In the last six to 12 months, so-called "virtual worlds" have begun to generate "real news" in respected news sources like the New York Times, the Wall Street Journal, Reuters, and CNN.com. Stories have covered the vandalizing of John Edwards' virtual campaign headquarters (and a similar attack on the HQ of a French presidential candidate), a lawsuit filed by a game player who was barred from the game and stripped of his virtual "property" because he allegedly violated the game rules, the Chinese government's reaction to a game currency being traded for real-world items and real-world cash, concerns about money laundering and securities fraud within virtual-world games, and the Netherlands' enforcement efforts against virtual pornography, and even virtual rape. While these are virtual worlds, the actions of the participants have consequences in the real world with legal implications.

A New Life—Inside the Internet

Usually created by video game developers, these worlds reside on the Internet and are available to anyone with access to the World Wide Web. They most often are created in what are known as "massively multi-player online role playing games" or MMORPGs (pronounced "Morpegs"). The principal goal of these worlds has been to provide a setting for a fantasy entertainment experience for the players who register and play the game.

Unlike some science fiction depictions of virtual reality suggesting humans donning head gear and perhaps body gear so as to control and maneuver three-dimensional holographic figures, Internet MMORPGs employ "avatars"--cartoon-like representations of the person participating in the game. Avatars may actually resemble the person behind the avatar or bear no resemblance—physical or otherwise--to the player. While these games and worlds have been around for the last 10 or more years, it has been in the last year or two that the phenomenon has really caught the imagination of large numbers of people and, consequently, the attention of nonplayers such as governmental agencies who see real-world consequences for what is happening in the online world; and these real-world consequences implicate real-world laws and regulations.

MMORPGs began as an offshoot of video games--a result of the desire of players to pit their skills against contestants more broadly via use of the Internet. However, the genre has grown beyond this original video-game-based model. More sophisticated games--MMORPGs--allow many players to compete or interact at the same time.

The technology has developed to a level that allows avatars to relate to each other through online chat and instant messaging software, providing an added sense of realism that exists over and above normal online chat in platforms such as Yahoo! and MSN.

These interactions occur in what may be viewed as an alternative earth. Often a period piece of sorts, an alternative earth might be futuristic or medieval in its orientation and activities. Of particular importance is the distinction between those games that end upon sign-off and start anew when logging back on, and those games where the world is "persistent" and continues even in the absence of the player.

Often the persistent games involve "leveling," where the players rise through various levels of skill and develop increasing proficiency in the game. Of critical importance is the ability of the player to earn and acquire in-world scarce resources such as weapons and skills that aid the player in the pursuit of the game's goals--be they acquisition of wealth, killing dragons, fighting enemies, or whatever the player desires as part of the game. It is the acquisition of such things and skills that bring to the fore the legal issues that are currently of interest.

In addition to "leveling games," other games focus on simply hanging out socially with other players' avatars. The leading example of the "social game" is Second Life, developed by Linden Labs in California. Second Life claims over 9,000,000 members. Of course, many of those members may have registered but do not regularly participate. Second Life notes that over 1.5 million people have logged on to the game in the last 60 days and, at any given time, 28,000-40,000 players are online and in-world. While these numbers may be exaggerated because of individuals who operate more than one avatar, nonetheless, there remain a large number of participants worldwide who play in Second Life.

If one goes into Second Life, one will find, at most anytime, chat occurring in multiple languages. Indeed, people can acquire devices in Second Life that, when used with their avatar, translate from one language to another—all the better to facilitate interaction among players and create the means for a true "second life" experience. Broader social games such as Second Life raise more legal and regulatory issues because the "game" aspect is not as prevalent and the interactions among players are more real-world-like.

Property Inside the Games

The fact that players in Second Life (as well as other online games) acquire items that resemble property is of particular importance. In most online games, the End User License Agreement (EULA) and Terms of Service (ToS) severely limit the alienability and transferability of things acquired in-world. Whether a player earns a valuable weapon with which to slay dragons and other monsters or purchases clothing for his or her avatar to reflect a particular status, these items have value both in-world and in the real world to other players.

This value has been reflected in the development, on eBay and similar Internet sites (e.g., Gaming Open Market and IGE.com, a large Chinese site), of open trading of game items, where in-world tools, weapons, and other property have been bought and sold for real-world money. Some players are able to earn part or all of their real-world living by buying and reselling in-world assets. eBay, Inc., recently announced that it would cease trading in game items if the trading is forbidden by the game's EULA or ToS.

Unlike games that seek to limit the ability to realize the value of in-game acquisitions, Second Life makes clear in its EULA that items created by players in-world become and remain the property of the player. In Second Life, a player's creations are subject to a nonexclusive royalty-free license in such creations retained by Linden Labs. Questions about transferability, contract, and property claims abound. It only takes one disappointed party in-world to create potential real-world legal effects.

Some games' EULAs impose restrictions on the ability of players to manufacture, mine, or otherwise create items through the use of "bots"—banks of computers running full-time to mine metal, make armor, sew bandages or clothing, make bricks, etc. Such "gold farming" profits players who are able to sell their bot-generated items to other players.

A variation of gold-farming is a "click-shop" (analogous to sweatshop), in which a real-world low-salary employee in a poor country is hired to perform the same repetitious function as the bots, clicking computer keys and mouse buttons for many hours per day. The employer then sells these click-shop items to players whose time is worth more, often in richer countries, so that they can advance more quickly in the game.

The social aspect of games such as Second Life distinguishes these "worlds" from those one might find in leveling games like World of Warcraft, Star Trek, or Ultima Online. While some leveling games include a social component, the competitive play aspect predominates. In Second Life, discussions with those participating reveal many different motivations for being "in" the world. Many people join Second Life for socialization--to meet and chat with people from around the world in a largely anonymous setting. Others view Second Life as a new platform for the development of software code that may be marketed to others, either in-world or sometimes in the real world. Most of what one finds in Second Life is owned and operated by other players. These players "build" items in designated areas in Second Life created by others. This creativity is encouraged by Linden Labs through the terms of the EULA, which, unlike other games, acknowledges the property rights of players in the items they create.

In-World Currencies

In addition to the creation and acquisition of things in-world, most games have in-world currencies. Linden Labs has created a separate Second Life currency, the "Linden Dollar" or "Linden." Second Life has a Linden exchange where players can buy and sell Lindens for U.S. dollars and other currencies. The Linden has traded at a rate of roughly 250-275 Lindens to the U.S. dollar. Lindens are then used in-world to buy items desired--whether it be clothing, furniture, or even land.

In addition to purchasing Lindens with real-world currencies, Lindens also can be acquired by selling products developed for sale in-world. People in-world use the Second Life platform to create items such as clothing and furniture that other players buy for their avatars to use in their second life. Just as businesses are built and expand in the real world, there is an active thriving economy in-world in Second Life.

Land is available in areas all over the Second Life world. At least one player claims to have Second Life realty worth more than $1 million. Some lenders in Second Life are willing to loan the money (Lindens) needed to buy the land and even to acquire the code needed to construct buildings and other structures on one's land. People in-world sell their services to acquire Lindens to add to their in-world wealth. With such burgeoning commerce, the legal conflicts that will arise are easy to imagine.

A few players have amassed sufficient wealth to give Lindens away to new players trying to get a start in Second Life. So there are ways in-world to acquire small amounts of money by simply "camping"--that is, hanging out in-world at a spot created by a benefactor to provide limited Lindens. Often these camping spots are located in entertainment centers such as casinos or dance clubs where having additional people--"traffic"--helps attract others who will come into the casino or club to play and purchase what is available. Players can sell their Lindens back to Second Life for cash, or they can sell them on other established Internet markets.

The ability to amass in-world wealth and trade the excess for real money in the real world has caught the attention of some governments. In China, real-world trading in these in-world currencies has raised a concern that flooding the real world with in-world currencies could actually affect the money supply in the real-world economy. The government has reacted by limiting the amount of in-world currency that any individual can acquire. The Swedish government has signed off on Entropia Universe's in-world ATM card, as to its protections against money laundering. In the United States, concerns about in-world bank scams, money laundering, and in-world securities fraud have led to investigations by the SEC and banking regulators. The IRS is looking into whether income might be realized in-world, and in response to FBI visits to in-world casinos, Linden Labs has elected to prohibit casino gambling in Second Life.

In-World Businesses and Education

Existing businesses are venturing in-world. Corporations such as DuPont, Toyota, Cisco, IBM, Microsoft, Sun Microsystems, Sony, Circuit City, Sears, Nike, Starwood, the Dutch bank ABN Amro, and Thomson Publishing have established a presence in Second Life. Toyota has established Toyota Scion City where avatars can test-drive Scion automobiles. IBM has built a Sears store where a player can mock-up a kitchen with Sears appliances to see how it would look. Thomson/NetG has created an entire learning center with classes taught by Cisco and Microsoft among others. Reuters News Agency has an established, embedded reporter in Second Life who does nothing but report on events in Second Life. Even the governments of Sweden and the Maldives have established embassies in Second Life.

The active presence of real-world businesses and governments suggests that Second Life is somehow more than a game. Indeed, there are currently university classes being conducted in Second Life. From Texas State University-San Marcos, to Ohio University with a two-island campus, to the University of North Carolina- Chapel Hill and the University of Illinois, major universities in the United States and from around the world are establishing a presence and conducting classes in Second Life. Through a platform such as Second Life, professors and students can sit in different locations, in front of their individual computers, and interact with each other in real time. Of course, the limitation is that all participants must communicate using chat and instant messaging technology; however, Linden Labs recently inaugurated interactive oral communication technology in Second Life. It is apparent that as an experimental and growing platform, this technology is causing educators to rethink the delivery and settings of education.

Enter the Law!

Given that real value can be acquired in these worlds and that transactions in those assets occur in significant amounts each day--what are the rules governing these acquisitions and interactions? Each of these MMORPGs requires players, as part of registration, to agree to a EULA and/or ToS. These agreements address the player's rights and obligations relative to the game developer/designer/licensor (the "Creator" or "wizard").

In the case of Second Life, the ToS also include "Community Standards," which set forth rules and mores to be observed by participants in-world. The Community Standards address the relationships between and among the players in-world. These documents sometimes set forth provisions for in-world dispute mechanism processes when one player perceives that another player has violated the rules.

In Second Life, the Creator (Linden Labs), grants "owners" of land within Second Life total control and authority to punish or even expel players violating the rules on the player's land (in the same way as people have authority to exclude people from their real-world home). In "public" areas, the Creator is the enforcer. Reports of perceived abuse are made to the Creator and enforcement is meted out by the Creator. These fairly rudimentary enforcement mechanisms apply in-world. There are groups forming (e.g., the Metaverse Republic) who intend to develop functioning legal systems to better address the need for enforcement of legal norms in these developing "societies."

Might there be recourse in the real world for wrongs committed in-world that have real-world consequences or impacts? Since players acquire "avatar capital," it is not difficult to imagine injured parties seeking recourse in the real world when losses are suffered. These claims may be brought against other players directly for the wrongs suffered, against the Creator for arbitrary or wrongful conversion of in-world property, or possibly against the Creator for failure to enforce the ToS and Community Standards.

Perhaps the easiest claims to imagine relate to contract claims between players, given the real opportunities for disappointed expectations. While "land" in Second Life is not real property, players act as though the space acquired in-world is like real land. They wall it off, precluding entry by those without permission; they build houses and other structures; and they suffer damage when the value of the land is reduced because of a neighbor's use of his or her land.

Second Life players have intentionally acquired virtual land in order to use it as a dump and drive down the land value of a neighbor. Another player acquired land in a green and quiet area, only to have the neighboring parcel acquired by a player who then erected a large, garish, and noisy casino and club. Given that players have claimed to have spent the equivalent of hundreds and thousands of real U.S. dollars to buy and develop these virtual properties, do they or should they have recourse in real courts for nuisance-like damages against these other players?

The "reality" of these virtual worlds blurs the distinction between fantasy and game on the one hand and real-world reactions and consequences on the other. While being injured or killed or having property forcibly taken from you in a game such as Star Trek or World of Warcraft may simply be "part of the game," perceptions and reality may be quite different in a world like Second Life. Where people come together in a space like Second Life specifically to interact with others, create, develop relationships, build, and engage in normal human behaviors, the "game" aspect may well be lost on many participants. How the Creators, players, and likely ultimately real-world courts address the inevitable conflicts that will arise will be not only interesting, but instructive of the way in which our social and legal system addresses new challenges.