Virtual Worlds, Real Litigation
Though the U.S. Supreme Court cut back this week on Americans’ rights to sue for equal pay in the real-world workplace, our rights to sue for wrongs visited upon our imaginary selves in imaginary game worlds made some modestly countervailing gains.
“This has been one of the most important weeks in US virtual-world law in memory, perhaps ever,” says S. Gregory Boyd, an intellectual property attorney and games law expert at Kenyon & Kenyon.
First, in a 46-page ruling handed down Wednesday, U.S. District Judge Eduardo Robreno of Philadelphia allowed a player’s suit against Linden Lab, the maker of the popular online fantasy game Second Life, to go forward. In April 2006 Linden Lab seized Marc Bragg’s virtual property and expelled him from the game for allegedly violating its terms of use by using an “exploit” — a software trick, essentially — to buy virtual land in that world on the cheap. In October 2006 Bragg sued to recover the value of his virtual property, which he estimates at $6,000, as well as about $2,000 in U.S. currency that he had in a game-related account controlled by Linden Lab. “While the property and the world where it is found are ‘virtual,’” Judge Robreno wrote, “the dispute is real.” Though the game’s Terms of Use (i.e., the contract to which the user clicks his agreement before starting the game) required that such disputes be handled by arbitration in San Francisco, the judge found those arbitration provisions to be “unconscionable.” This was so, Judge Robreno found, even though Linden Lab offered to move the arbitration to Philadelphia and pay all of Bragg’s upfront fees. It was so, moreover, even though Bragg, who is himself a lawyer, might have seemed unusually well situated to understand the meaning of the Terms of Use.
Then, on the same day that the Bragg ruling came down, a player of Blizzard Entertainment’s wildly popular subscription-based online game, World of Warcraft, filed a nationwide federal class-action suit in Miami, Florida, against a company known as IGE (formerly International Gaming Entertainment). (Blizzard is a unit of Vivendi (VIVEF.PK).) IGE is in the business of facilitating so-called “real-money trade”; that is, it runs online exchanges where players of online games, including World of Warcraft, can buy and sell virtual currency and trinkets that have value in a particular game in exchange for real money, even though such transactions are typically forbidden by most games’ Terms of Use agreements. Plaintiff Antonio Hernandez, represented by G. Richard Newsome of Orlando, Florida, maintains that real money trade causes “pollution and interruption of the fantasy Subscribers paid for.” He alleges that IGE’s low-paid contract laborers in Southeast Asia “strip out scarce and limited virtual world resources,” devalue the in-game currency, and effectively put “honest” players at a disadvantage vis-a-vis unscrupulous ones. Hernandez says he spent more than $50 on the World of Warcraft software, more than $50 on its “Burning Crusade” expansion upgrade, and $15 per month in subscription fees. (World of Warcraft, which launched in North America in November 2004, is probably the most successful so-called “massively multiplayer online role-playing game” (MMORPG) ever marketed, with, currently, an estimated 8.5 million subscribers worldwide, according to Blizzard.)
Defendants IGE and Linden Labs each declined comment on the case against it, stating that it does not comment on pending litigation.
I have written before on the subject of real money trade in virtual worlds, both in a November 2005 Fortune feature story (”From Megs to Riches”), available here, and in a November 27, 2006 blog posting, available here, about the “Anshe Chung,” who is believed to be the first person to accumulate $1 million worth of real value entirely through machinations inside an online world (Second Life).
While some worlds, like Second Life, permit and facilitate real money trade, most, like World of Warcraft, forbid it. Still others, like Sony Online Entertainment’s EverQuest, have attempted to offer subscribers the choice of operating in versions of the world where it is permitted and other versions where it isn’t. (SOE is ultimately owned by Sony (SNE).)
Legally and factually, the more interesting of the two cases is the Hernandez class action. IGE has previously defended its business model by saying that it does not violate any game’s Terms of Use, because its employees do not play the games themselves, and, therefore, never enter into those so-called “click-through agreements.” IGE merely brokers trades between people that do play the game.
In the suit, however, Hernandez alleges that IGE, which is based in Hong Kong but has offices in Miami, Boca Raton, and Beverly Hills, is much more than a mere broker. In World of Warcraft, players can earn in-game currency, called gold, and other virtual items that bestow in-game powers or status by performing certain feats. The complaint alleges that IGE contracts with “hundreds” of “gold farmers” who are “often citizens of developing third world countries who spend up to 14 hours per day, or more, logged onto World of Warcraft collecting resources and World of Warcraft gold.” (Best story I’ve seen on the phenomenon of gold farming in China is a December 2005 New York Times article, available here.) Hernandez’s complaint claims that the IGE’s gold farmers use accounts that “are paid for, or controlled, directly or indirectly,” by IGE. He then accuses IGE of acting in a conspiracy with those gold farmers in ways that violate the consumer protection laws of Florida and the other 49 states, D.C., and Puerto Rico, which generally forbid “unlawful, unfair, unconscionable, deceptive and fraudulent business practices.”
Boyd, of Kenyon & Kenyon, says its hard to comment on the Hernandez case at such an early stage, but does say this: “Traditionally, the players have been harmed by this type of activity and not really had a voice against the people ruining the economies and diminishing the game play experience. Hopefully, this type of legal action will give them that voice.”
Well, readers, how do you feel about these unusual lawsuits, and how they should come out?
I agree IGE should be sued, I also believe PayPal should be sued as well. Ige and alot of these Virtual Goods For Sale sites use PayPal for there buying and selling of virtual currency and goods, Yet PayPal offers no protection to the buyer or the seller.
I am a living example of this, I arranged to sell my virtual currency. In a game called Final Fantasy XI to IGE. IGE offered me $703.76. I agreed and met up with their in game character and traded in my gil (In game money) I was told I would be paid in 24 hours to the PayPal account I had registered. Little more than 48 hours later no payments, IGE’s livehelp does not work, Email requests I send keep telling me to wait 24-48 hours while they look into why they don’t show the transaction happening on their end.
Now a week later I get a reply from IGE that I was paid, but they will not provide me with the PayPal transaction ID. So I called PayPal they told me, that they do no cover virtual goods in any shape or form. Yet they allow sites like IGE to use PayPal as a purchasing tool, so in the end only the consumer is screwed IGE gets its cake and eats it too while the customer gets the shaft.
I am also eager to join a suit against Gaia. Some story, we invested birthday money, purchasing directly from them, over $200 in the course of a couple of months. Suddenly they took her account. All her time, energy and work and money is just stolen away from her.
I’ve been in touch with a service rep “Tracey … for Gaia Online”. We’ve exchanged 3 messages so far. I’ve asked for the money or the account to be returned. I’ll keep you posted.
Along similar lines - are there any known lawsuits against online games which charge a fee and then do not provide the service? My son plays a game which we pay $20 per month for. At one point the game apparantly changed it’s Internet service provider and simply disappeared for 10 days while data was transferred. Meanwhile all the people who had paid for the service were left wondering what had happened. When the game came back online the owner said “it wasn’t my fault” and refused to make any refunds for the amount of time the game was not available. Any precedent here for reclaiming the money spent when service was not provided?
Mike Fisher, Seattle WA
>> If anyone out there is considering a class action suit against Gaia - let me know. I am irritated enough with them to join up.
It’s unfortunate that so many people believe irritation is sufficient grounds for a lawsuit. While I don’t believe the bar for litigation should be set quite so low, I’m glad you’re so vocal about your family’s problem with Gaia. It sounds like you received horrible customer service and future potential customers ought to know about it. The business they lose over how they treated you and your son is entirely earned.
Admittedly, I was blowing off some steam when I wrote that I was irritated enough to join a class action suit but, irritation would not be the cause for a suit.
Gaia has arbitrarily taken something of value from my son. The users agreement on the site did not prohibit the activity that they claimed. What does someone do once they have exhausted attempts to resolve an issue with a company that won’t even respond.
There are a lot of frivilous and ridiculous lawsuits out there. For me to sue Gaia over this one incident would add to that total but if this is a common issue for users of Gaia or other online games, it may be that legal action is the only way to make them sit up and pay attention. The loss of my son’s account and the numerous donations he(we) had made does not seem to have bothered them.
The question is whether or not you “own” a piece of “property” in the game. Gary has a very good point in that there is room in the EULAs of differnt games to handle this in different ways.
In fact in WoW you do not “own” anything in a real world sense. You are paying to play the game, not necessarily to enjoy it. If someone else in the community is ruining your experience, quit playing. You do not have a right to that form of entertainment.
It would be like suing the obnoxious guy behind you at a baseball game who was yelling and being a jerk. As long as he didn’t physically harm you or anything you really have no recourse. Your enjoyment was diminished, but sometimes a bad experience is part of the experience.
The next step is suing a game maker because you simply didn’t like the game! Could I get away with suing them for not only the price of the game, but the time and energy I put into it? Going to the store, buying the game, installing it, playing for an hour or two and realising I hated it? What’s next? Suing movie makers for crummy sequels?
In the case where a person is banned for no apparent reason, that is a different case all together. But the cases in the article should be thrown out.
Bill–
Hernandez has, indeed, also brought a claim for tortious interference. Sorry, I omitted to mention that. Also, he’s brought a claim based on the theory that he is an intended third-party beneficiary of the contract that gold farmers sign with Blizzard, and that IGE allegedly conspires with the farmers to violate.
Gary Macklin Green Bay Wi:
>> The game comapny in my opinion has no right to say what a person can or can not do with thier account it is bought and paid for period. It is no different than someone going and paying 20 grand for a car and then 2 years later selling it off to either another purchaser or another buisness in exchange for either cash or another vehicle.
Of course if the vehicle was leased and then resold without the lienholder’s permission, this analogy no longer applies. The deal on the table is that you’re purchasing access to a service for a limited time period, not virtual items aquired within. Anyone who’s uncomfortable with that deal can find alternate service providers who do confer in-game virtual property ownership rights. But agreeing to a lease and then demanding ownership rights after the fact isn’t fair.
The real item of value a virtual world offers is community. Each MMO provider defines its ideal community, structures the rules of the game to support building that community, and expels people who break the rules. If a paid access only web forum says “no cursing, no warnings, you will be banned” and someone breaks the rule, a fair banning ensues. Hope your archived your past posts if you entended to use them again in the future. In the same way, if a service provider decides the community is enhanced, greater customer “stickiness” occurs, or in-game economic inflation is kept down by prohibiting cross-player sales of virtual items, more power to them. Their service, their game, their rules. But it’s your wallet - don’t open it to them if they’re not willing to meet your requirements (which, I should say, are not unreasonable when they’re stated up-front).
In the case of WoW, my current fav, Blizzard has determined that the long term interests of their community (and thus, their profits) are best served by only allowing acquisition through time, not money. That’s their definition of community and certainly their right to impose on anyone who wants to play their game. Consumers who disagree can simply choose not to become a member of such an objectionable community.
>> The game company’s need to realize they own the servers the games are played on. Once that game is Purchased it is no longer owned by the game company, it is now owned by the consumer.
Not if you agreed to lease the goods in question and not to own them. There’s room in the marketplace for a variety of MMOs offering a variety of different terms of service. This is a good thing too because it’s not possible for any single service provider to write their TOS in a way that satisfies everybody.
>> When are we finally going to say enough is enough and start looking after the little guys
YES! Absolutely, you should NOT send authoritarian companies your hard earned money and you should encourage others to avoid doing the same. Get hooked up with a libertarian-style MMO that meets your needs, evangelize the heck out of it, and let the marketplace work its magic.
None of this, unfortunately, tells us whether we ought to support 1) using the civil justice system to dictate business models to companies, 2) imposing legal regulation on companies offering online virtual games, 3) let the markets sort it out themselves, or 4) some combination of the three. (Psst, I support #3, if that wasn’t obvious already.)
Dave Bevis, Nashville, TN:
>> If anyone out there is considering a class action suit against Gaia - let me know. I am irritated enough with them to join up.
It’s unfortunate that so many people believe irritation is sufficient grounds for a lawsuit. While I don’t believe the bar for litigation should be set quite so low, I’m glad you’re so vocal about your family’s problem with Gaia. It sounds like you received horrible customer service and future potential customers ought to know about it. The business they lose over how they treated you and your son is entirely earned.
Re the Hernandez suit against IGE, even if he could not argue consumer fraud, and even if IGE employees do not play the games and therefore do not enter into contracts, I wonder if the suit could not proceed on the basis of tortious interference?
I myself have never bought/sold items/in game cash to any buisness. However i do disagree with this lawsuit for these main reasons. For example: I played everquest for 6-7 years if you take into consideration that every expansion costs $29.99 ( EQ has 10-11 Expansions) + Monthly fee of $14.99 to play if u add this all up over a 6 year period it comes to about $180 just for the game + $1079.28 for 6 years @ $14.99 = a grand total of almost $1200 to play a game. The game comapny in my opinion has no right to say what a person can or can not do with thier account it is bought and paid for period. It is no different than someone going and paying 20 grand for a car and then 2 years later selling it off to either another purchaser or another buisness in exchange for either cash or another vehicle. People invest a lot of time in these games and spend alot of money. Game company’s are just being way to greedy. They not only want thier cake but want to eat it to. where is it going to stop? They already can ban people for almost anything they want and the consumer has no way of protecting themselves from this. The game company’s need to realize they own the servers the games are played on. Once that game is Purchased it is no longer owned by the game company, it is now owned by the consumer. The consumer pays the fee, he pays the purchase price and puts in the time of play. NOT the game company. The player should beable to have some kind of return if he/she decides they dont wanna play anymore. Welcome to America it’s called free enterprise. its what our country was built on.It’s pretty sad when a multi million dollar company has to result to suing children to make themselves feel better. I don’t expect this post to be posted considering it’s not what the gameing industry wants to be seen. But I feel better knowing atleast someone will read this. When are we finally going to say enough is enough and start looking after the little guys instead of the companies pulling in multi millions off children and then complaining that a few of them made a couple hundred bucks off the hard work and time they spent playing thier game. They should just be happy thier game is being played. especially considering most of these online games support section actually offer no support at all.
My son used to spend a lot of time online in a role playing site call Gaia. He had a lot of time invested and had accumulated items. For his birthday I bought him some “gold” on ebay. The next day Gaia had banned him from playing. We made several attempts to contact Gaia to resolve the problem but never received a response. He ended up losing everything that he had accumulated on the site.
I think these lawsuits are valid and it is about time someone held these companies accountable. If anyone out there is considering a class action suit against Gaia - let me know. I am irritated enough with them to join up.
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This blog is about legal issues that matter to business people, and it's geared for nonlawyers and lawyers alike. Roger Parloff is Fortune magazine's senior editor (legal affairs). He practiced law for five years in Manhattan before becoming a full-time journalist.
Here’s the latest on my Gaia online issue (see posting “I am also eager to join a suit against Gaia). After a few correspondance, they are now ignoring me. Their story is that some Gaia Gold my daughter purchased, from a 3rd party, in good faith, was the cause of them taking her account - they call it “botted gold”. Why they are not going after the source of this supposed botted gold, how do they know it’s botted gold, etc. is way beyond me.
So now I am filing a fraud case with the people I used to pay them.
In short, the saga continues.