

In the Bragg case in Pennsylvania, chat log evidence was brought before a judge and the defendant nor the plaintiff objected to it. The authenticity was never challenged and the court did not show any degree of suspicion.

Civil procedures in virtual world cases is no different than any real life case. In Eros, LLC v. John Doe62, a default judgement was delivered by a Florida district court. The identity of the Second Life avatar was not known. The use of John Doe summons is quite common in virtual world cases. Excerpts such as this are commonly utilized.

[D]espite reasonable efforts, Eros does not presently know Defendant's true identity or address but intends to obtain this information by way of subpoenas directed to one or more internet service providers that are likely to have obtained said information from Defendant.63

F. Virtual Privacy64

The amount of data that is collected by the virtual world service providers is enormous. Government agents can collect data on avatars without raising any issues of privacy since the data is being collected in open spaces. According to Prof. Zarsky65,there are three areas of concern: (1) threats to privacy by other users, (2) threats to privacy by the government and (3) threats to privacy by providers. Second Life, for example, requires users to agree to grant Linden Labs ''a royalty-free, worldwide, fully paid-up, perpetual, irrevocable, non-exclusive, sub-licensable right and license to exercise the copyright, publicity, and database rights you have in your account information, including any data or other information generated by your account activity, in any media now known or not currently known”. 66 The privacy policy states that Linden Labs will not disclose the identity of the users. The result is that Linden Labs attains a license to copyright, publicity and database rights to all non-personal information. They can give this information to anyone as long as it does not personally identify a user. Data

62 http://dockets.justia.com/docket/florida/flmdce/8:2007cv01158/202603/ (accessed 7/21/2010,password required).63 Id.64 http://www.merriam-webster.com/dictionary/privacy (accessed 7/23/2010).65 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=963889 (accessed 7/21/2010).66 http://secondlife.com/corporate/tos.php (accessed 7/21/2010, See 7.2).

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accumulates quite quickly and the connection between an avatar and its owner is not difficult to make with modern tools. There is an urgent need to legislate specialized privacy laws dealing with virtual worlds.

IV. Property

Property in law is defined differently from what a layman expects. To a layman property is what he owns. Law defines property as "an aggregate of rights which are guaranteed and protected by the government" and that the term property "includes not only ownership and possession but also the right of use and enjoyment for lawful purposes." 67 Ownership by itself is nor enough to claim property, the notion of property exists if a right to land or personal property can be respected and enforced by a court of law. Property is a bundle of rights.68 Property rights are not absolute. A person may have the right to use, sell and modify property. Public rights exists such as right to tax and eminent domain. The bundle of rights can expand as rights are added and can shrink when rights are taken away.

Legal positivism69 in the United States views property as rights arising through the government. In Johnson v. M'Intosh70, the Supreme Court said that it could only rely on laws adopted by the federal government in deciding land claims. There are other theories such as the Natural Law Theory71 that prescribes to the theory that rights arise as a matter of fundamental justice.

Recognition of private property is important to the creation of property law. There are five theories which are useful in understanding the need for private property recognition. In latter sections a theory of virtual world property rights will be proposed. The first theory is the Labor-Desert theory. Locke says:

[T]hough the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature hath placed it in, it hath by this labour something annexed to it, that excludes the common right of other men: for this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others.72

67 Black's Law Dictionary (5th ed.1979).68 http://urbanext.illinois.edu/lcr/propertyrights.cfm (accessed 7/21/2010).69 http://plato.stanford.edu/entries/legal-positivism/ (accessed 7/21/2010).70 21 U.S. 543 (1823).71 http://plato.stanford.edu/entries/natural-law-ethics/ (accessed 7/21/2010).72 http://www.constitution.org/jl/2ndtr05.txt (accessed 7/21/2010).

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The theory says that property that is produced by people is their entitlement. American property law is greatly influenced by this theory73. Proudhon74 charged Locke with committing a fallacy called ''double dichotomy''. The reason being that Locke presents two systems: common property and full ownership, Proudhon asserted that there are other options. The second is the Traditional Utilitarianism theory. The overall happiness of the general public is considered and property rights are created so that the general public can attain the maximum benefit. Jemery Bentham, the founder of the Traditional Utilitarianism theory says the following:

[A]n action is right from an ethical point of view if and only if the sum total of utilities produced by that act is greater than the sum total of

utilities produced by any other act the agent could have performed in its place.75

This theory is the dominant idea in American property rights. The third theory deals with the idea that whoever occupies or possesses something first, becomes its rightful owner. Possession of wild animals can be acquired by catching them. It can also be obtained by creating a new thing. Obtaining possession of something from another person without consent is protected by law. The right of possession is not enforceable against those with a better right to possession. The Personhood theory is the fourth theory, it tells us that certain objects are needed for the emotional well being of an individual and thus creates property rights in them. Radin argues that the right to personal property as opposed to fungal property is morally stronger and taking away personal property ( which is so attached to personhood) has worse consequences than taking away fungal property.

[I]t is plausible to maintain that if government must respect equally the personhood of all, it cannot permit forms of fungible property that make full self-development impossible for one class and are not necessary for the self-development of the holders. If the government has erroneously permitted wrongful fungible property . . . and acts to correct its error, compensation is not appropriate for reasons analogous to why it is inappropriate to compensate "expropriated" slaveholders . . . . The citizenry as a whole is not required to legitimate (by paying the value of) a benefit that the beneficiary held in error and as a wrong against our ideas of individual worth.76

Finally, the Civil Republican theory argues that private property rights are an important fabric of a democratic government. The essence of Civil Republican theory was conveyed by French economists.

73 http://plato.stanford.edu/entries/locke-political/ (accessed 7/12/2010).74 http://www.ohio.edu/chastain/ip/proudhon.htm (accessed 7/23/2010).75 http://en.wikipedia.org/wiki/Jeremy_Bentham (accessed 7/23/2010).76 Jane Radin, Reinterpreting Property (University of Chicago Press) (1993).

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[I]f man acquires rights over things, it is because he is at once active, intelligent and free; by his activity he spreads over external nature; by his intelligence he governs it, and bends it to his use; by his liberty, he establishes between himself and it the relation of cause and effect and makes it his own . . . .Where is there, in a civilized country, a clod of earth, a leaf, which does not bear this impress of the personality of man? In the town, we are surrounded by the works of man; we walk upon a level pavement or a beaten road; it is man who made healthy the formerly muddy soil, who took from the side of a far-away hill the flint or stoe which covers it. We live in houses; it is man who has dug the stone from the quarry, who has hewn it, who has planed the woods; it is the thought of man which has arranged the materials properly and made a building of what was before rock and wood. And in the country, the action of man is still everywhere present; men have cultivated the soil and generations of laborers have mellowed and enriched it; the works of man have dammed the rivers and created fertility where the waters had brought only desolation . . . . Everywhere a powerful hand is divined which has matter, and an intelligent will which has adapted it . . . to the satisfaction of the wants of one same being. Nature has recognized her master, and man feels that he is at home in nature. Nature has been appropriated by him for his use; she has become his own; she is his property. This property is legitimate; it constitutes a right as sacred for man as is the free exercise of his faculties. It is his because it has come entirely from himself, and is in no way anything but an emanation from his being. Before him, there was scarcely anything but matter; since him, and by him, there is interchangeable wealth, that is to say, articles having acquired a value by some industry, by manufacture, by handling, by extraction, or simply by transportation. From the picture of a great master, which is perhaps of all material production that in which matter plays the smallest part, to the pail of water which the carrier draws from the river and takes to the consumer, wealth, whatever it may be, acquires its value only by communicated qualities, and these qualities are part of human activity, intelligence, strength. The producer has left a fragment of his own person in the thing which has thus become valuable, and may hence be regarded as a prolongation of the faculties of man acting upon external nature. As a free being he belongs to himself; now the cause, that is to say, the productive force, is himself; the effect, that is to say, the wealth produced, is still himself. Who shall dare [p. 37] contest his title of ownership so clearly marked by the seal of his personality? . . .77

77 Leon Wolowski & Émile Levasseur, Lalor's Cyclopedia of Political Science...392-93 (M.B.Gary & Co.) (1884).

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The fundamental ideas presented in these theories are of valuable importance in crafting theories to develop the idea of property in virtual worlds. Common law property can be classified as follows:

Common Law Legal Property

Real Property Personal Property

tangible intangible tangible intangible(land) (e.g. easement of way) (e.g. truck) (e.g. stocks, bonds, intellectual

property---patents, copyrights and trademarks)

Where does Virtual Property fit?

The above schematic shows the relationship between the types of property rights derived from common law. The above rights are to be discussed below to gain an understanding of what they are and how they work. A Virtual property theory will follow next.

A. Types of Property

1. Real property

Real property78 is derived from the Latin word res and was used78 An example from State of Washington, others have similar definitions. Definition — Property — Real.

The term "real property" is defined in RCW 84.04.090; this definition should be consulted as a matter of course in all cases where the meaning of "real property" is in doubt. As there defined, "real property" includes but is not limited to the following:(1) All land, whether platted or unplatted.(2) All buildings, structures or permanent improvements built upon or attached to privately owned land.(3) Any fixture permanently affixed to and intended to be annexed to land or permanently affixed to and intended to be a component of a building, structure, or improvement on land, including machinery and equipment which become fixtures. Intent is to be gathered from all the surrounding circumstances at the time of annexation or installation of the item, including consideration of the nature of the item affixed, the manner of annexation and the purpose for which the annexation is made and is not to be gathered exclusively from the statements of the annex or, installer, or owner as to his or her actual state of mind.(a) Such items shall be considered as permanently affixed when they are owned by the owner of the real property and:(i) They are securely attached to the real property; or(ii) Although not so attached, the item appears to be permanently situated in one location on real property and is adapted to use in the place it is located. For example a heavy piece of machinery or equipment set upon a foundation

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in England to mean ''relating to things''. Real property79 can be divided into tangible80 and intangible. Tangible real property is any real property that can be touched, such as the land. Intangible real81 properties include mineral rights, easement of way, water and other rights.

2. Personal property

Personal property82 is anything owned that is not real property. It can be further divided into corporeal (tangible) and incorporeal (intangible) personal property. Tangible personal property is something that can be moved, touched or felt. For example, furniture, clothing, jewellery, art,

without being bolted thereto could be considered as affixed.(b) Such items shall not be considered as affixed when they are owned separately from the real property unless an agreement specifically provides that such items are to be considered as part of the real property and are to be left with the real property when the occupant vacates the premises.(c) Whenever the property taxable status of engines, machinery, equipment or fixtures is questioned by the assessor, the taxpayer may be required to list such items in the manner provided by chapter 84.40 RCW and WAC 458-12-080. The assessor shall make the determination of whether such property is real, and shall amend the taxpayer's statement as provided by WAC 458-12-080(2).(d) The explanations relating to fixtures under subsection (3) of this section are for purposes of clarification and may not answer the question as to whether an item is a fixture in all cases. In the event these explanations do not clearly indicate whether the item is a fixture, the numerous decisions of the Washington appellate courts regarding fixtures should be consulted.(4) Privately owned easements and easement-like privileges, irrespective of whether the servient estate is public or privately owned land. However, easements of public service corporations other than rail roads are personal property by reason of RCW84.20.010.(5) Leases of real property and leasehold interests therein having a term coextensive with the life of the tenant.(6) Title to minerals in place which belongs to someone other than the surface owner. Such a title to minerals in place is a "mineral right" but must be distinguished from mineral leases and permits, which do not give title to minerals in place and which are intangible personal property. Mineral rights, as defined herein, are realty regardless of whether they were created by grant or reservation.(7) Standing timber growing on land which belongs to the same person as the timber.(8) Water rights, whether riparian, appropriative, or in the nature of an easement.(9) Buildings and similar permanent improvements erected or made by a tenant on land which he does not own, and title to which is not reserved in the tenant by the lease or some other landlord-tenant agreement. Such buildings and improvements become the landlord's real property.(10) All life estates in real property, whether created by grant or a reservation. A person has such a life estate when he has a right to the possession, occupation and use of a piece of realty, and to the crops, rents and profits produced by it, during his or her natural life.(11) All possessory rights in realty which are coextensive with the natural life of their holder. Such possessory rights are analogous to leases, and since leases for life are realty, possessory rights for life are also realty.

79 http://www.lectlaw.com/def2/q013.htm accessed 7/21/2010.80 Tangible real property in a corporeal hereditament.81 Intangible real property is an incorporeal hereditament. 82 WAC 458-12-005—An example of the definition of personal property from the State of Washington.

Definition — Property — Personal.(1) Introduction. The terms "personal property" and "real property" are defined in RCW 84.04.080 and 84.04.090, respectively. These definitions should routinely be consulted in any case where it is at all doubtful whether a given piece of property is real or personal.Personal property, as defined in RCW 84.04.080, falls into two categories; namely, tangible personal property, that is to say, things which have a physical existence, and intangible personal property which consists of rights and privileges having a legal but not a physical existence.(2) Tangible personal property. The category of tangible personal property includes but is not limited to the following:(a) Goods and chattels. RCW 84.04.080. This category includes most tangible movables, such as:

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writings etc. Intangible personal property is something that cannot be moved, touched or felt but has value. Examples of intangible personal property are intellectual property, securities, negotiable instruments. Intellectual property83 is the idea of giving property rights to the creations of the mind. This includes intangible rights in music, literature, artistic works, industrial designs, scientific and other discoveries and inventions. These rights are obtained through mechanisms such as copyright, patents, and trademarks.

B. Regulation of property(i) Inventories, AGO 57-58, No. 206 (1958);(ii) Farm machinery, AGO 1909-1910, p. 51;(iii) Livestock and poultry;(iv) Logs and lumber, RCW 84.44.030;(v) Motor vehicles, RCW 84.44.050;(vi) Books, Booth & Henford Abstract Company v. Phelps, 8 Wash. 549 (1894);(vii) Coin collections and coin inventories of coin dealers, AGO 63-64, No. 116 (1964); and(viii) Tools.(b) All standing timber held or owned separately from the ownership of the land on which it stands, RCW 84.04.080; Leuthold v. Davis, 56 Wn.2d 710 (1960).(c) All fish traps, pound net, reef net, set net and drag seine fishing locations, RCW 84.04.080.(d) All privately owned improvements, including buildings and the like, upon publicly owned lands which have not become part of the realty, RCW 84.04.080; Pier 67, Inc. v. King County, 71 W.D.2d 89 (1967); AGO 1935-1936, p. 167; AGO 3-25-52; TCR 6-17-1947.(e) All gas and water mains and pipes laid in roads, streets or alleys, RCW 84.04.080.(f) Water craft of all descriptions, RCW 84.04.080, Black v. State, 67 Wn.2d 97 (1965), provided they have acquired an actual situs in the taxing county pursuant to RCW 84.44.050.(g) Foxes, mink, marten, fish, oysters and all other animals held or raised in captivity for business or commercial purposes, including livestock.(h) The roads and bridges of plank roads, gravel roads, turnpike or bridge companies. (i) Trade fixtures. This concept, which is peculiar to the landlord-tenant relationship, refers to the machinery or equipment of any commercial or industrial business which operates on leased land or in rented quarters. Such machinery or equipment is a trade fixture; i.e., the tenant's personal property, no matter how firmly it may be attached to the landlord's realty, unless it could not be removed without virtually destroying the building housing it, or otherwise seriously damaging the landlord's realty. Brown on Personal Property (2d Edition 1955), Sec. 144.(j) All engines and machinery of every description used or designed to be used in any process of refining or manufacturing, unless such engines and machinery shall have been included as part of any parcel of real property as defined in WAC 458-12-010(3).(k) All buildings and other permanent improvements constructed or placed upon the easements of public service corporations other than rail roads.(l) All surface leases, whether of public or privately owned land, except leases for the life of the lessee. RCW 84.04.080; AGO 49-51, No. 476 (1951); TCR 8-8-41: In Re Barclay's Estate, 1 Wn.2d 82 (1939). This category includes practically all leases to corporations because the legal life of a corporation is almost always longer than the term of any lease to it. Pier 67, Inc., v. King County, 71 W.D.2d 89 (1967).(3) Intangible personal property. Intangible personal property includes but is not necessarily limited to the following:(a) Contract rights to cut timber on either public or privately owned land under which title to the timber has not yet passed. AGO 53-55, No. 29 (1953). A contract right to cut timber is a mere license, and all contractual licenses to use someone else's realty are personal property.(b) All mining claims, whether patented or unpatented, which are located on public land. TCR 10-3-35; TCR 4-4-1950; AGO 55-57, No. 327 (1956); American Smelting and Refining Company v. Whatcom County, 13 Wn.2d 295 (1942).(c) All mining or prospecting leases, whether on public or privately owned land, except leases for the life of the lessee. RCW 84.04.080; TCR 4-22-36; Walla Walla Oil, Gas & Pipe Line Company v. Vallentine, 103 Wash. 359

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1. Real property

The regulation of property whether it be real or personal property is important in formulating a theory of virtual property. Real property regulation will be looked at in this section. The next section will emphasize personal property regulation. This is not a comprehensive look at property regulations, it is a study of the principles involved and their reasoning.

Legally, a person owns legally-enforceable rights in land. A present estate is a legal interest that entitles its owner the present possession of real property. Future interest is an interest that may become a present estate in the future. The freehold estate is what is considered as land ownership. Leased land are non-freehold estates. Infinite freehold estate is termed fee simple. A life estate can also be established, life estates measure duration by the life of one or more specified persons. A life estate pur autre vie84 is also permissible. There are times when conditions are imposed upon an estate and these conditions determine when the estate may end. This is termed as a defeasible freehold estate. Defeasibe estates are useful in situations where an estate is given to an entity for specific use such as a hospital, with a condition that the hospital treat certain patients for free. In case the hospital does not fulfil this condition the estate will be transferred to another. Equitable interests85 may also be created in freehold estates. There are a variety of issues that

(1918).(d) All contractual licenses to use public or someone else's land for specified purposes, or to take something from public or someone else's land, which have a specified minimum term. Examples: Timber contracts, AGO 53-55, No. 29, (1953); oil and gas prospecting permits, Walla Walla Oil, Gas & Pipe Line Company v. Vallentine, 103 Wash. 359 (1918); grazing permits; permits to take gravel or other minerals, TCR 4-22-1936. However, a license or permit which is revocable at the will of the landowner is not property at all because it gives the licensee no legally protected right or interest whatsoever.(e) All possessory rights in realty which are divorced from the title to the realty. TCR 10-3-35; AGO 1937-1938, p. 353. Such possessory rights are analogous to leases; hence they are personal property unless they are coextensive with the life of their holder. This category includes the possessory interest which an instalment contract for the sale of public or privately owned land creates in the vendee. See RCW 84.40.230.(f) Public utility franchises owned by public service corporations. A public utility franchise is the right to use publicly owned real estate for power lines, gas or water lines, sewers or some other public utility facility. Commercial Electric Light and Power Company v. Judson, 21 Wash. 49 (1899); Chehalis Broom Company v. Chehalis County, 24 Wash. 135 (1901). Such public utility franchises are very similar to public utility easements, which are personal property under Paragraph 8 thereof. However, a Washington corporation's primary franchise to exist and do business in corporate form is not taxable property. Bank of Fairfield v. Spokane County, 173 Wash. 145 (1933).(g) Public utility easements owned by public service corporations other than rail roads. RCW 84.20.010.(h) See WAC 458-50-150 through 458-50-190 for rules relating to exemption of intangible personal property under RCW 84.36.070.

83 http://www.wipo.int/portal/index.html.en (accessed 7/21/2010).84 Life estate pur autre vie is a estate in which the duration is measured by the life of a person other than the

grantee.85 An equitable interest in a free estate is created as follows: suppose that John gives land to Hillary in trust for Jacob, in

this case, Hillary holds the title but Jacob has an equitable life estate.

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arise with estates. These issues are concurrent ownership, restrictions, community and marital property, landlord and tenant issues86, sales contract and issues in sale of real property87, mortgage issues and the sale of mortgage property88, zoning, rights of owners and neighbors, easements, tresspass and adverse possessions89. All of these issues will be examined in detail and their use will be formulated in virtual property in a latter section.

2. Personal property90

86 See http://apps.leg.wa.gov/rcw/default.aspx?Cite=59 as an example of issues and laws relating to landlord and tenants. (accessed 7/21/2010).

87 http://apps.leg.wa.gov/rcw/default.aspx?Cite=65 (accessed 7/21/2010).88 http://apps.leg.wa.gov/rcw/default.aspx?Cite=61 (accessed 7/21/2010).89 http://apps.leg.wa.gov/rcw/default.aspx?Cite=61 (accessed 7/24/2010).90 An example of definition of personal property from the state of Washington.

http://apps.leg.wa.gov/wac/default.aspx?cite=458-12-005 (accessed 7/24/2010).WAC 458-12-005Definition — Property — Personal.

(1) Introduction. The terms "personal property" and "real property" are defined in RCW 84.04.080 and 84.04.090, respectively. These definitions should routinely be consulted in any case where it is at all doubtful whether a given piece of property is real or personal.Personal property, as defined in RCW 84.04.080, falls into two categories; namely, tangible personal property, that is to say, things which have a physical existence, and intangible personal property which consists of rights and privileges having a legal but not a physical existence.(2 Tangible personal property. The category of tangible personal property includes but is not limited to the following:(a) Goods and chattels. RCW 84.04.080. This category includes most tangible movables, such as:(i) Inventories, AGO 57-58, No. 206 (1958);(ii) Farm machinery, AGO 1909-1910, p. 51;(iii) Livestock and poultry;(iv) Logs and lumber, RCW 84.44.030;(v) Motor vehicles, RCW 84.44.050;(vi) Books, Booth & Henford Abstract Company v. Phelps, 8 Wash. 549 (1894);(vii) Coin collections and coin inventories of coin dealers, AGO 63-64, No. 116 (1964); and(viii) Tools.(b) All standing timber held or owned separately from the ownership of the land on which it stands, RCW 84.04.080; Leuthold v. Davis, 56 Wn.2d 710 (1960).(a) Contract rights to cut timber on either public or privately owned land under which title to the timber has not yet passed. AGO 53-55, No. 29 (1953). A contract right to cut timber is a mere license, and all contractual licenses to use someone else's realty are personal property.(b) All mining claims, whether patented or unpatented, which are located on public land. TCR 10-3-35; TCR 4-4-1950; AGO 55-57, No. 327 (1956); American Smelting and Refining Company v. Whatcom County, 13 Wn.2d 295 (1942).(c) All mining or prospecting leases, whether on public or privately owned land, except leases for the life of the lessee. RCW 84.04.080; TCR 4-22-36; Walla Walla Oil, Gas & Pipe Line Company v. Vallentine, 103 Wash. 359 (1918).(d) All contractual licenses to use public or someone else's land for specified purposes, or to take something from public or someone else's land, which have a specified minimum term. Examples: Timber contracts, AGO 53-55, No. 29, (1953); oil and gas prospecting permits, Walla Walla Oil, Gas & Pipe Line Company v. Vallentine, 103 Wash. 359 (1918); grazing permits; permits to take gravel or other minerals, TCR 4-22-1936. However, a license or permit which is revocable at the will of the landowner is not property at all because it gives the licensee no legally protected right or interest whatsoever.

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In Pierson v. Post91, Post was a hunter who was chasing a fox in an empty land. Pierson shot and killed the fox. Post brought suit and the court held that Pierson was the true owner because he was first in killing the fox. Therefore, as far as wild animals are concerned, property rights begin upon the capture of the wild animal and end if the wild animal is released in the wild. This idea translates into modern law of finders. A finder is the first person to take possession92 of unclaimed property. There are four categories of found object: treasure trove, lost property, mislaid property and abandoned property. Treasure trove is the intentionally hiding of gold, silver or currency by an unknown owner in a secret location, lost property is property that the owner unintentionally and involuntarily parts through neglect and does not know its where-about. Mislaid property is property that a owner voluntarily puts in a particular place but fails to reclaim. An owner retains property rights to lost or mislaid property. The finder acquires title to the lost or mislaid property subject to a superior claim---the claim of the true owner and sometimes the landowner.93 Abandoned property is property to which an owner intentionally and voluntarily relinquishes all rights, title and interest. First person taking possession of abandoned property acquires title to the property. Property rights in human body is of interest to us since an avatar in virtual world can be seen as a ''body'' whose parts can be sold. In the real world the law generally allows control of one's body parts with some restrictions94. There are other rules dealing with personal property. A bailment is the rightful possession of a chattel by someone other than the rightful owner. A bailee is held strictly liable if he delivers the chattel to the wrong person. The doctrine of accession allows on to gain title to a property to which he applies labor to transform the original item into a fundamentally different item or greatly increases its value. Adverse95 possession allows one to acquire title to a chattel96 owned by another.

(e) All possessory rights in realty which are divorced from the title to the realty. TCR 10-3-35; AGO 1937-1938, p. 353. Such possessory rights are analogous to leases; hence they are personal property unless they are coextensive with the life of their holder. This category includes the possessory interest which an instalment contract for the sale of public or privately owned land creates in the vendee. See RCW 84.40.230.(f) Public utility franchises owned by public service corporations. A public utility franchise is the right to use publicly owned real estate for power lines, gas or water lines, sewers or some other public utility facility. Commercial Electric Light and Power Company v. Judson, 21 Wash. 49 (1899); Chehalis Broom Company v. Chehalis County, 24 Wash. 135 (1901). Such public utility franchises are very similar to public utility easements, which are personal property under Paragraph 8 thereof. However, a Washington corporation's primary franchise to exist and do business in corporate form is not taxable property. Bank of Fairfield v. Spokane County, 173 Wash. 145 (1933).(g) Public utility easements owned by public service corporations other than rail roads. RCW84.20.010.

91 3 Cai. R. 175 (N.Y. 1805).92 Possession requires an intent to control the property and an act of control.93 See Armory v. Delamire, 93 Eng. Rep. 664 (K.B. 1772).94 See Moore v. Regents of the University of California, 793 P. 2d 479 (Cal. 1990). 95 The possession of the chattel must be actual, adverse, hostile, exclusive, open, notorious and continuous for the

requisite period.96 http://legal-dictionary.thefreedictionary.com/chattel (accessed 7/30/2010).

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An important area of intangible personal property is the area of Intellectual Property. The differentiation between intellectual property and virtual property will be discussed in the next section. The Swiss Federal Office for Intellectual Property was founded in Bern in 1888. The French and Swiss offices combined in 1893 to form the United International Bureaux for the Protection of Intellectual Property. The World Intellectual Property Organization (WIPO) was formed in 1967 through a treaty as an agency of the the United Nations. The passage of the Bayh-Dole Act97 in 1980 brought intellectual property to the forefront. Thomas Jefferson and James Madison were quite skeptical to the monopolies of copyright and patents.

[S]table ownership is the gift of social law, and is given late in the progress of society. It would be curious then, if an idea, the fugitive fermentation of an individual brain, could, of natural right, be claimed in exclusive and stable property. If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then

97 Also known as University and Small Business Patent Procedures Act. http://www.access.gpo.gov/nara/cfr/waisidx_02/37cfr401_02.html accessed 7/21/2010 (Implementation) and codified by http://www.access.gpo.gov/nara/cfr/waisidx_02/37cfr401_02.html (accessed 7/23/2010).

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cannot, in nature, be a subject of property. 98

Intellectual property is primarily protected by the following four concepts: copyright, patents, trademarks and trade secrets. A copyright is a protection that is given to authors of various types of works. These works include literary works, sound recordings, musical works, dramatic works, choreographic works, pantomime works, pictorial works, graphical and sculptural works, motion pictures, audiovisual works and architectural works. United States Copyright law is codified in 17 U.S.C. 102. 99 The owner of copyrighted work has exclusive right to reproduce, license, perform, and produce derivative works.100 The popular belief that or a work to be copyrighted the © symbol is required is a fallacy. It is not required for works created after March 1, 1989. Copyright infringement is the use of copyrighted work without the permission from the copyright holder. There are a few exceptions such as the fair-use doctrine and the use by libraries.101 Penalties for copyright infringement range from injunctions, monetary damages to criminal prosecutions.102

A patent is an exclusive right given to a patent holder to make, use and sell an innovation for a limited period of time. Patents are governed by the U.S. Patent Act. There are five main requirements for obtaining a patent: patentable subject matter103, utility104, novelty105,non-obviousness106 and enablement.107 The patent holder has exclusive right for a period of time.108 A law suit can be file against anyone who infringes on the patent , once the patent is issued. There are two defences to patent infringement: the patent is invalid or the products being sold or made do not infringe the patent. The Patent Act assumes that once a patent is issued it is valid and the burden of proof is on the person asserting its invalidness to prove that the patent is invalid.109

98 http://press-pubs.uchicago.edu/founders/documents/a1_8_8s12.html (accessed 7/21/2010).99 http://www.copyright.gov/title17/ (accessed 7/23/2010).100 http://www.law.cornell.edu/uscode/html/uscode17/usc_sec_17_00000106----000-.html (accessed 7/22/2010).101 See http://www.copyright.gov/title17/92chap1.html#107 for a complete list (accessed 7/21/2010). 102 http://www.copyright.gov/title17/92chap5.html (accessed 7/24/2010).103 http://www.law.cornell.edu/uscode/html/uscode35/usc_sec_35_00000101----000-.html (accessed 7/23/2010). Also

see http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=447&invol=303 accessed 7/23/2010. (congress intended anything under the sun to be patentable)

104 35 U.S.C. § 101. (Invention has to be useful).105 35 U.S.C. § 102(a). (Novelty requires that the invention was not known or used by others in the United States). 106 35 U.S.C § 103. (the test for non obviousness is whether the subject matter sought to be patented and the prior art

are such that the subject matter as a whole would have been obvious to a person having ordinary skill in the art at the time the invention was made).

107 35 U.S.C. § 112.("The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains...to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.")

108 Utility patents are for twenty years from the date of filing, design patents are valid for fourteen years from the date of filing. See 35 U.S.C. §§ 156, 173.

109 35 U.S.C. § 282.

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A trademark is a word, symbol, design, or any combination of thereof, used in commerce to identify and distinguish the goods of one manufacturer or seller from another. For trademark protection two conditions have to be met: it must be used in commerce and it must be distinctive. Trademark is a constitutionally protected by the commerce clause. The Lanham Act110 defines trademarks as a mark used in commerce. Trademarks are divided into four groups of distinctiveness.111 Arbitrary trademarks and suggestive trademarks are considered distinctive and rights to the mark are determined by the priority of use. A descriptive trademark is registered as a trademark if it has acquired a secondary meaning in the minds of the consumers. Generic trademarks are not eligible for trademark protection because they refer to a general class of products. The law allows for any registered trademark to be cancelled if any party files a claim that the party will be harmed by the trademark.112 It is illegal to import any merchandise of a foreign vendor that has a trademark which is registered and owned by a U.S. citizen or corporation.113

A Trade Secret is defined as:

[I]nformation, including a formula, pattern, compilation, program, device, method, technique, or process that derives independent economic value, actual or potential, from not being generally known to or readily ascertainable through appropriate means by other persons who might obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.114

Trade secrets are protected via non-compete and non-disclosure contracts with employees. State laws usually protect trade secrets and most states have adopted the Uniform Trade Secrets Act. Trade secrets are only protected when the secret is not disclosed.115

C. A new type of property----virtual property

110 http://topics.law.cornell.edu/wex/Lanham_Act (accessed 7/23/2010).111 See Zatarin's Inc. v. Oak Grove smoke House, Inc., 698 F.2d 786 (5th Cir. 1983). 112 15 U.S.C. § 1064.113 19 U.S.C. § 1526.114 http://topics.law.cornell.edu/wex/trade_secret (accessed 7/23/2010).115 See The Gates Rubber Co. v. Bando Chemical Industries Ltd., United States Court of Appeals, 10th Circuit, Oct. 19,

1993, 9 F.3d 823, 28 USPQ2d 1503 (A good practical discussion on trade secrets is found in this case).

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A variety of issues have been discussed relating to real and personal property. The main purpose of the above discussion was to build the background necessary to formulate a new theory of property rights in the virtual worlds. The main argument against virtual property rights is made by Richard Bartle.116 Before looking at his arguments, another look at Ralph Koster's117 theory of interration is warranted. The theory of interration says that virtual world providers should be able to avail the legal protections that are afforded under the ''magic circle''118 idea. What this means is that a virtual world provider should be able to interrate by creating a pure play virtual world without any interjection of real currency into the virtual world. In return the virtual world's use of real and personal property will not be subject to real life laws. This idea has some support in the legal arena. In a game of professional football, for example, once the players sign a contract and start playing they are considered to be in the ''magic circle''. The players agree to conform to certain actions and are protected from tort liability.119 Should the players deviate from the acceptable actions then they open themselves for legal actions. Bartle's argues that there are ''pitfalls in considering virtual property rights''. There are five pitfalls according to him. The first pitfall looks at the concept of virtual property and questions whether virtual property is a meaning full concept? In response he argues that ''within the virtual world itself, property is a meaningful concept, but within the real world it is not meaningful in the same way unless the virtual world explicitly recognizes it''. Suffice to say that if real money is involved in property in a virtual world, then property is a meaningful concept in the real world. The second pitfall states that if virtual property is accepted as a concept then the developer becomes a custodian with responsibilities rather than an owner. Commodification is a real concept and once an owner decides to allow real world currency and other items to enter the virtual world, the magic circle (interration) protection is void. Thus the developer has a choice to be an owner or become a custodian with responsibilities. The third pitfall states that ''virtual worlds aren't games, but almost all of them use the same conceit: players agree to give up some of their real-world freedoms in order to gain new freedoms and benefits''. Virtual worlds can have a combination of real life laws as well as the ''magic circle'' rules of play. The degree to which a virtual world leans towards one end or the other will define the type of players its attracts. The fourth pitfall is dealing with the idea of interference with player enjoyment of the game due to monopolies by large organized professional players who are able to get objects because of their player level and professional organization. There is no doubt that this behaviour is a serious problem and does interfere with player enjoyment. The solution is to

116 Richard Bartle, The Pitfalls of Virtual Property (2004), http://www.themis-group.com/uploads/Pitfalls%20of%20Virtual%20Property.pdf ( accessed 7/23/2010).

117 Supra, note 54.118 Johan Huizinga, Homo Ludens 13 (1938). A copy translated copy is available at http://www.amazon.com/Homo-

Ludens-Johan- Huizinga/dp/0807046817#reader_0807046817 (accessed 7/21/2010). Huizinga states that play is ''an activity connected with no material interest and no profit can be gained by it''.

119 RESTATEMENT (SECOND) of TORTS § 50 cmt. B, illus 5 (1965) (shows that even offside tackle is within scope). Also see Vendrell v. Sch. Dist. No. 26C, Malheur County, 376 P.2d 406 (1962) (football tackle).

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craft play rules and use real life laws to prevent such behaviour. Game designers have to be mindful of such issues while designing a virtual world. The final pitfall is to do with affording IP120 rights to participants. IP rights can be afforded to participants in a limited fashion. IP rights can be obtained in the usual manner through patents, trademarks, copyright and trade secrets. The option of no IP rights is problematic as it carries with it the usual misuse of achievements by others without any due regard to the creator or the owner. Bartle concludes by saying '' the biggest pitfall of virtual property is this: the uncertainty of its status in law''. This is absolutely true and this thesis is removing this uncertainty by proposing concrete solutions in law. The main arguments against regulating virtual property have been mentioned here, in the very next section we shall define a definition and theory of virtual property. It is important to understand that as of today virtual property does not exist in law in the United States. This thesis is proposing that virtual property should be legislated as a type of property and be governed by a set of legal laws.

Another important reason for such legislation is to do with economics and international competition. Virtual worlds have a thriving economy similar to a real world economy.121 In 2010 the virtual economy of a popular virtual world, Second Life, grew to an all time high. Over half a million residents spent over $160 million in user-to-user transactions.122 The value of Linden dollars exchange for real U.S. dollar was U.S. $ 31 million.123 In order to classify a virtual economy as a real economy there are various questions124 raised: (1) What the goods and services sold in the virtual economy? (2) Is it possible to calculate nominal and real GDP and price levels in a virtual economy? (3) Can the structures of virtual world create predictable economic behaviour? The study concluded that '' the conditions may be virtual, but the players in them are very real and apparently quite rational in the aggregate—at least in their economics.''125

The government has an interest in maintaining a vibrant and stable virtual economy, free of crimes with actual rights for the participants. Eventually, virtual worlds will provide a rich tax base.126 United States is already falling behind in terms of affording property rights and other legal protections to virtual worlds, as compared to China, Australia, Taiwan and South Korea. Participants of virtual worlds may shift to well regulated virtual worlds in those countries and then U.S. based virtual worlds will lose participants. Thus

120 IP stands for Intellectual Property.121 Edward Castronova et al, As Real As Real: Macroeconomic Behaviour in a Large-Scale Virtual World, 11(5)

Sage Publications 685, 685-707 (2009) (discussing macroeconomic behaviour in virtual worlds).122 http://blogs.secondlife.com/community/features/blog/2010/04/28/second-life-economy-hits-new-all-time-

high-in-q1-2010 (accessed 8/5/2010).123 http://wiki.secondlife.com/wiki/Linden_Lab_Official:Xstreet_Currency_Exchange (A good explanation of the

Linden $ to U.S.$ exchange is described here) (accessed 7/23/2010).124 See supra, note 123.125 See supra, note 126.126 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1274731 (accessed 7/22/2010).

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reducing the virtual economy of U.S. based virtual worlds. China, Taiwan and Korea are moving in the direction of affording property rights to players. Li Hongchen v. Beijing Arctic Ice Technology Development Co.127 was a Chinese case decided by the Beijing Second Intermediate Court. Li Hongchen lost his virtual property to a third party when his account was hacked. The lower court ruled that Beijing Co. has the obligation to restore the rights of the stolen property to Hongchen. The court of appeals (Beijing Second Intermediate Court) affirmed the decision. The court basically determined that Hongchen had property rights against the ''world'' rather than the against the person who committed the wrong. In a Taiwanese case, a defendant was found guilty of cheating the victim by selling virtual equipment. A Dutch court in Leeuwarden, Netherlands, ruled that stealing virtual property is a crime.128 It is becoming clearer and clearer that virtual world actions will have real world consequences and hence courts in every jurisdiction will be forced to decide the occurring issues. Many jurisdictions will be willing to act pro-actively and create legislation to deal with the various virtual world issues. One area that is of particular importance is the area of property rights, as without property rights other issues will be difficult to deal with. A definition and a theory of virtual world is warranted before a discussion of virtual property rights can be undertaken. 1. Definition and theory

This section will answer the question whether virtual property should be regulated, if it is to be regulated then who should regulate it and how?

No absolute definition exists. Many have tried to define the term.129 A new definition is as follows: Virtual Property is any real or personal property that is afforded property rights in a virtual world. The property right is obtained as soon as the transaction is registered by the virtual world service provider.130 Property rights may be obtained through the same mechanisms as are obtained in real life. Once those rights are obtained the property should be available for the property owner to use it as permitted by property law. There is no reason why real life property rights laws cannot be applied to virtual property. Looking back at the theories of property mentioned above, the author could not find any reasons in those theories that prevent the affording of virtual property rights to virtual assets. Persistence131 of objects is often considered as an hindrance to virtual property rights, in real world property does not have to be persistent, for example, suppose a person bought a goat and went to sleep, the goat was slaughtered overnight for a meal, the next morning the

127 w ww.chinacourt.org/public/detail.php?id=143455 (accessed 7/21/2010, translated via Google).128 http://www.pcworld.com/article/152673/.html?tk=rss_news (accessed 7/21/2010).129 Joshua Fairfield, Virtual Property, 85 B.U.L. Rev. 1047,1050 (2005).130 A external legal recording is also required as shall be discussed later.131 Persistence is the idea that an object remains with a user even after he logs off.

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goat was gone, it still was his property. Therefore, persistence is not a requirement to obtain property rights. Why is it important to have virtual property rights132 defined and made law?

Currently virtual property is governed via TOS agreements and EULAs.133 The famous Bragg134 case illustrates a vital point why TOS and EULAs are heavily sided with the service provider leaving the property owner with no recourse. Excerpts from the Bragg case are shown below.

[S]econd LifeThe defendants in this case, Linden Research Inc.(“Linden”) and its Chief Executive Officer, Phillip Rosedale, operate a multiplayer role-playing game set in the virtual world known as “Second Life.” Participants create avatars to represent themselves, and Second Life is populated by hundreds of thousands of avatars, whose interactions with one another are limited only by the human imagination. According to Plaintiff, many people “are now living large portions of their lives forming friendships with others, building and acquiring virtual property, forming contracts, substantial business relationships and forming social organizations” in virtual worlds such as Second Life. Compl. 13. Owning property in and having access to this virtual world is, moreover, apparently important to the plaintiff in this case.B.Recognition of Property RightsIn November 2003, Linden announced that it would recognize participants’ full intellectual property protection forthe digital content they created or otherwise owned in SecondLife. As a result, Second Life avatars may now buy, own, andsell virtual goods ranging “from cars to homes to slot machines.”Most significantly for this case, avatars maypurchase “virtual land,” make improvements to that land, exclude other avatars from entering onto the land, rent the land, or sell the land to other avatars for a profit. Assertedly, by recognizing virtual property rights, Linden would distinguish itself from other virtual worlds available on the Internet and thus increase participation in Second LifeDefendant Rosedale personally joined in efforts topublicize Linden’s recognition of rights to virtual property.For example, in 2003, Rosedale stated in a press release made

132 A recent case is in court, the issue is whether virtual property rights exist in Second Life, http://www.socialtimes.com/2010/05/real-legal-rights-to-virtual-property-on-second-life/ (accessed 8/12/2010).

133 Supra, note 47.134 Supra, note 56.

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available on Second Life’s website that:

Until now, any content created by users forpersistent state worlds, such as Everquestor Star Wars Galaxies , has essentiallybecome the property of the company developingand hosting the world. . . . We believe ournew policy recognizes the fact thatpersistent world users are making significantcontributions to building these worlds andshould be able to both own the content theycreate and share in the value that iscreated. The preservation of users’ propertyrights is a necessary step toward theemergence of genuinely real online worlds.

Press Release, Linden Lab, Linden Lab Preserves Real World Intellectual Property Rights of Users of its Second Life Online Services (Nov. 14, 2003). After this initial announcement, Rosedale continued to personally hype the ownership of virtualproperty on Second Life. In an interview in 2004, for example, Rosedale stated: “The idea of land ownership and the ease with which you can own land and do something with it . . . is intoxicating. . . . Land ownership feels important and tangibleIt’s a real piece of the future.” Michael Learmonth, VirtualReal Estate Boom Draws Real Dollars, USA Today, June 3, 2004. Rosedale recently gave an extended interview for Inc. magazine, where he appeared on the cover stating, “What you have in Second Life is real and it is yours. It doesn’t belong to us. You can make money.” Michael Fitzgerald, How Philip Rosedale Created Second Life, Inc., Feb. 2007. Rosedale even created his own avatar and held virtual town hall meetings on Second Life where he made representations about the purchase of virtual land. Bragg Decl. 68. Bragg “attended” such meetings and relied on the representations that Rosedale made therein. Id.C.Plaintiffs’ Participation in Second LifeIn 2005, Plaintiff Marc Bragg, Esq., signed up and paidLinden to participate in Second Life. Bragg claims that he was induced into “investing” in virtual land by representations made by Linden and Rosedale in press releases, interviews, and through the Second Life website. Bragg Decl. 4-10, 65-68. Bragg also paid Linden real money as “tax” on his land. By April 2006 Bragg had not only purchased numerous parcels of land in his Second Life, he had also digitally crafted

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“fireworks” that he was able to sell to other avatars for a profit. Bragg also acquired other virtual items from other avatars.The dispute ultimately at issue in this case arose onApril 30, 2006, when Bragg acquired a parcel of virtual landnamed “Taessot” for $300. Linden sent Bragg an email advising him that Taessot had been improperly purchased through an “exploit.” Linden took Taesot away. It then froze Bragg’s account, effectively confiscating all of the virtual property and currency that he maintained on his account with Second Life. Bragg brought suit against Linden and Rosedale in the Court of Common Pleas of Chester County, Pennsylvania, on October 3, 2006. Linden and Rosedale removed the case to this Court (doc. no. 1) and then, within a week, moved to compel arbitration.135

The above excerpt show how the TOS and EULAs are being used to eliminate property rights. Unfortunately, no real legal issues were decided in this case, it was finally settled for an undisclosed amount. The ease with which a property right can be taken away by a service provider using an unconscionable contract136 is worrisome. The equilibrium between contract law and property law in real life is a crucial element in the proper functioning of the property rights system. Virtual property rights are necessary to avoid contracts and intellectual property laws from disturbing the property rights-contracts equilibrium.

Existing property laws can be modified to accommodate virtual property. The regulation of virtual property laws can easily be done by creating a virtual office of the same institutions that regulate real world property rights. Courts can also have a virtual presence and hear virtual cases. There are many different types of issues that arise in virtual property cases. The most challenging issue is the issue of jurisdiction, as virtual world residents are spread out across the globe. A conflict may arise between a resident in U.S. and in Australia, for example, such conflict resolution is certainly a challenge. Resolving these issues are critical to the success of virtual property rights.

2. Issues arising in virtual property

Jado Singh, a resident of California, U.S.A., owns a church in a virtual world. There are thousands of worshippers and the church is thriving. A few months later, the adjacent land to the church, owned by Kale Lunde, has a building structure on it. This structure is a social club. Kale Lunde is a resident of Singapore. The church pastor notices the pornographic

135 Supra, note 56.136 http://www.lectlaw.com/def2/u055.htm (accessed 7/22/2010).

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and vulgur acts that are openly taking place in the club. The pastor complains to Jado Singh, who then complains to the virtual world provider. The provider replies that they do not get involved in disputes between users, and that that Mr. Lunde bought the land legally and there is no conditions in the TOS that prohibit the building and operating of a club, including a vulgur club. The issue the pastor faces is that his congregation is constantly complaining of the behaviour of the club members and are threatening to abandon the church. This would imply that the church will lose income and the cost of its construction will also be lost. Ten thousand American dollars was paid for the acquisition and development of the church. The virtual world has servers on which the land resides in may different jurisdictions including China, Japan and Romania. What can Jado Singh do to save his church, is he just going to abandon his church and lose the recurring income and the cost of ten thousand dollars?

The most important issue arising here is the issue of virtual world jurisdiction. Which court can claim personal jurisdiction? A California court, a Singaporean court or some other court? In order to understand Cyberspace jurisdiction an analysis of International Law137 is necessary. The ''effects'' doctrine138 of International Law states that if injury is caused by a nation's actions (by an individual) to another nation (or an individual) then jurisdiction is claimed by the nation where the injurious effect occurred. Once a California judged is convinced on the basis of the ''effects'' doctrine, the court will try to apply the standard of ''purposefully availed''. The ''purposefully availed'' standard will require Mr. Singh to show evidence that the club is an intentional interaction directed towards the church owned by a resident of California.139 Personal jurisdiction may also be claimed when there is contact with the state of California.140 This is not the case here. Even if a California court assumes jurisdiction then what can it do? If the acts performed at the club are not in violation of any laws in Singapore or in California then the court has very little choice to enforce any injunctions against the club. Traditionally such issues fall under property laws and are resolved via zoning laws.141 The issue for a California would be that virtual property does not exist in law. Even if intellectual property rights are afforded to the club and the church, there is no remedy available via intellectual property laws. The court could try to create law and impose zoning laws, it can order the service provider to artificially separate the the club and the church. In the virtual world this is technically feasible. Courts cannot start imposing on international law and start controlling the internet, although they can

137 International Law is a set of rules and principles dealing with the relationship of nations with each other, between a nation and individual and between international organizations. http://www.un.org/en/law/ (accessed 8/3/2010).

138 RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE U.S. § 401 cmt. a (1987).139 See ALS Scan v. Digital Consultants, Inc., 293 F.3d 707 (2002).140 See Barrett v. Catacombs Press , 44 F. Supp. 717 (1999). (Personal jurisdiction).141 See Village of Euclid, Ohio v. Ambler Realty Co., 272 U.S. 365 (1926) (Landmark zoning case).

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impose such restrictions142 on the club being seen in the U.S., but this will not completely solve the church owner's problem.

The church owned by Jado Singh has various pieces of valuable virtual personal property, such as a valuable statue bought for U.S. $6000 and a samurai sword used for ceremonies which was bought in an auction for U.S. $500. The pastor noticed the church burning, one night, while he was getting ready to go home. Virtual fire-fighters were called and they put off the fire but the damage was extensive. Many witnesses came forward claiming that they saw four men carrying the statue and the sword from the church, while the church wasburning. The virtual world service provider once again cited that it cannot provide any compensation to Mr. Singh. It emerged that the auction from where the sword was bought was an illegal action, the sword was obtained via “backward browsing''. According to the TOS of the service provider, backward browsing is illegal and the service provider has the right to shut down Mr. Singh's account thus denying him any access to the virtual world. The service provider did exercise its right and banned Mr. Singh from using the virtual world without offering any compensation.

The biggest issue Mr. Singh has right now is the fact that his account has been blocked and he cannot access his church. He is accused of ''backward browsing''. Backward browsing in the words of Jason Archinaco143 is as follows:

[W]hat he did isn’t in violation of that law. It’s just ''backward browsing''. You type in a URL instead of clicking on a link. The media does it all the time. There’s even a situation in California where it came up, and we put this in a brief. A political opponent of Governor Arnold Schwarzenegger downloaded an audio file of some really inflammatory statements made by Schwarzenegger and published them. The person found them by typing web addresses in his web browser until he located them. Schwarzenegger tried to have the person prosecuted. The California Attorney General and the California Highway Patrol conducted an investigation and concluded that there was no crime to charge there because more than one person could access the web page that way, and there was no security device preventing ''backwards browsing''. Look, anybody could access the pages the way Bragg did. He just typed an address in a browser. People do that whenever they take the last

142 See Toys “R” Us, Inc., v. Step Two, 318 F.3d 446 (2003) (Personal jurisdiction to ban business).143 Jason Archinaco was the attorney representing Mr. Bragg in the Bragg case. See supra, note 56.

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part of a web address off and hit enter to pull up a different page. Linden Lab made the web pages and put them on the internet. Linden Lab published the parcel numbers that anyone could type in. And they did nothing to prevent this. They had no security, no passwords, nothing. It is outrageous for them to put a page on the internet and then accuse someone of committing a computer crime for accessing it using information they gave him. They use fancy words like ''synthesize a URL144'' to try to dress it up, but they’re accusing of typing an address in a web browser. That’s it. Typing an address in a web browser is not a crime.145

Certainly, backward browsing is not an issue. A California court can assume personal jurisdiction and Mr. Singh can file a complaint against the virtual world service provider. The concept of ''unconscionability''146 of TOS agreement can be used to negate the effects of the TOS agreement. Once the court finds the TOS contract as a contract of adhesion, it will be easy to settle as was done in the Bragg case. It is the position of this thesis that virtual property should be recognised as property in the same sense as it is in the real world. Once such a recognition is afforded then the disputes in virtual property will be easily settled according to the well tested laws of property rights. Assuming that the access is restored to the virtual world Mr. Singh has the issue of theft of personal property and arson.

Virtual arson147 can legislatively be made a crime, similar to arson148 in real world. Virtual arson needs to be defined. Virtual arson is the malicious, intentional or reckless burning or exploding of an object of dwelling in a virtual world. Punishment for the guilty can range from virtual punishments to real life monetary damages. Virtual theft is another crime that can be defined and made law legislatively. Virtual theft can be defined as a crime in which an object (avatar)149 intentionally and fraudulently takes the personal property of another without permission or consent and with the intent to convert it to the taker's use. Virtual theft can occur in various ways: through fraud and via various software bugs.150 Personal property must be returned where the “virtual theft” occurred unintentionally but no crime has been committed. Currently, absent any hacking, it would be extremely

144 URL stands for Uniform Resource Locator. http://www.merriam-webster.com/dictionary/url (accessed 8/2/2010).145 http://virtuallyblind.com/2007/08/28/jason-archinaco/ (accessed 8/2/2010).146 See supra, note 49.147 No definition of virtual arson exists in law.148 http://legal-dictionary.thefreedictionary.com/arson (accessed 8/2/2010).149 Avatar is an extension of a real human being. 150 A software bug is an error or flaw in programming that produces an undesirable effect.

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difficult to prove theft in a court of law. Although consumer protection laws may be used to recover damages from the service provider. The service provider will protect itself through TOS agreements but as mentioned earlier, if they can be shown to be a contract of adhesion then there may be a chance to recover damages through a court in California. If the account is hacked or other unlawful means are used then other laws such as CFAA151 can be used to prosecute but violating terms of service agreements is not a crime according to a recent ruling.152 A recent Netherlands case153 is illustrative. A 15-year old boy with his 14-year old companion forced a 13-year old boy to log into Runescape154 and give him money and virtual goods he owned in the virtual world. The defendant took the victim's virtual money and virtual goods. The judge ruled that ''goods don't have to be material for the law to consider them stolen.'' The defendants were guilty of theft. The 15-year old defendant was sentenced to 200 hours of unpaid work and the 14-year old was given 160 hours of unpaid service work. By this judgment the Netherlands created a virtual theft law. A similar law is what this thesis is proposing. If such a precedent existed in the U.S. Mr. Singh would prevail.

The final issue remaining in the above case is the issue of virtual evidence. Virtual world service providers back up data regularly. This provides a wealth of evidence. In most virtual worlds there are chat logs, voice and video recordings, images, transaction records, and histories. The early evidence of acceptance of these evidences by a court was seen in the Bragg case. No objections were raised in court and the court readily accepted the evidence. A key issue of interest is how long should the service providers retain virtual world data? It would be optimal from a litigation and law enforcement point of view to keep the data indefinitely but it might be more practical to retain it for two years.155 A full discussion of admissibility of virtual evidence is beyond the scope of this thesis.

Alison Silverman is a 66 year old lady who bought virtual land and paid real U.S.$ 25,000. Few years later, Alison died. Her son Mark informed the virtual world provider of her death. The service provider

151 http://www.law.cornell.edu/uscode/18/1030.html (accessed 8/12/2010).152 See Facebook v. Power Ventures. http://www.eff.org/cases/facebook-v-power-ventures (accessed 8/14/2010).153 http:// www.rechtspraak.nl/ljn.asp?Ijn=BG0939 (Dutch cases database, accessed 8/13/2010, translated via Google).

The proving of guilt was based on the following arguments:a. The purpose of the Article on theft is to protect (assets, resources, money)b. Does the item have value?c. Is it Tangible?d. Taking away---victim lost power over amulet and mask while the defendant gained power over the same.

154 http://www.runescape.com/ (Runescape is a massive 3d multiplayer adventure, accessed 8/10/2010).155 http://www.govtrack.us/congress/billtext.xpd?bill=h111-1076 (Internet Stopping Adults Facilitating the

Exploitation of Today's Youth Act of 2009, accessed 8/11/2010).

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promptly closed her account and auctioned her property. Mark is an avid virtual world player and when he found out of the auction, he contacted an attorney to recover his mother's virtual property, what can the attorney do?

The New York attorney advises Mark that according to real life property theory, Mark should get the property as he is the only family member Alison had. He also mentioned that virtual property is not recognized in law and hence he will have to file a law suit and try to make the court determine the rightful owner of Alison's property. The court can dismiss the case citing that no property rights are defined in law for virtual property. It can also create virtual property law and award the property to Alison's heir. The outcome in such situations can be made more certain if the virtual property rights are codified into law.

Ling bought a huge piece of virtual island for U.S. $ 560,000. The island was put in her basket. She left the island alone for a few months while she was building her real life mansion. After she returned to the virtual world she noticed that the island was missing from her tray. The island existed but she was not the owner. She complained to the service provider and the reply she got was that she was never the rightful owner, the previous owner who she paid the real money is nowhere to be found. The service provider actually sold the island to another owner and deleted all records of any transactions between Ling and the previous owner. In fact, the date of first allotment of the island was modified to show that it was not available when Ling claims she bought it. Ling is shocked and looking for a good lawyer.

The lack of any digital evidence of the acquisition of the island by Ling is indeed a serious matter and without any evidence it would be impossible to claim ownership, even in intellectual property rights (if not registered with the patent office). If some evidence of the sale of the island to Ling can be discovered then a law suit may be brought based on the common-law cause of action of conversion.

[U]nder this traditional construct, conversion was viewed as "the 'unauthorized assumption and exercise of the right of{**8 NY3d at 289} ownership over goods belonging to another to the exclusion of the owner's rights' " (State of New York v Seventh Regiment Fund, 98 NY2d 249, 259 [2002], quoting Vigilant Ins. Co. of Am. v Housing Auth. of City of El Paso, Tex., 87 NY2d 36, 44 [1995];see e.g. Colavito v New York Organ Donor Network, Inc., 8 NY3d 43, 49-50 [2006]; Industrial & Gen. Trust, Ltd. v Tod, 170 NY 233, 245 [1902]). Thus, the general rule was that "an action for

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conversion will not normally lie, when it involves intangible property" because there is no physical item that can be misappropriated (Sporn v MCA Records, 58 NY2d 482, 489 [1983]).Despite this long-standing reluctance to expand conversion beyond the realm of tangible property, some courts determined that there was "no good reason for keeping up a distinction that arose wholly from that original peculiarity of the action" of trover (that an item had to be capable of being lost and found) and substituted a theory of conversion that covered "things represented by valuable papers, such as certificates of stock, promissory notes, and other [*6]papers of value" (Ayres v French, 41 Conn 142, 150, 151 [1874]). This, in turn, led to the recognition that an intangible property right can be united with a tangible object for conversion purposes (see Agar v Orda, 264 NY 248, 251 [1934]; Iglesias v United States, 848 F2d 362, 364 [2d Cir 1988]).

"[I]t is the strength of the common law to respond, albeit cautiously and intelligently, to the demands of common sense justice in an evolving society" (Madden v Creative Servs., 84 NY2d 738, 744 [1995];see Hymowitz v Eli Lilly & Co., 73 NY2d 487, 507 [1989], cert denied 493 US 944 [1989]). That time has arrived. The reasons for creating the merger doctrine and departing from the strict common-law limitation of conversion inform our analysis. The expansion of conversion to encompass a different class of property, such as shares of stock, was motivated by "society's growing dependence on intangibles" (Franks, Analysing the Urge to Merge: Conversion of Intangible Property and the Merger Doctrine in the Wake of Kremen v. Cohen, 42 Hous L Rev at 498). It cannot be seriously disputed that society's reliance on computers and electronic data is substantial, if not essential. Computers and digital information are{**8 NY3d at 292}ubiquitous and pervade all aspects of business, financial and personal communication activities. Indeed, this opinion was drafted in electronic form, stored in a computer's memory and disseminated to the Judges of this Court via e-mail. We cannot conceive of any reason in law or logic why this process of virtual creation should be treated any differently from production by pen on paper or quill on parchment. A document stored on a computer hard drive has the same value as a paper document kept in a file cabinet.156

Using the above case it may be possible to sue for conversion.

156 See Thyroff v Nationwide Mut. Ins. Co.2007 NY Slip Op 02442 [8 NY3d 283] (certifying that conversion can occur in digital property). http://www.courts.state.ny.us/reporter/3dseries/2007/2007_02442.htm (accessed 7/29/2010).

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There may be consumer fraud and other laws that may be used here. It would have been much easier if there was a virtual property law requiring registration and recording157 of virtual property title,which comes with legal protections and due diligence, so that such issues may be avoided. The recording authority in each jurisdiction can easily create a virtual property registration unit and process all virtual property registrations. This requires minimal cost and effort as the principles and regulations remain the same with minor modifications.

Aisha was a tenant in a posh villa in second life, a popular virtual world. She was paying her rent on time and was a model resident. She had a lease contract for a year with a stipulation that the landlord can evict the tenant without cause and at any time without notice. One night Aisha came back from a party and found herself unable to enter her villa. By click of a button ''Reclaim Land..'', the landlord evicted Aisha from her villa. Aisha has no where to go and her parents are coming in a week. She looks for a landlord-tenant dispute lawyer.

[I]mportant things to be aware ofCaveat emptor— buyer beware! This isn't meant to scare you, but encourage you to be assertive when looking for rental land. Just as there are all kinds of people in the world, there are all kinds of landlords with individual styles, some of which may mesh better with you depending the personalities involved. With that in mind:The landlord always has the final sayWhen renting land on a private estate, the "owner" in ABOUT LAND – GENERAL shows your name, but the landlord reserves the right to change that at any time. This means they can reclaim the land and offer it to someone else on a whim. Linden Lab doesn't mediate if your landlord is hostile.If you have a consistently great relationship with your landlord, you don't have to worry about getting kicked out. But if you find yourself getting into quarrels, you may want to consider relocating. Hopefully you've done your homework to minimize getting into such a situation.Always check the covenant before you buyThe covenant is the terms and conditions of rental land, always shown in ABOUT-LAND COVENANT. In other words, what you can and can't do if you rent this land. For example, there may be a dress code of how avatars should appear to match the theme. Covenants often include a code of conduct in addition to Linden Lab's Community standards.

157 See http://apps.leg.wa.gov/rcw/default.aspx?cite=65.08&full=true for an example of real life recording laws and procedures from the state of Washington, U.S.A. Similar procedures can be applied in virtual worlds (accessed 7/23/2010).

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Some rules that apply on mainland may not apply on an estate. For example, a landlord could decree "Combat is allowed for all!", then make their land a constant war zone where no one could be accused of "griefing with weapons" because it's part of the theme.A landlord can change the covenant at any time, but shouldn't do so without notifying tenants first or even more considerate, soliciting their input. (Similar to how you wouldn't like it if your cell phone provider changed your contract in a detrimental way without notice.) The last-modified date of a covenant is always shown.158

The above contract is so sided with the landlord, that it would be possible to get it declared unconscionable.159

The judge may then apply real life landlord-tenant law principles in resolving the disputes. The judge may also dismiss the (landlord-tenant dispute) case based on the principle that no property exists. There are no precedent cases. If virtual property existed and landlord-tenant laws were available then this matter would be settled in a more certain manner. The court can always create virtual property laws and apply real life landlord-tenat laws to resolve this matter.

A virtual landlord-tenant law160 would not allow such immediate eviction of a tenant. Summary Eviction Proceedings161 would have to be initiated.

Choi owns a large hotel and one morning when he arrived at his hotel he found four buildings built adjacent to his hotel. The four pieces of land were bought by Mr. Fuji, he built four hotels on his land. Now Choi's hotel is landlocked and no one can go to his hotel without passing through Mr. Fuji's property. Choi is hearing from his customers that Mr. Fuji is denying access to most of Choi's customers. The virtual world designers should never have allowed this to occur but now since real life cash is involved it is a serious problem because it takes away from Choi's real life income.

Real life real estate law provides a solution for this problem via ''Easements''. An affirmative easement is a non-possessory right to use the land in possession of another.162 This is

158 http://wiki.secondlife.com/wiki/Renting_land (accessed 8/12/2010).159 See supra, note 49.160 http://apps.leg.wa.gov/rcw/default.aspx?cite=59.18&full=true (An example of State of Washington's landlord-

tenant laws, accessed 7/23/2010).161 http://www.courts.state.ny.us/ithaca/city/webpagelandlordtenantinst.html (New York's law on Summary Eviction

Proceedings, accessed 7/23/2010).162 http://legal-dictionary.thefreedictionary.com/easement (accessed 7/21/2010).

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considered an appurtenant easement. This means that the easement stays with the land. An example of an easement code from the State of New York is shown below:

§ 335-a. Easements of necessity. The owner of any lot, plot, block, site or other parcel of real estate being a subdivision or part of a subdivision of any larger parcel or parcels of real property shown upon

a map of said parcel or parcels of real property and of its subdivision or subdivisions, filed in the office of the county clerk or of the register of deeds of the county where the property is situated, prior to the sale or conveyance of such lot, plot, block, site or other parcel, or subdivision thereof by the seller thereof, upon which map any road or street is indicated or shown as giving access to or egress from any public road or street to such lot, plot, block, site or other parcel of real estate thereon indicated or to any part thereof, sold or granted after such filing, and the owner of any lot, plot, block, site or other parcel of real estate, the conveyance whereof shall specifically give the right of access to or egress from the same by any private road or street over lands belonging to the maker of such conveyance and which road or street is described in such conveyance, may, when necessary to the enjoyment of the lot, plot, block or site or other parcel of real estate so sold or conveyed and when the same is not bounded by a public road, lay, beneath the roads or streets indicated and shown upon such map or described in such conveyance as giving access to or egress from any public road to such property so sold or conveyed as aforesaid, wires and conduits for the purpose of supplying the said property with electric light and telephone service. Such wires or conduits shall be laid only on condition that the private roads or streets on which the owner has the right of access to or egress from such property shall be restored as nearly as possible to their original condition and that the person or persons entitled to the fee of such private roads or streets or having an easement over the same shall be compensated for actual damage occasioned by the laying of such wires or conduits. Nothing herein contained shall be deemed to affect in any manner lands acquired by the city of New York for the

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purpose of construction or development of its water supply system. 163

The above example show that easement laws exist to provide relief in real life real estate right of way issues. Such laws are available in most jurisdictions. It would be a simple matter for Choi to apply for easement by necessity, but since virtual property is not defined in law and such relief is not available. The service provider is not inclined to provide relief, hoping that Choi sells his property at a much lower cost to the service provider which can then create the necessary easements and modify the property in order to be able to sell it at a much higher price. Thus virtual property codification in law is necessary. Upon filing of a law suit a court may be inclined to create virtual property rights and allow an easement. This would also serve Choi's interest. The idea is that virtual property rights have to exist to provide relief in such serious situations.

V. Model principles for virtual property regulation

Various hypothetical situations were looked at in the previous section to identify situations in which virtual property rights would be a necessity. The creative result of this thesis leads to the following model principles upon which virtual world developers and legislators can look upon to formulate policies in virtual world design and virtual property law.

Principle I: All virtual worlds must either be interrated or regulated.

Principle II: The Effects clause of International Law will determine jurisdiction.

Principle III: Legislation must be passed to create virtual presence of courts and all bodies dealing with property registration and regulations.

Principle IV: Federal and state legislation must be passed requiring the modification of property laws to include virtual property.

Principle V: All rules of civil and criminal procedures must be modified to include virtual procedures.

Principle VI: ABA must help create certifications in virtual law.

Principle VII: All non interrated virtual worlds must incorporate broad features of property laws in their design of virtual land and other objects.

Principle VIII: Virtual world providers must modify their TOS and EUL agreements to avoid the contracts being declared unconscionable.

163 http://law.onecle.com/new-york/real-property/RPP0335-A_335-A.html (accessed 7/21/2010).

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Principle IX: All property (virtual and intellectual) must be registered with the appropriate external recording body.

Principle X: Forfeiture of virtual property can only occur if a real life crime is committed that allows forfeiture of property.

Principle XI: Eminent domain laws must ensure that fair market value of virtual property is paid, including the value of intellectual property.

Principle XII: All property must remain the property of the original owner in cases where a computer system has been hacked or compromised and a third party gains ownership.

Principle XIII: Zoning of properties can best be done by the service provider with supervision from a supranational body.

VI. Conclusions

It has been shown above that the fundamental theories of real property ownership supports the ownership of virtual property. Regulation of virtual property is necessary to avoid countless litigations in every jurisdiction as the internet spans globally. The virtual world service providers cannot be depended upon to regulate the virtual worlds as they are motivated by profits and will adopt every means possible to gain any and all unfair advantages. The TOS and EUL agreements are one sided and many times deemed unconscionable by the courts. Players in virtual worlds have invested billions of real world currency and therefore are subject to real economy pressures. These pressures are complicated and subject to all the real life ills that accompany real economies. Therefore it is only logical to subject such properties in virtual worlds to time tested real life property laws, subject to accommodations required by the digital world. The major arguments against the regulation of virtual property were presented and shown that they can easily be refuted. The claim that regulated virtual property will take the fun out of game playing and hinder the creativeness of game designers is simply answered by say that those who desire to be creative and just play without any real world consequences should stay in the magic circle and interrate their play world. Jurisdiction by the courts is of key importance since the audience is located globally, to solve this issue this thesis proposed that the courts have to apply the effects clause of international law. Courts in every jurisdiction have to extend there reach to the virtual worlds by opening a virtual court unit. This will allow processing of virtual world disputes much easier as everything can be done electronically unless there is a need for physical presence by the litigants. Cyber-notaries can verify identities and since electronic signature164 is legally binding it will be possible to accomplish most litigations electronically. Virtual world revolution is not going to slow down165 any time soon and more

164 15 U.S.C § 7001, http://www.law.cornell.edu/uscode/html/uscode15/usc_sec_15_00007001----000-.html (accessed 7/24/2010), for other jurisdictions see http://en.wikipedia.org/wiki/Digital_signatures_and_law (accessed 7/22/2010).

165 http://news.bbc.co.uk/2/hi/technology/8425623.stm (accessed 7/23/2010).

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and more complex issues and legal disputes are going to occur, it is the conclusion of this thesis that a legal system be implemented (through legislation by global jurisdictions) as soon as possible to avoid spending valuable resources and time on countless litigation worldwide. More serious issue is that if disputes are not resolved then serious real life crimes may become a reality as participants may be willing to obtain vigilante justice.166

166 http://news.bbc.co.uk/2/hi/technology/4072704.stm (accessed 7/22/2010).

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