To Catch a Virtual World Thief

Too strict a definition of intellectual-property theft in places like Second Life could have a chilling effect on entrepreneurialism and innovation

Second Life has been stalked by the tech paparazzi for the last few years. Almost anything that happens to the company becomes fodder for a story—it even made the cover of BusinessWeek (BusinessWeek, 5/1/06) last year. A Google (GOOG) search garners a diverse list of Second Life stories: Estonia opening a virtual embassy, a synagogue conducting online religious services, IBM (IBM) employees in Italy striking virtually, and, of course, oodles of cybersex stories.

Why is Second Life so newsworthy? It's not like the Linden Research creation is heavily used. Of the almost 10 million people who have signed up for a free account, less than 10% are still active within 30 days—the paying crowd is smaller. It's not clear yet whether regular people are using the service; the volume and tenor of the news stories make me wonder if all Second Lifers are actually reporters, IBM executives, or online sex workers.

Hype notwithstanding, much of the interest is warranted. Many knowledgeable people suspect that avatar-based cyberspace is the next new thing. The idea is that in the future, people will interact online using 3D avatars (, 4/16/07) in place of the flat messaging, chat rooms, and message boards of today's two-dimensional Web. (For a good description of how Second Life might evolve, read Neal Stephenson's seminal novel Snow Crash.)

Moneymaking and Legalities

The financial potential of virtual technology is a magnet for entrepreneurs, who see an opportunity to create new businesses. Second Life has sparked many interesting new moneymaking ventures. But startups that push the envelope of applied technology often do so by leaping into legally ambiguous areas. Since the service is intangible, the commodities offered by these companies are likewise ephemeral. They are selling things that have not been sold before—representations of objects rather than the objects themselves.

The legal questions become especially thorny in Second Life, where subscribers retain full intellectual-property rights to their designs. Houses, clothing—even the look and feel of avatars' skins—are owned by their creators. These copyrights form the basis for startup businesses, but they exist in a legal wilderness because there is very little relevant case law.

The assertion of copyright by users instead of the hosting company has already resulted in one lawsuit and will undoubtedly be followed by others. Eros, run by Kevin Alderman, is an unusual product line: pixilated genitalia and code that animates sexual movements inside Second Life. Although the payment is made with in-world "Linden dollars," the funny money is convertible to greenbacks, making Eros a real, paying business.

Virtual Lawsuit

A virtual guy named Volkov Cattaneo (real name unknown) is spiking Alderman's turf; to his dismay, Cattaneo has snitched the code that Eros uses for its products and has been reselling it at a reduced price. When confronted by Alderman, the avatar Cattaneo allegedly replied: "Sue me." So Eros tried, but there was a wrinkle—you can't serve legal documents to an avatar…yet. So the attorney's solution is to go after Second Life and eBay's (EBAY) payment service, PayPal, to force them to out Volkov.

As weird as this legal activity may sound, it is deadly serious to the participants. And more important, to the rest of us it's a harbinger of many equally bizarre legal things to come. In a virtual world where everyone is on a level playing field and the only differentiating factor is creativity, intangibles such as design, innovation, and even genius are the true commodities. People argue, fight, and often litigate over wherever the money is. In the virtual economy, the money's an intellectual property and copyright is currency.

I can certainly understand why Alderman would sue. He is entitled to recoup his investment and shouldn't have future earnings diluted by a porn poacher. If a business's intellectual-property rights aren't protected, it will have a chilling effect on entrepreneurship and will retard investment in Internet businesses in general.

On the other hand, because the virtual world is based on mind stuff, not hand stuff—bits, and not atoms—it is difficult to avoid being at least a little derivative. Very few creations are truly unique. In the digital world more than in the physical one, each inspiration is layered on the reputation of predecessors. Too strict adherence to and application of copyright law will have a chilling effect on creativity, especially given the heavy-handedness of some big companies built around valuable trademarks. Take cartoon mice, for instance.

Intellectual-Property Protection

If online copyright protection is too strong, we will see a blast of recording industry-like legal shotgun shenanigans aimed against avatars and their artifacts by entertainment conglomerates. If copyright protection is too weak, no one will want to take the financial and emotional risk necessary to build a virtual business. We need a balance of IP law that tacitly acknowledges that the Internet is a special place and perhaps deserves special treatment. Perhaps theft could be reinterpreted and applied as the result of a stricter litmus test than in other media. Linking to someone else's Web site, for instance, doesn't intuitively seem like the same crime as, say, hot-wiring a car.

Stealing explicit code is clearly wrong, but avatar Volkov might have gotten sued even if he'd only reverse-engineered the look and feel of Eros' products; after all, the perception of theft to the owner is based on the look and feel of the artifact, not the underlying atomic structure. It is this larger sense of ownership that will cause much trouble in tomorrow's Internet. Lawyers will write laws protecting fungible stuff like code. This will result in intellectual-property protection only for the wealthy, who can afford good lawyers.

It seems that there needs to be more latitude with the legal protections afforded to artifacts in the virtual world. We need a simple system that is both egalitarian and intuitive. It's easier to create such a system by giving the benefit of the doubt to the borrower rather than deferring to the involuntary lender of the intellectual property. For instance, copying pictures, large hunks of songs, and linking to other Web sites should be permissible as long as attribution is given and the whole piece isn't lifted and resold. YouTube is suffering from exactly this problem. The Digital Millennium Copyright Act makes it all too easy for television networks, for example, to force even the smallest snippet of video to be lifted from a Web site, even though it is not being misappropriated in its entirety nor is anyone else making any money off of it.

I suspect that in the future, plagiarism may become a bigger IP crime than misappropriation, because attribution becomes critical in an online world where buzz can create instant Warholian celebrity, and reputation is the only differentiator between pseudonymous identities.

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