June 1st, 2007 by Benjamin Duranske
A Federal judge in the Eastern District of Pennsylvania issued a new 46 page order (.pdf) in the Bragg v. Linden case denying Philip Rosedale’s motion to dismiss the portion of the lawsuit directed at him for lack of personal jurisdiction, and also denying defendants’ motion to compel arbitration.
First, I’m excited to see how thoroughly the Court dug into these issues. The Court could have granted or denied these motions with little discussion, but it didn’t. The Order states: “Ultimately at issue in this case are the novel questions of what rights and obligations grow out of the relationship between the owner and creator of a virtual world and its resident-customers. While the property and the world where it is found are ‘virtual,’ the dispute is real.” You can tell that the Court “gets it” right off the top.
Regarding the motion to dismiss Rosedale for lack of personal jurisdiction, the bar for establishing personal jurisdiction is pretty low, so I wouldn’t read too much into that part of the Court’s decision. Realistically, there are a lot of ways Rosedale can get himself out of the case later, and personal jurisdiction is fairly easy to establish.
But the denial of the motion to compel arbitration? That is a pretty big deal.
Understand initially that arbitration provisions are enforced all the time, and defeating one isn’t ever a simple thing. Moreover, when there’s complex technology and somewhat bizarre issues involved, the smart money says there’s a good chance the Court will let alternative dispute resolution procedures play out before it tackles the case.
The smart money would have been wrong this time. The Court held that Linden Lab’s Terms of Service amount to a “contract of adhesion” that “provide[s] Linden with a variety of one-sided remedies to resolve disputes, while forcing its customers to arbitrate any disputes with Linden.” In other words, the arbitration provision — though equally applied to both Bragg and Linden — is unconscionable because the rest of the Terms of Service (particularly those provisions that give Linden Lab unilateral, unlimited ban rights) aren’t “mutual.”
Bottom line is that this is a pretty extraordinary decision which, assuming it survives an almost certain appeal, will likely be cited as the seminal decision in virtual law for the foreseeable future. It will certainly force Linden Lab to revisit their Terms of Service, and in the end, it will result in virtual world participants being viewed somewhat more as “citizens” of these spaces and somewhat less as gameplayers subject to the whims of the provider.
There are a lot of issues raised by this Order, among them: the impact on the other provisions of the TOS, the possibility for special rights for participants in virtual spaces, and whether this will encourage other law suits. Readers, please consider sharing your thoughts on these issues, or any other issues raised by this Order. There’s a lot to digest here, and I’d love to hear your thoughts.
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