The Economist is currently featuring an article that focuses largely on virtual law. Sean Kane, one of my co-chairs on the committee on Virtual Worlds and Multiuser Online Games of the American Bar Association’s Section of Science and Technology Law, commented for the piece, along with Ted Castronova, Dan Hunter, and some of the other usual suspects in virtual law. It’s a good, fairly straightforward introduction to the current questions in this field, and a great article to forward to colleagues who are not yet familiar with virtual law if you are an attorney considering focusing your practice at least partly in this area.

Virtually Blind periodically runs “Quicklinks” — items that are not long enough for a full story, but are worth a click. Here’s today’s batch, all from Second Life.

• Landbots are misunderstood, according to Landbot Invasion, a new blog from the “Super Babenco Brothers.” The brothers warn Second Life users against bad landbot practices (e.g. buying land for pennies on the dollar, the deliciously ironic subject of Marc Bragg’s most recent lawsuit threat), and lobby for their responsible use. So far, it strikes a reasonable tone. And hey… it’s the first site to formally adopt VB’s proposal for a standard format for avatar reference, so it gets a Quicklink on those grounds alone.

• The Second Life Herald recently reported that ‘Master Quatro,’ manager of Anshe Chung’s Dreamland, sent Dreamland residents an angry note encouraging “a massive outpouring of disgust … or a class action lawsuit” directed at Linden Lab for “aid[ing] and abett[ing]” griefers. Probably better off going with the “massive outpouring of disgust. ” The Second Life Terms of Service don’t obligate Linden Lab to do anything against griefers, and a breach of implied warranty claim is going to be tough sledding since the service basically does work. The claim is not completely unreasonable, but it would be an uphill battle.

• In the “it was bound to happen” department, we recently ran across a placeholder for a website for a Second Life private investigator (via TecnoLlama). The awkwardly-named “SL(eye)investigations” offers “vetting & pre-employment screening, asset tracking, people tracing, theft & fraud investigation, general research, and computer security & data recovery.” One can assume they also offer, “posing as a hot avatar to get the dirt on your real life spouse,” but felt that sounded too sleazy for the front page.

Giant Interactive Group Inc. (“Giant”), an online game developer in China, has become the target of a class action lawsuit filed in the U.S. District Court for the Southern District of New York. The suit alleges that Giant lost subscribers after curbing gold farming activity in its popular “ZT Online” (aka “Zheng Tu Online”) title, and failed to tell investors of the decline.

ZT Online, set in the world of ancient China, claims 1.3 million active subscribers and was the most popular online game in China in 2006.

The lawsuit was filed on November 26 by the law firm of Coughlin Stoia Geller Rudman & Robbins LLP (“Coughlin Stoia”) on behalf of all persons who purchased “American Depositary Shares” in Giant between November 1, the date of Giant’s initial public offering, and November 19, when Giant released a new financial report.

The complaint (.pdf) alleges that Giant’s IPO Registration Statement filed with the SEC failed to disclose material information regarding a third-quarter decrease in average concurrent users (“ACU”) and peak concurrent users (“PCU”) in ZT Online. In its November 19 financial report, Giant reported ACU and PCU of 481,000 and 888,000, marking quarterly declines of 6.6 and 17.2 percent, respectively. However, the numbers used in the Registration Statement were based on ACU/PCU numbers from the quarter ending September 30, 2007.

The complaint asserts that Giant was required to disclose the allegedly material negative registration trend taking place in the month of October. Giant has attributed the fall in users to a rule adjustment that increased restrictions on gold farming. As the Complaint states, gold farming is an action wherein people play online games so that they can generate online currency which is then sold on third-party websites for real-world currency. One Fox News report claims there are hundreds of thousands of gold farmers in China, where gold farming is an increasingly viable way to make a living.

Commentary

There are several interesting aspects to this story. The lawsuit is based on the alleged misrepresentation by Giant regarding user numbers, of course. But apparently the Giant investors feel that gold farming in ZT Online was an important part of their investment, as opposed to the increasingly popular view that gold farming is damaging to an MMORPG’s economy as a whole (and thus, the long term health of the game).

This may be reflective of the relatively short-term investment potential in MMORPGs, where the next big thing may be just around the corner. Indeed, the fact that the one-month downward trend (any trend prior to September 30 should have been noticed by prudent investors who conducted their due diligence) has led to this class-action lawsuit further highlights the get-rich-quick mentality.

Giant probably took what it considered the correct action to preserve ZT Online’s economy for the long term. Whether a little more transparency was required in their actions will be determined by this lawsuit.

The suit could also impact how closely other developers of virtual worlds are forced to monitor their economy and report to shareholders.

A judgment by consent (.pdf) was filed today in the copyright and trademark lawsuit six Second Life content creators brought against Thomas Simon (avatar ‘Rase Kenzo’) last month. In the judgment — which still must be “entered” by the court to take effect — Simon agrees to a number of terms and conditions, including the following.

• Simon will pay $525 in damages for profits made through unauthorized use of the plaintiffs’ intellectual property via “unauthorized copying and distribution of plaintiffs’ merchandise.”

• Simon will represent, under penalty of perjury, that no one assisted him in his copying efforts and that he profited only $525 by his actions.

• Simon will make his PayPal and Second Life transactional records available to the plaintiffs’ attorney.

• Simon will inform plaintiffs of any future “alt” accounts in Second Life.

The parties — the six content creators and Simon — all also agree that they will “not make any further comment on the terms of this Order [...] or the negotiation of the terms of this Order, or the events giving rise to this Action.”

While the judgment must still be formally entered by the court, settlement agreements like this are typically honored, so the matter is essentially concluded. The six content creators “win” the lawsuit with this kind of judgment; that would not be true if they had simply dismissed the claim.

Although the claims largely centered on intellectual property, if the judge — the Honorable Sandra Townes, in the Eastern District of New York — enters the consent judgment as written, including its reference to copying of “merchandise,” the judgment will stand as the first formal, if tentative, recognition of virtual property by a U.S. court. Though the judgment will not have as significant a precedential value as a contested decision on the merits would have had, it will be cited for the foreseeable future.

Reuters reported last week that Simon had rejected a larger settlement demand, and that at the time, he planned to fight the charges.

This post will be updated if and when the judgment is entered. Depending on the court’s procedures, that often occurs within days of filing.

[January 3, 2008 update: the consent judgment was signed by the court and entered without modification.]