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The Biggest Lawsuit You’ve Never Heard Of

Unless, of course, you read BlawgIT. I posted about the lawsuit,Bragg v. Linden Research, Inc. (Second Life) and Philip Rosedale, last November.

On its face, the case may not seem like much; a lawyer who tried to “game” the game Second Life by buying up virtual real estate before it went on sale to the public. He is now suing Second Life for taking all of his virtual “stuff” after catching on to his shenanigans. What makes this case so important is that it gives us a glimpse of how courts are beginning to view the way we will all contract in the future (at least for most things).

Linden Labs portrays the case as simply revoking the rights of a gamer caught cheating violating the rules and having his privileges revoked pursuant to a standard Terms of Service (TOS) agreement. The problem is that these rules involve real money, and lots of it. If all Second Life gamers rushed the bank, Linden Labs would have to come up with nearly $10 million in real money to pay everyone.

Or, argues attorney Marc Bragg, Second Life might decide to assert its TOS adhesion contract against its users and not pay them anything. That is what happened to Bragg when Linden Labs caught him manipulating Second Life land sales. Bragg argues that this case is about a business taking people’s money in the real world in exchange for virtual stuff and then taking the virtual stuff back pursuant to an unfair contract. Bragg is upset that the adhesion contract Linden Labs forces all players to agree to, allows Linden Labs to avoid jurisdiction, mandate expensive arbitration and keep all settlements confidential so no other gamers can discover how to repeat the process on the cheap. By keeping the cost of fighting higher than the amount in question, Linden Labs’ TOS agreement basically allows it to commit any transgression it wants with impunity. Or at least so far.

Last Wednesday, however, the United States Court for the Eastern District of Pennsylvania denied Second Life’s Linden Labs motions to dismiss for lack of personal jurisdiction and motion to compel arbitration. In denying the motions, the court found that Linden Lab’s Terms of Service (TOS) Agreement was a contract of adhesion which:

expressly allow[s] Linden, at its “sole discretion” and based on mere
“suspicion,” to unilaterally freeze a participant’s account,
refuse access to the virtual and real currency contained within
that account, and then confiscate the participant’s virtual
property and real estate. A participant wishing to resolve any
dispute, on the other hand, after having forfeited its interest
in Second Life, must then initiate arbitration in Linden’s place
of business. To initiate arbitration involves advancing fees to
pay for no less than three arbitrators at a cost far greater than
would be involved in litigating in the state or federal court
system. Moreover, under these circumstances, the confidentiality
of the proceedings helps ensure that arbitration itself is fought
on an uneven field by ensuring that, through the accumulation of
experience, Linden becomes an expert in litigating the terms of
the TOS, while plaintiffs remain novices without the benefit of
learning from past precedent.

While you might not see yourself in Bragg’s position today, you will be one day, one day soon. The decision by this court as to how much more businesses will be allowed to take advantage of customers online is simply the first of many decisions that will shape your day to day life more than any other area of the law. Don’t worry. I will stay on top of it for you.

Brett Trout

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