Why Virtual Property Doesn't Make Sense

from the bingo dept

I've long had trouble with the idea that "property rights" make sense in virtual worlds. After all, the entire purpose of property rights is to efficiently allocate resources in the presence of scarcity. If there's no scarcity, there's no question of efficient allocation (everyone can get as many copies as they want). However, for whatever reason, there's been a big push to create "property rights" within virtual worlds. Slashdot points us to an excellent paper that goes through the arguments for assigning property rights in virtual worlds, and even models out some scenarios based on them. In the end, it finds no compelling reason for assigning property rights in virtual worlds. Here's just a snippet, from a look at whether or not property rights make markets more efficient in a virtual world:

Extending property rights to virtual resources does not make more efficient markets for those resources. The qualified approach to virtual resource property rights provides no reductions in the search costs of a buyer since the legal rights and attributes of those resources mirror those granted by the virtual world's code-based regulations. Worse, a carte-blanche approach will increase search costs by requiring a buyer to determine where the code-based rights and attributes of a resource deviate from its legal rights and attributes.

Therefore, the efficient market justifications for virtual resource property rights can not be satisfied under either the carte-blanche or qualified approach to virtual resource property rights. The only way this justification may be satisfied is if legislatures and courts reach into the virtual worlds and mandate what specific rights and attributes virtual resources can take.

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Yet Another Run On A Virtual Bank

from the but-don't-get-too-excited-over-it dept

A couple years ago, there were stories about how there was a "run" on the virtual banks of Second Life. Later on, some reporters tried to suggest that the Second Life "credit crunch" was a predictor of the real world's credit crunch. That wasn't even close to true. Yet, with yet another story about a virtual world, we're once again hearing in-apt comparisons to the real world. The latest is a run on a bank in the game EVE Online. In this case, it looks like one of the guys involved in running the "bank" simply took some of the virtual currency out of the bank and exchanged it for real world cash (about $5k). The BBC headline calling it "billions stolen" is inaccurate, since it was only "billions" in the meaningless virtual currency. In the real world, it translated into not very much at all. The BBC article also calls it a "virtual version of the credit crunch." Again, this is quite inaccurate. In both the Second Life bank run and this bank run the problem was simply outright fraud by the "virtual banks" or those who run them. That's quite different than what has happened with the real world credit crunch, and it does little good to pretend otherwise.

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If You Duplicate That Virtual Sword In The Real World... Is It Copyright Infringement?

from the question,-questions,-questions... dept

Three years ago, in trying to discuss some of the thorny copyright issues that arise in virtual worlds where any "good" is easily copied, we questioned whether copying a magic sword in a virtual world was copyright infringement. Perhaps we should have taken the question a bit further. Reader Cap'n Jack points us to the news that video game company Square-Enix has sued four retailers for $600,000, not for creating a digital replica of a magic sword, but a real world costume replica of a sword from within the game Final Fantasy. The retailers have agreed to stop selling any Final Fantasy gear, but it does raise some questions about whether creating such material is copyright infringement... and what that means for folks making Halloween costumes every year...

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IRS May Be Gearing Up To Send Tax Collectors Into Second Life

from the how-much-is-the-tax-on-a-magic-sword? dept

It wasn't difficult to predict that this day was coming -- especially with both China and Australia already experimenting with charging taxes on virtual goods and transactions in virtual worlds. However, Game Politics points us to the news that the US's "taxpayer advocate" (we have such a thing?) is now suggesting the IRS start taxing transactions in virtual worlds as well. While the initial suggestion is for the IRS to just issue "guidelines" for taxpayers, that's the start down the path to active taxation in those worlds. This could get troublesome fast -- as you could easily see scenarios where kids who thought they were just playing a game suddenly owe significant real world taxes, just because they've been successful in the game and accumulated "valuable" assets. It seems fairly pointless, and potentially troublesome, to do any kind of taxation on virtual transaction until such time as real dollars exchange hands.

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Google Kills Lively Quickly

from the that-didn't-take-long dept

Just a few months ago, when Google launched its "Lively" 3D chat offering, I questioned Google's strategy, as it didn't seem to offer anything different or compelling. Some people here disagreed, and believed Google would be able to turn the service into something compelling, but that appears not to be. Since the launch, to be honest, I can't recall ever hearing about Lively again -- and had pretty much forgotten it existed. And, indeed, less than six months after launching it, Google has killed off Lively, admitting that the experiment was something of a failure.

There seems to be a growing pattern in figuring out which Google projects are a success and which will fail. When it merely copies something others are doing, as with Lively, it tends not to do very well. When it changes the game, as it did originally with things like Google Maps (the first real AJAXy mapping solution) and Gmail (huge storage and AJAXy front end), then it gets usage. Google's success has always been in reimagining products that people seem to believe are mature, and completely reshaping how people think about those products. That was true with maps (which had been dominated by MapQuest and Yahoo Maps for years) and email... and it was even true in search. People thought the search market was too crowded when Google showed up, but its solution was so different and so much more compelling it got attention. Lively, on the other hand, was a pure me-too play. There are half-a-dozen other offerings that effectively do the same thing. Google didn't give anyone a real reason to use Lively... and, so it shouldn't be too surprising that Lively is now dead.

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China Sends Tax Collectors Into Online Worlds

from the good-luck-with-that dept

A few years back, we discussed whether or not politicians would eventually try to tax virtual world winnings. After all, if there's an exchange rate to real money with fake virtual money (as there usually is), then wouldn't holding all your money in these virtual dollars be seen as something of a tax dodge? Indeed, Australia took the lead in this two years ago, with plans to tax virtual earnings. Now, it appears that China has signed up as well, and will begin taxing any virtual world earnings at 20%.

This actually follows on a failed attempt to ban earning any money on the trade of virtual currencies. That ban had been announced last year, basically as a way to avoid dealing with the taxation issue. When the Chinese government realized that people were ignoring the rules and still earning and trading money in virtual worlds, it reversed course and has now added the 20% tax. What's unclear, of course, is how they plan on enforcing it. Will China take some of its tens of thousands of Great Firewall employees and send them into World of Warcraft for an audit?

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That Was Fast: Woman Arrested For Virtual Murder Of Virtual Husband

from the fantastic dept

Earlier this week, in writing about some kids convicted of theft in the real world, I jokingly asked if we'd soon hear of someone arrested for "murder" for killing a virtual character. Who knew it would happen so fast? Okay, actually, it's not that extreme, but a woman in Japan has been arrested (in real life) for "killing" the avatar of her virtual husband, who had apparently "virtually" divorced her. The charges are not for murder (phew), but illegally accessing his computer. She basically logged in to his account and killed off the character. Of course, you might argue that she didn't do anything illegal, since the guy had given her his password in "happier times" and hadn't changed it. Also, again, this certainly seems like the sort of thing that could (and should) have been taken care of directly in the world. The folks who run the world could easily revive the guy, and kick the woman out of the world. Case closed.

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Dutch Kids Convicted For Stealing Virtual Magic Amulet

from the are-you-kidding-me? dept

It's been over five years ago since we pointed out how silly the world would be if we started bringing real world justice into virtual worlds. It sets up a ridiculous situation, since the way any virtual world works is based on how it's programmed. If there's a problem with an action, it should be up to whoever controls the game to fix the problem, rather than the real world police. If you start setting a precedent where the "theft" of a virtual item in a video game is considered theft, then how do you deal with online worlds where theft is a part of the game? If the game allows it, then it should be a part of the game.

Even with plenty of people warning about how ridiculous it would be for police to get involved in searching for a stolen magic sword, it seems that hasn't stopped people from going to the police. In the past, the lawsuits have usually been for other crimes besides theft, though. We had one for illegal computer access, after a woman logged into a boyfriend's account and deleted his virtual objects. In another case, someone was charged with copyright infringement for "copying" weapons.

However, now we have a case of an actual theft charge in the Netherlands. Two kids have been convicted of theft of a (I kid you not) "virtual amulet and a virtual mask" in the game Runescape. The details are pretty scarce, but apparently the two kids "coerced" another kid to hand over the items, and to the court that's as good as theft:

"These virtual goods are goods (under Dutch law), so this is theft."

I have to admit I don't know much about Runescape, but a quick look at the website mentions that it can involve "fights to the death." Does that mean we'll soon have murder charges stemming from the game? Update: Some folks in the comments have helpfully filled in some of the details that were lacking from the original article. The two kids in this case apparently beat up and threatened at knifepoint (in real life) the other kid in order to get him to give them the virtual amulet. As others in the comments point out, it sounds like they should have been charged with assault and battery, but still not theft.

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Will Google Cultivate Its Virtual Worlds To Make Them Lively? Definitely

from the me2.0 dept

We're running a little experiment here with our discussion on Google's new Lively offering. Two of us at Techdirt, Mike Masnick and Mike Ho, reacted quite differently to the announcement, so we're each posting our own take (after sharing them with each other) and we'll let everyone has out their thoughts in the comments. We're hoping to work on a few more "debates" like this one in the near future. This is Mike Ho's post. Mike Masnick's post is here.

Google has been working on virtual world environments for about a year, and now they've announced Lively -- which has an unfortunate moniker that could inspire lawsuits from Microsoft Live branding folks. The descriptions of Google's new service have made Lively sound like a watered-down version of Second Life, aimed at people who can't figure out how to install an application. I'm a Mac user, so I can't even try it out -- but I'll take a stab at justifying Google's "me-too" avatar project.

Obviously, the main difference between Lively and any other virtual chatroom is that Google has access to a nearly instant critical mass of global users. But that doesn't mean Lively will be an sure-fire success. What will help ensure a Google hit is the consistent development of features that cater to users -- and then some text analysis magic that will provide relevant virtual world advertisements based on the Lively chat discussions. This is basically the same game plan that Google has used for Google Maps and Gmail (and Gtalk, too) -- start off with a sort of lackluster service and then add features that are compelling -- while sneaking in ads to monetize the service.

I'm not really disagreeing that Lively seems a bit lame at its start, but I'm slightly more optimistic that Google will be able to cultivate Lively and bring contextual ads into the environment. It just has to be entertaining enough to attract people to use it -- and I guess I don't see extraordinarily high barriers to keeping a Web audience entertained (see Youtube). Additionally, Google can build upon Gmail and Google Maps and its other offerings to enhance Lively -- which is something that Second Life and other virtual worlds can't necessarily do. On the other hand, it is also entirely possible that Lively could follow Orkut -- and miss out on the G-branding (why isn't it called Glively? or Google Life?) and the popularity of Google's more successful products. But I think Lively has a very good chance of tying together many Google services and reaching out to a younger audience.

In response to Mike Masnick, it's mostly true that "you can't just stick ads everywhere" if you don't want to annoy your users. But several popular video games already incorporate subtle advertisements (and Second Life isn't exactly devoid of advertising). In fact, a visual environment for chat only enhances the ads opportunities. I assume Google is smart enough to avoid the simplistic keyword-based ads that might present a user with annoying irrelevant ads that seem creepy and to be spying on your conversations (Google doesn't seem to do that in Gmail, right?). I imagine that the contextual ads in Lively will be more attuned to automatically detecting demographics (eg. based on "OMG, LOLz" conversations) to present targeted, age-appropriate virtual billboards. That's exactly the kind of unobtrusive, contextual advertising that Google is developing and gives it an edge.

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Google's Lively Seems Lifeless; Joins A Big List Of 3D Chat Providers

from the not-quite-a-virtual-world dept

We're running a little experiment here with our discussion on Google's new Lively offering. Two of us at Techdirt, Mike Masnick and Mike Ho, reacted quite differently to the announcement, so we're each posting our own take (after sharing them with each other) and we'll let everyone has out their thoughts in the comments. We're hoping to work on a few more "debates" like this one in the near future. This is Mike Masnick's post. Mike Ho's post is here.

Google's latest product launch, Google Lively is a 3D chat room offering that has plenty of people comparing it to Second Life, though in its initial version, it seems a lot closer to IMVU, a popular 3D chat solution that is apparently growing like mad. It's really no different than your everyday chat room other than the fact that your text chat takes place in a 3D animated room with avatars who can do a few different pre-designated actions. The Google version requires a software download, but after that apparently will appear in a browser, meaning that it can be included as parts of any site. It's still not clear what the actual advantage of such an offering is beyond traditional chat -- or what sort of advantage Google may have in providing a similar solution to what's already out there, beyond just the Google brand name. Perhaps there's more to this offering, but at a first pass, this seems like a me-too effort by Google without any significant advantage (yet).

This isn't say it won't get usage, but I'm having trouble figuring out what about this is really all that useful compared to other solutions out there. Google's successes all seem to be about a new and different take on something out there that makes is significantly more useful: Google search made search better, faster and cleaner. Gmail massively increased storage while providing a much cleaner, faster and more useful interface. Google Maps took the tired interface of internet mapping and made it (again) cleaner, faster and more useful. It's not clear that Lively really does any of that. It requires a download, and seems to merely copy what else is already out there without a significant advantage over any of them. Perhaps people will use this just because it's from Google -- but it still seems like it should be more compelling then just adding 3D avatars to chat.

As for Mike Ho's claims that this follows the same path as Gmail and Google Maps, I disagree. Both of those were instant sensations that attracted instant attention and usage do their differentiation. I also disagree with the assertion that Google is doing this just to add in contextual ads. While that may happen, contextual ads on chat seem a much more difficult proposition than on email, where there's a lot more content. Plus, it's difficult to see how ads would fit unobtrusively into such a scenario. Despite what some assert, Google doesn't try to stick ads everywhere, knowing that too many ads will often upset users. Finally, it's difficult to see how ads stuck into a synchronous process such as chat ad value. It would seem like they do more to detract value.

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Shockingly, Businesses Who Set Up Shop In Second Life Because It's 'Cool' Don't Fare So Well

from the who-woulda-thunk-it? dept

Over the last year or so, it seems like the halo around Second Life has worn off, especially for all the big companies who rushed in, believing it was the next big thing. A new report now notes that approximately 90% of companies who rushed into virtual worlds saw their projects fail. Not surprisingly, most of the failed projects involved companies who got involved because they thought it was "cool" or because a competitor was there. Apparently, not having a real business purpose or strategy pretty much guarantees that you're not going to achieve very much of either.

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Do Real World Laws Apply In Virtual Worlds?

from the in-most-cases,-no dept

Back in 2003 people began realizing that the growth of various "virtual worlds" was going to raise certain questions about how real world laws applied to virtual worlds. However, there's been little effort by the legal community to take a serious look at the question. So, we've had story after story after story after story after story of upset users within virtual worlds trying to make use of real world laws against those that upset them.

In many cases, this is quite problematic. While it might seem fair to charge someone with "theft" for taking a virtual good in a virtual world (especially if that virtual item can be exchanged for real money), it's not that easy at all. For example, what if stealing is a part of the game setup in that virtual world? At some point, you almost have to assume that anything allowable in the world is "within the rules," or you run into some trouble. At the very least, it's the owners and managers of these virtual worlds who have to act as the government and "law enforcement" within those worlds, using their terms of service and EULAs as de facto "constitutions."

Fortunately, it appears that legal scholars agree on this. Eric Goldman points us to a paper by Orin Kerr that looks at these questions and concludes that the answers are similar to what we suggested: the law, in most cases, pertains only to physical acts, not virtual ones. Thus, virtual theft, virtual murder and virtual rape are quite different under the law than real theft, murder and rape -- no matter how upset it makes the "victim." In most cases, Kerr concludes, the real world law would not be applicable. Furthermore, he suggests that, despite this, it makes little sense for politicians to create new laws to cover virtual worlds. Instead, he notes that this is part of the responsibility of those who create and manage the game. By the very nature of creating the game, they become the de facto "government" and justice system, and there shouldn't be a need to get the real world justice system involved at all.

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Second Life Lawsuit Over Copied Goods Settled

from the just-like-that dept

Just after we discussed yet another bad situation involving bringing real world laws into virtual worlds involving World of Warcraft, it looks like there's an update on another such case we discussed last year. In this case, it was a dispute between two members of Second Life, one of whom had "copied" items made by another and started selling them. This seemed perfectly ridiculous, since being a virtual world where there is no scarcity, nothing was being stolen. Indeed, it looks like the participants in the lawsuit more or less came to the same conclusion. They've "settled" the case, but by settling, it sounds like they really meant giving up the case. No money is exchanging hands and no one is admitting to any guilt. That sounds a lot more like they're just dropping the case.

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Government Continues To Search Virtual Worlds For Terrorists

from the anyone-look-on-America's-Army? dept

A few weeks back, we pointed to a ridiculous report from the federal government's Intelligence Advanced Research Projects Activity, claiming that places like Second Life could be breeding grounds for terrorists. Why Second Life as opposed to any standard web chat room? That's not at all clear. Salon has gone through and thoroughly debunked the notion that terrorists are likely to use Second Life, noting that the so-called "experts" who made the claims clearly had never used Second Life. Yet, don't think that means the government won't keep up its fear-mongering over the issue. Wired is reporting that the U.S. intelligence community is working on software to detect terrorists infiltrating World of Warcraft. Initially, the program will focus on just profiling the behavior of people in such virtual worlds, but down the road they hope that it will automatically identify those likely to be terrorists. I wonder if they'll use similar programs in the Army's own America's Army online video game?

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Gov't Says Second Life + Online Anonymity = Terrorism

from the oh-really? dept

Just as our courts on continually pointing out that anonymity is protected free speech, it appears that the federal government is trying to do away with anonymity entirely. We've already pointed out that National Intelligence Director Mike McConnell has been saying that the government should be able to monitor all internet communications. Now, the government's Intelligence Advanced Research Projects Activity has come out with a fear mongering report trying to suggest that online anonymity in 3D worlds leads to terrorism. It highlights things like Second Life as a breeding ground for terrorism. It's all quite scary if it weren't for the fact that it's totally baseless. There's no evidence at all that this kind of activity is happening in world's like Second Life. In fact, the report buries a quote from an anonymous (ha!) intelligence official admitting that there's no evidence whatsoever that any such activity is happening at all. As the EFF points out in the link above, private communications online are nothing new. The fact that they might take place in a 3D virtual is totally meaningless -- other than to suggest that there are folks involved in national "intelligence" who aren't that intelligent at all.

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More Evidence Of Why Virtual World Economies Are Risky

from the inflation-inherent-in-the-system dept

We've already discussed the inherent dangers of basing a business model on the economics of virtual worlds. While there definitely is quite a bit of trade in virtual goods (often for lots of money), it's mostly based on ideas of artificial scarcity on goods that are effectively infinite. To drive that point home, Josh sent in an interesting story about a lawsuit between two founders of one such virtual world, where part of the complaint was that one of the guys effectively handed over the company to a third guy -- who planned to make money by selling the game world's currency, noting that once he controlled the company, he could just create an "infinite" amount of money in "a few minutes" and sell it at "below market" prices. While this suggests the folks in question had little sense of how basic economics works, it also highlights a pretty serious risk in these virtual worlds. At the same time that we're seeing Ben Bernanke struggling with managing the monetary policy of the US economy, for virtual worlds where there really is no scarcity at all, the temptation to simply flood the market without recognizing the consequences is just too great.

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If Someone Picks Your Pocket In Second Life, Who Do You Blame?

from the that-border-between-virtual-and-real dept

We've recently covered a few cases where real world laws end up in virtual worlds due to accusations of theft or fraud. These cases are always problematic, because it's impossible to know where to draw the boundaries. If a virtual world allows theft, then is it still a crime in real world? Now let's make this question a little more complicated. Some researchers have discovered that, thanks to a flaw in Apple's Quicktime, which is used within Second Life, it's possible to steal money from players within Second Life. This is important, because Second Life money can quickly be converted into US dollars. So, the virtual world "pick pocketing" can have real world implications. However, is it a crime?

Second Life is famous for pitching itself as a world where anything can happen -- and you could assume that if it can happen in the virtual world then it's legitimate activity -- or should be dealt with within the confines of the world. Otherwise, you're opening the door to people in worlds where "thieving" is encouraged or a part of game play accusing others of stealing in real world courts as well. Of course, that does open up the question of whether or not someone is to blame for the lost money here. Some could pin the blame on Second Life -- and, in fact, the article above notes that Second Life may need to upgrade its security to be more "bank like." Some could pin the blame on Apple, who has yet to patch the flaw in Quicktime. Others, of course, might blame users for keeping "valuable" currency in an unsecured environment like Second Life. And, of course, some would blame the person exploiting the security flaw in the first place. The point, though, is that it's a bit more complex than many would make it out to be, and future scenarios are only going to get more complex.

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Real Police Cross Over Into Virtual World Again; Arrest Teen For Theft Of Virtual Furniture

from the bad-precedent dept

Just a few weeks ago, we pointed to a lawsuit involving two Second Life users, with one accusing the other of "theft." We pointed out, as we have for quite some time, how problematic it is when real world laws are applied within a virtual world. The point of a virtual world is that anything is possible -- and putting the constraints of the real world on those worlds not only seems counterproductive, but potentially dangerous. That Second Life lawsuit was between two users, but over in the UK, a similar situation has gone even further: involving the police.

The police have arrested a teenager accused of "stealing" virtual furniture from another player in the virtual world Habbo Hotel. Again, it's true that the virtual furniture has real monetary value, but it's the sort of thing that should be taken care of within the framework of Habbo Hotel. The folks who run the world should be able to deal with the situation, as they are the world's de facto government. If you don't think this is a problem that's going to get more and more problematic, then just start to think through the scenarios of what happens next. What happens in an online virtual world where "theft" is designed to be a part of the gameplay? Can players then call the real cops when they lose in the game? That situation may be a bit more black and white, but many of these virtual worlds are designed to be defined by the users. So what if the users decide that "theft" is a part of the gameplay? What if some users decide it is and others don't? Bringing real world laws and real world cops into virtual worlds is guaranteed to cause problems.

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Yes, Timmy, Spending Money In Virtual Worlds Ends Up With A Real World Bill

from the funny-money dept

NetSafe, New Zealand's Internet safety group, warns that parents may be shocked to learn that their children's purchases in virtual worlds rack up real world charges on their credit cards. They warn that in virtual worlds like Second Life, it is possible to quickly run up huge credit card bills -- real money is spent when buying real estate, avatars, and clothing in the game. NetSafe used to discourage youths from spending any money in these virtual worlds, but has since changed their policy. They reason that while they might not understand the need for someone to buy a virtual good, it is not their place to judge where people spend their money. They stress instead that the most important lesson is for parents to set limits on their children's spending habits, but this seems pretty much like common sense parenting, and not something specific for online spending. Then again, our increasingly digital world has made it more difficult to teach children the value of a dollar. And with kids spending thousands of dollars on real estate that only exists in cyberspace, that lesson may get even harder to teach.

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China Planning Virtual World For People To Order Directly From Chinese Manufacturers

from the second-life-for-sweatshops dept

Apparently, the Chinese government is trying to build a huge 3D virtual world online that will function as something of a direct-to-consumer portal for Chinese manufacturers. The idea is that rather than buying "Made in China" goods through retailers, you could just log into this virtual world and order your products directly. In fact, the idea includes putting unique identifiers along with the "made in China" stickers so that people know where to go in this virtual world to order more. This raises a ton of questions, so we'll just start with the easy ones, and let you fill in the rest in the comments:

• How often have we seen big gov't projects online succeed? How often do they fail? Somehow we doubt this is going to get very far.
• To its credit, China has been somewhat successful with its big "censor the internet" project (aka The Great Firewall of China) -- so perhaps they can do it. However, how will they handle censorship in a virtual world mainly designed to deal with foreigners from countries where such censorship isn't appreciated?
• Oh wait, this should have been the first question: A 3D virtual world? Say what? Why? What's wrong with standard web pages?

This seems like the type of project gov't officials would think is cool without having any understanding of how people use the web, how they shop online or how they interact within virtual worlds. Otherwise, sounds like a fantastic idea.

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