Linden Labs and Virtual Sex Toys? Huh?

Oh, yeah, there is a lot of kinky virtual sex going on in Second Life.  And to support all of that activity, there are apparently a lot of vendors selling knock-offs of the “real” virtual sex toys of one vendor who is mad enough to sue.  (See Wired Article)

Yes, a few years ago, Linden Labs set up a special “mature” designation for areas in its virtual worlds that were aimed at “adult” conduct, so those under 18 and others with sensitive eyes  would not be offended by what they found.  However, probably much like the real world, virtual sex is rampant in Second Life.  As a consequence, there is a heavy trade in sex-related objects.  According to the plaintiff, Eros Products LLC, his SexGen products line has sold about $1 million (that’s U.S. dollars) within Second Life over the past five years.  (A copy of the Complaint is here)

Vicarious and contributory liability for copyright infringement is recognized by the courts as a cause of action under federal law.  This kind of liability has been raised in recent years by the various music file sharing services that came and went, such as Napster (originally a file sharing service without any copyright licensing from the music companies that owned the music being shared), Gnutella, and Limewire.  Each of these services were held to be liable for the file sharing of their users, in part based on the notion of vicarious liability.  Cases prior to Napster et al. that addressed this kind of liability along two lines: landlord-tenants where the landlord exercised no control over the leased premises, and dance-hall cases where the operator of the hall controlled the premises and obtained a direct financial benefit from the infringing performances.  Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996).  Under common law, landlords have not been held to have copyright liability where dance-hall operators have.

In Fonovisa, the defendant operated a “swap meet” where the operator rented stalls to individuals who were selling unlicensed copies of bootlegged music owned by the plaintiff.    For the swap meet operator to be liable, the plaintiff had to prove that the operator controlled the marketplace and obtained a direct financial benefit from the sales of infringing works.  The Court sided with the plaintiff in this case, even though Cherry Auction did not receive a commission from the sales of the infringing materials.

Assuming that Eros Products LLC (and other plaintiffs that may join the suit should the court certify this as a class action) can prove that they are the valid owner of the copyrighted works, the question for the court is whether Linden Labs can meet the standard for contributory liability.  Linden Labs is a virtual landlord in the sense that users of Second Life pay an annual subscription in order to “own” virtual real estate within the virtual world.  The right to own this virtual property is limited by payment of the subscription.  You will note, however, that there are plenty of users that do not acquire any virtual real estate in Second Life – and for them, there is no fee to participate.

However, Linden Labs also charges fees for the conversion of Linden Dollars into U.S. Dollars through the Linden Exchange.  For infringers seeking to sell pirated works in the virtual world, the real benefit to them is the ability to take the proceeds of those sales and convert them back into hard currency for use in the real world.  Approximately 250 Linden Dollars are worth a U.S. Dollar (the trading in this currency fluctuates).  In order to convert Linden Dollars back to U.S. Dollars, Linden Labs charges a fee of 3.5% of the value of the transaction.  So, indirectly, Linden Labs benefits from the sale of infringing goods every time that the infringer converts his Linden Dollar proceeds to hard currency.

There is a question, however, of whether Linden Labs is merely a landlord who relinquished control to his infringing tenant.  Eros Products LLC claims that Linden Labs did exercise control over the activities of its users because all of the virtual worlds within Second Life are ultimately housed on servers controlled by Linden Labs.  Pl.’s Complaint at ¶ 127-128.  And furthermore, Linden Labs has ultimate control over its software that operates Second Life, and I suppose that Linden Labs could alter its software to prevent copyright infringement if it wished to do so (how, exactly, is another story).  Factually, however, I think this is going to be tough to prove.  Unlike Grokster, who marketed itself as the successor to Napster for those looking to willfully infringe on the copyrights of others, Linden Labs has not marketed itself as a safe haven for willful copyright infringers.  On the contrary, Linden Labs gave some thought to copyright in its license agreement, granting its users rights in the works they create in-world.  (See Terms of Service here at section 3.2)

The other question is whether Linden Labs, in light of the DMCA, fits within the safe harbor established for internet service providers, shielding it from liability for the infringing acts of its users.  More on that in another post.  Stay tuned!

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faithatlaw

Maryland technology attorney and college professor.

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