Virtual Items...who owns what?

The issue of virtual item ownership has been percolating in the background of the industry for a few years, occasionally coming to a boil as a dispute gets some press or litigation occurs. One one side, we have the publishers and developers of massively multiuser online games (usually role-playing, hence the term MMORPG) and virtual worlds (Second Life, Project Entropia, etc.). On another side, we have the end-user…the players who spend hours and hours drudging along to level their character and gain hard to find or rare items. This category also includes people that spend time in various virtual worlds…in some cases generating or creating content of their own. There is a third side that everyone seems to ignore for the most part, and that is the Government (the US Government for the most part).

When you create an account with a MMORPG or Virtual World (VW), you generally have to agree to a “Terms of Service” that is loaded with a lot of legal sounding mumbo jumbo. Among other things, users are expected to recognize and agree that the developer (or publisher, depending on how things are setup) owns, claims full copyright, and reserves all other rights regarding to everything within the game or world. For example, the World of Warcraft Terms of Service states:

Ownership.

All rights and title in and to the Program and the Service (including without limitation any user accounts, titles, computer code, themes, objects, characters, character names, stories, dialogue, catch phrases, locations, concepts, artwork, animations, sounds, musical compositions, audio-visual effects, methods of operation, moral rights, any related documentation, “applets” incorporated into the Program, transcripts of the chat rooms, character profile information, recordings of games played on the Program, and the Program client and server software) are owned by Blizzard or its licensors. The Program and the Service are protected by United States and international laws. The Program and the Service may contain certain licensed materials, and Blizzard’s licensors may enforce their rights in the event of any violation of this Agreement.

Second Life, however takes a different approach:

Content available in the Service may be provided by users of the Service, rather than by Linden Lab. Linden Lab and other parties have rights in their respective content, which you agree to respect.

You acknowledge that: (i) by using the Service you may have access to graphics, sound effects, music, video, audio, computer programs, animation, text and other creative output (collectively, “Content”), and (ii) Content may be provided under license by independent content providers, including contributions from other users of the Service (all such independent content providers, “Content Providers”). Linden Lab does not pre-screen Content.

You acknowledge that Linden Lab and other Content Providers have rights in their respective Content under copyright and other applicable laws and treaty provisions, and that except as described in this Agreement, such rights are not licensed or otherwise transferred by mere use of the Service. You accept full responsibility and liability for your use of any Content in violation of any such rights. You agree that your creation of Content is not in any way based upon any expectation of compensation from Linden Lab.

Before I continue, let me declare a few definitions to help clarify what I am talking about. Yes, labels and names are important. Let’s define User Generated Content (UGC) as content that is built (like fitting legos together) or customized (character race, stats, name, appearance, etc.) based on other content that is created by the developer. Your character’s avatar in the game is not created by you…individual components are created by the developer and put together by you (this includes equipping the character with particular gear and items, or selecting skills, etc.).

User Created Content (UCC) is any content that is created by the user from scratch. This includes written fiction and stories, textures, 3D models, animations, code (widgets, applications, scripts, etc. usually based on some sort of scripting language provided), and so forth. In the case of Second Life, it is a very open environment and architecture, that lets users use tools to create and upload new content. Second Life makes no claim to this content, and they are willing to literally sell ownership rights to sections of virtual “land”.

Ok, moving on. Regardless of which type of content we are talking about, people have a natural feeling of ownership for their character/avatar, as well as everything that the character or avatar “owns”. This goes beyond the name of the character and its likeness, personality, and backstory. In MMORPGs particularly, there is a significant and substantial time requirement to develop characters, complete quests, collect items, and so forth. Users equate their time and effort to collect these items (indeed, most of these games heavily emphasize item collection) as their investment to acquire the items. Remember, MMORPGs are supposed to be about role playing…you are your character. All of these games have built in mechanics to trade items from one player to another, as well as sell these items directly to another player for in-game currency (platinum, gold, silver, whatever), sell them in in-game shops, or even post them on auction systems built directly into the game. While this is absolutely necessary as functionality in any MMO game, they serve to reinforce the perception of ownership…not just by the character, but by the player as well. So, naturally, people attempt to sell items, currency, characters, and even entire accounts for real world currency. There are dozens of auction sites for doing so (Ebay has been particularly aggressive about disallowing such sales), and venture capitalists have funded several ventures that exist solely to buy and sell game currency in multiple MMORPGs (gold farming anyone?).

Developers are usually against this. The reasons vary, but basically they don’t like being left out of the loop and not making any money on it, they feel that users don’t have the right to sell something that doesn’t belong to them, and there are a lot of potential legal issues and pitfalls that developers simply do not want to be exposed to or have to deal with when it comes to this particular issue. It is interesting to note that some publishers, like Sony Online, have changed their stance somewhat and make provisions for things like character transfers and whatnot, but they charge a fee for the service (I don’t believe that the mechanics are there for person to person sales though).

The issue is further muddied by the growing emphasis on virtual item sales (microtransactions) where developers sell game items directly to the player. $5 gets you a shiny sword or some unique piece of limited edition clothing. But do the players actually own this? Or are they just paying for access or limited license to the object? Are they in fact paying a service fee to use the item?

I’ll come back to that in a moment. First though, I want to talk about the third entity coming to the party. The Government. For the time being, the Government has limited its interest and interference to crowing about ratings systems and mature content (rightly so), and the occasional congressional nutcase (both parties) hollaring about how games are destroying our youth and the definite cause of much teen violence (which is ludicrous). The danger that lurks is when the Government decides that virtual items DO have real value, and they DO belong to the end user. Which means, they are taxable. Great. You really want to own your level 70 Warrior in World of Warcraft? What’s the market value on that? Do you really want to have to declare it on your tax return and pay for it? How about virtual property taxes? Be careful what you ask for…

Another quick point…I think Second Life made a big mistake in selling virtual land. The concept is good (and honestly, I was pitching this in the mid 90’s (95/96) with my first MMORPG venture), but there are some issues. One of the problems that Second Life has (and they have many) is that they have a difficult time keeping new users (the reasons I may discuss in some other post). People make accounts, buy some virtual land, build some objects (usually displeasing to the eye, but that is the nature of the toolset and no moderation over user created content), and then they don’t come back after they get bored. What happens? Landscapes filled with a chaotic imbroglio of buildings and objects with no consistency or context…and no population. So, Linden keeps releasing new land and the cycle repeats. Because some user OWNS those objects and virtual land, there is nothing Linden can actually do about it to clean it up or reclaim it.

Wouldn’t it have been better to sell leases, licenses, or limited rights to the property? Pay rent and do what you want. Quit paying rent and your virtual land gets forclosed on and resold. This simple little twist would have made Second Life a much greater success than it is now. Revenues would have been higher, the economy would be much more stable, and high traffic areas would be much easier to develop. Plus, the continual refreshment of content would help keep the world alive and vibrant. This approach (applied to virtual items as well) would let developers maintain all rights to their content in games and solve a few potential pitfalls. Even in WoW, the terms of service should be modified to allow users to transfer ownership rights of their license or service agreement.

I’m not an attorney by any means, but I think this is the way to go. Oh, I haven’t discussed the pitfalls I mentioned earlier. If the user owns everything, what happens in a MMORPG where there are thieving skills? What happens if another character kills your character, or screws up a quest or raid you were in the middle of trying to earn some epic item? If these things have real world value and ownership tied to it, you could conceivably sue them, and the developer for the loss or even emotional distress. Think about it… not very reassuring, is it? What happens in a server outage or rollback? Bugged items?

The moment that users (especially gamers) claim full ownership to the virtual items and start placing real world value on them, the pandora’s box opens wider and wider. Then at some point, developers will be shut down after litigation (ruining it for everyone) or the government will step in with a fat tax package (Obama already wants to raise your taxes by a ludicrous amount…it wouldnt be a far cry for anti-corporate and anti-gamer politicians to go after the mythical internet tax or the more realistic virtual item tax).

Just my two pieces of gold.

If you noticed I was incorrect in anything I mentioned specifically here, or you have some data on which party has been more vocal and anti-gaming (or even which politicians favor taxing internet stuff), please comment and let me know.