Tobold's Blog
Sunday, March 23, 2008
Virtual property rights

I'm trying to split off the discussion of the Blizzard vs. MDY lawsuit away from the short posts where I just linked to the court documents. Because I don't really want to talk about Glider, which anyway is a program I need about as much as a machine that watches TV for me. For me playing World of Warcraft is entertainment, and having a bot do it for me is counterproductive. But I am interested in that lawsuit, for the simple reason that if it actually gets far enough in a court, we might get some interesting rulings on virtual property rights.

If you look up "trespassing" in law books, you will find a wealth of information and law that developed over hundreds of years. You can find out exactly what your rights are to for example cross somebody else's land which is the only way of access to some landmark. Property rights are one of the oldest forms of law. But virtual property laws are new, and jurisdiction hasn't really evolved all that far yet.

At the heart of the virtual property debate is the question of whether you actually own your character and his possessions. Most players instinctively think they own their characters. Game companies think they don't, players only have limited use rights for anything that happens on the company's servers, including characters. If you really owned your character and that gold in his pocket, then who could legally stop you from selling that character or gold? Or who could stop you from running a program that plays your character 24/7 to level him up to 70, if getting to 70 is all you are interested in? The horror vision of a game company is a court decision that says that virtual property is property of the players, which would mean that players could sue the game companies for decisions that affect the value of said property, for example shutting the game down, or causing virtual inflation.

So you might have noticed that in the lawsuits of Blizzard vs. Peons4Hire or MDY the game company is careful not to invoke any virtual property rights directly. They claim, and with some justification, that the actions of gold farmers and botters have a negative effect on players, and thus on Blizzard's business. The goal is to either reach an early judgement in favor of Blizzard to shut the small company disturbing their business down, or if that fails, to scare them into a settlement. That is why Blizzard is asking for several millions of dollars of damages from MDY, but would probably settle for Glider just going away and MDY stopping to do business. But such an outcome would leave the underlying question of what exactly you can and cannot do in a virtual world unresolved. And that wouldn't be the best possible outcome, so I kind of grudgingly have to admire the fighting spirit of MDY.

Companies shouldn't be in the business of making laws. Sure, there have to be rules. If I enter a McDonald's restaurant, there are certain house rules I'll have to obey or get kicked off the premises. But there are also laws and rules of the real world that take precendence over the house rules. Virtual worlds aren't any different. I totally agree that Blizzard should have house rules for World of Warcraft, telling people how to behave, and threatening to kick them off the premises if they don't. But I do not think that real world laws don't apply at all in the virtual world, and I do not think that Blizzard could make any sorts of rules. Just like McDonald's can't refuse to serve someone based on his color of skin, religion, or sex, Blizzard isn't the final judge of what is and isn't allowed in World of Warcraft. There are limits where their jurisdiction ends, and the real world jurisdiction starts. If the CIA is looking for terrorists in World of Warcraft, they clearly think that this is outside Blizzard's jurisdiction.

We just don't know where exactly these limits lie, because they haven't been explored very well yet. This is why lawsuits like these are important, no matter on which side your sympathies are: If there is no law of the land, you'll one day do something that you considered totally okay, but the game company didn't, and is banning you for. Can a game company delete your character which might be worth $10,000, or do you have real world rights that could prevent that?
I think the game companies want this to remain as ambiguous as possible, which is why after a decade of online gaming shenanigans, it has remained as such...

If a virtual property law passes saying that players own all the rights to their characters and items /gold on the characters, it would open the commercial floodgates for all kinds of things (which you mentioned in the post). People will look at online gaming as a legitimate market to tap and all of a sudden, the gaming companies will have lots of responsibilities placed upon them. Say your character is worth $10,000 and the game suffers a massive crash and data loss... Class action lawsuit incoming.

If a virtual property law passes saying that the game companies own the rights to everything related to their game, you're going to have a lot of pissed off people. While the majority of people play for entertainment, people will still feel a major loss if the same crash/data loss situation were to occur without any obligation for recompense. Soon, people will also start realizing that they're paying a monthly fee to play something that is really just a rental unit. Over time, I think this will gnaw away at the interest for MMORPG genre games.

If the virtual property laws stay as ambiguous as they are, well, business as usual which is a lot more appealing than committing one way or another for the game companies IMO.
I couldn't see virtual property in MMOs working to be honest. If anything it'd detract from the game and we'd have plenty of players playing for real world monetary profit over the virtual profits within the game that their pursuits have brought them.
Hi Tobold,

I firmly believe that this is one area where not just the companies, but also the players are best off if the details are left ambiguous.

If it turns out that Cindy-Lou, my archmage with the Staff of Destruction, is my property, with all the legal rights and responsibilities therein, and an expansion resets the gear level (see: Burning Crusade and probably Wrath of the Lich King), then my assets just got devauled in real world terms due to the premeditated, purposeful actions of a corporate entity.

Of course, it would never get to that point, because the day that my archmage Cindy-Lou and your cleric Lolhealz are determined by the courts to be my property is the day that MMO makers stop pushing the design envelope and refuse to rock the boat, because anything that could have a negative effect on the value of characters -- especially when done purposefully, like simple exploit fixes and expansion packs that raise the level cap -- could be the source of a potential class action lawsuit.

As players we are best off if this issue is left grey. We probably aren't too bad off if it turns out that our characters are actually the company's property either, assuming that we can trust the game companies not to be too draconian, but on the balance all parties (except maybe the secondary market companies) are better off without the issue being decided.
If you own your character and the virtual gold and items (which themselves are worth gold), and this gold has an exchange rate with RL currency, governments will immediately begin to tax you based on your in-game earnings. Do you really want to go there?
I understand what solidstate is saying, and although it is a potential concern, I would be very surprised if the government tried to tax you on your in game exploits ... unless you were actively trying to sell them for profit.

Technically, my television set, couch, computer, and such are all depreciable assets with tangible values, but if the government placed a wealth tax on me for the mere act of possessing an iPod, there would be a one man riot through the streets of Tokyo.

If they tried to taxme for selling my characters, however, in the same way that they tax me for selling property, stocks, or bonds (see: capital gains taxes), that would be slightly more feasible. (have we been down this road on this blog before? I know I remember seeing an discussion about this topic on one of the MMO blogs I frequent)

In short, I guess that our characters would be treated more like personal posessions and less like assets. (could you imagine companies springing up speculating on the rogue market the way they do on oil futures?)
The more I think about it, the more slippery the whole idea of virtual property comes to me.

The accounts and characters are nothing without the game. To keep the game running, the game company has to keep up a set of physical servers running. Nothing virtual in that. Of course the costs of running those servers is very real too, so the game has to be profitable. If not profitable, they have to shut down the servers, and all the in-game characters go *boof*.

All I see is a service just like any other service. To ask if you should be able to trade your in-game character is also to ask if you should be able to trade your VIP card to a night club, or your spot in a waiting line to something, etc. Or, if copyrights are talked, should you be able to trade photographs of a painting from a gallery (and what of you made artistic alterations to the photo).

These are interesting legal questions for sure, but I feel calling everything computer related "virtual" as if it were a separate issue from the other service businesses or fields of art is a bit of red herring. Just because lots of authorities and propeller heads go weird when computers a talked doesn't mean they (or we) should.

(It also means making parrallers to similar cases in other fields may be interesting blog material.) *wink*
Neil said...

If they tried to taxme for selling my characters, however, in the same way that they tax me for selling property, stocks, or bonds (see: capital gains taxes), that would be slightly more feasible.

And how would goverment track you trading your in-game character? The paraller I see here tax vise is bying old books, or a bicycle, or washing machine or any other second hand item from another private individual. I so, and never taxes were involved. I think the taxes are already collected from Blizzard, just like the taxes from any second hand item are collected in the beginning of sales cycle.*

*My own term. Me foreigner, me not know prober engrlish. Me sorry. :)
I think there are several related questions:

1) Do ingame assets have a real money value?

2) Who owns the value of in-game assets?

Say game assets DO have a value. Also assume that by playing the game you increase the value of some of these assets. Now, if blizzard owns those assets, they are making money from your efforts. That's a nasty position for them to defend from, because EULAs don't trump empployment law.

So, the important position is for them to assert that game assets are valueless. Ownership is actually the lesser of the issues.
I personally am not sure where things should end up or where they will end up but I would be glad to see them go somewhere rather than it remaining the lawless virtual wild-west that it kinda sorta is now.

The problem in the US (Not sure about EU) is that our lawmakers are usually old people and they don't know much about this kind of thing, except what their aids tell them, and their aids get their info from yet another source. This isn't quite as reliable as getting the information first-hand from their own experiences and then making the decisions on their own.

My worry is that some group of lawyers, judges and whoever that knows very little about how MMO's work will be making all the calls as to what is allowed and not allowed and that most people won't like what they decide when they finally decide anything.
As far as taxes in the US go, it's actually clear and simple. If you make money, then you are SUPPOSED to claim it as income tax at the end of the year. It doesn't matter where you made that money. Once you sell something, whether it's a physical item, a service you provided, or an old book from your basement. If you get audited by the IRS and you have a bunch of money that you can't explain and it's not on your tax forms then you're in trouble. If that money is on your tax forms but falls under the many types of non-taxable income, then you're alright. There's only 60 thousand pages of tax code last I heard. How can it be any simpler than that?

In the end, there is no property in a virtual world. You can pay someone to use an account, but if the game company catches you and it's not allowed according to the TOS then you're in trouble again.

TOS and EULA are simple and explicit. The question here is whether the gold farmers can actually be sued for breaking the TOS contract for commercial gain. These cases have nothing to do with questions of ownership of virtual goods and characters. It's entirely a question of civil law as Blizard is basically suing for punitive damages. I think that they'll win for sure, it's just a question of the amount the judge will award and whether there will be criminal charges and/or an order to cease.

You kinda have to look at it like someone opening their own business in Walmart's parking lot and damaging Walmat's business. If the company is making 100 thousand dollars per week but only damaging Walmart's business by 1000 dollars per week, then how much does the judge fine them? If the fine is only 2000 dollars then they obviously won't stop unless ordered to. But then if the judge wants to fine them based on how much money they made, then you have to prove how much money they made. What if they claim to have only made 10 thousand dollars per week, but are actually making more? I'm guessing that even this isn't a difficult question to answer because there are surely legal precedents already in place.
In the US, if you lease a property and makes improvement to the property – the landlord owns those improvements when the lease expires. I would agrue that virtual property in an online gaming sense is the same thing. Your licensing agreement is effectively a lease or agreement to use Blizzard’s servers while playing their game. If you break the agreement by failing to pay or violating the terms, Blizzard has the right to void the contract. Any improvements made to your “character” are the property of Blizzard when there is no longer a contract in place.

Similarly, if I lease a piece of property for 10 years and build a two story building on it – then when my lease expires, my landlord owns any “improvements” on the property. In this scenario, that’s two story building. It may not seem fair, but unless otherwise specified in the lease agreement, the landlord is the owner of those of improvements and I only have rights to them while I am leasing the land.
If you go to a Chuck E. Cheese and play skiball for several thousand hours to get that big prize at the top of the prize board, do you own it? Can you sell it?

Of course you do and of course you can. You paid for it by putting tens of thousands of tokens in the machine. It doesn't matter that some people like skiball just because.

Similar to an MMO, as long as you're paying the subscription fee.
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