Plaintiff Marc Bragg has filed a new Rule 12(b)(6) motion to dismiss (.pdf) regarding Linden Lab’s counterclaims against him, and a supporting brief (.pdf). Some readers will recall that Bragg already filed a 12(b)(6) motion but after he did, Linden Lab amended its complaint. The amendment added quotations from chat logs that shed light on Linden Lab’s claim that the method Bragg used to buy land violated a California criminal law prohibiting unauthorized computer access for fraudulent purposes. Bragg’s new motion amplifies points made earlier, and addresses this material.

A few things are worth noting. First, Bragg has made the full chat logs available as exhibits to the motion (.zip, look for Exhibit 12). There are some redactions to the logs, but the redactions at least appear to excise only material unrelated to this suit. Second, the argument has shifted a bit based on these logs: Bragg now states that the chat logs reveal that Linden Lab provided the parcel numbers Bragg typed in URLs, and so Bragg now argues more directly that he accessed nothing that wasn’t made public by Linden Lab. Finally, the tone of the brief in support of this motion is, if anything, even stronger than the previous one — the “cornered rat” is still there, and he has been joined by an allegation that Linden Lab and its lawyers acted in bad faith by bringing the counterclaim related to the California criminal statute.

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3pointD.com reports that MindArk’s Chief Information Officer, Marco Behrmann, met with members of the U.S. Congress Joint Economic Committee and the U.S. Internal Revenue Service earlier this month to discuss the taxing of income generated in virtual worlds and MMO games. Mindark is the company behind Entropia Universe, a virtual world / multiplayer game with currency pegged to the U.S. dollar. 3pointD observes, “Congress has been looking at issues of taxation related to virtual worlds since at least last October, and the Joint Economic Committee is long overdue with a promised report.”

It is interesting that it was Mindark’s Chief Information Officer who met with government representatives, because it implies they wanted to talk about the mechanical nuts and bolts of money transfer and extraction rather than ask general questions about finances. To me, that’s a hint that the government may be further along with an enforcement plan than I suspected.

I’m not a tax lawyer, but everything I have read on this leaves me completely convinced of two things: 1) you own tax on profits you make running businesses in virtual worlds, at least at the point when you extract money from the world, and 2) the IRS is going to start enforcing this, maybe by requiring virtual world and game providers to issue 1099 MISC forms on withdrawal of profits above a certain threshold, relatively soon. Anybody out there with a tax background want to weigh in?

My advice: if you are making money in virtual worlds — and particularly if you are making significant money — you should already be keeping records and paying taxes on the profits just like you would for any other business. If you aren’t, now is an excellent time to start.

Elchoness Law Firm, LLC: Global Workplace Counsel recently announced the opening of a Second Life office. Elchoness Law Firm is an employment law firm based out of Boulder, Colorado.

VB doesn’t cover all firm openings in virtual worlds (there are dozens in Second Life alone now, according to the invaluable Galileo Law Directory) but this one caught my eye because the Elchoness firm seems to have a better understanding of what might work in a virtual world than some.

Beyond just hanging a shingle, Dave Elchoness (as Second Life avatar ‘Da Etchegaray’) has started a group in Second Life “dedicated to the enhancement of the workplace, human resources, and employment issues through the use of virtual worlds such as Second Life,” and is encouraging “all residents interested exploring how virtual worlds can improve the workplace” to join.

The group’s name is “Second Life Workplace,” and if you want to visit the Elchoness offices, you can find them at Silicon Island (193, 91, 38).

David Post, a law professor at Temple University (also an Adjunct Scholar at the Cato Institute, a Fellow at the Institute for Information Law and Policy at New York Law School, the Co-Director of ICANNWatch.org , Disputes.org, and the Cyberspace Law Institute, an occasional contributor to the Volokh Conspiracy blog, and a member of the band “Bad Dog“), called for “serious legal systems … that more closely resembles what we call law” in virtual worlds in an interview with ZDNet Asia.

He was interviewed while attending the State of Play conference in Singapore (mental note… find corporate sponsor). Setting aside my petty jealousy and turning to Professor Post’s insightful comments:

I think until you have some sort of serious legal systems in these virtual worlds, they really are just games. But I think [virtual worlds] have the potential to be really more than games, and they won’t reach that potential until there’s something there that more closely resembles what we call law.

Also from the interview:

Why would you invest [and] spend six months digging up your land to plant crops if someone could come in the next day and take it from you?  And since you know that before hand, you don’t spend the six months [building] a nice structure because you don’t have any security that you will be able to keep it under a fair rule.

The full interview is well worth the click. And the band he’s in isn’t bad either, if you like funky Dylanesque bluegrass. My favorite? “Betsy Likens” (.mp3).