Virtual Property

Law Faculty
University of Belgrade
RESEARCH PAPER IN
INTERNET LAW:
VIRTUAL PROPERTY
© Slobodan Trivić 08/966
All rights reserved. Including the right to virtual property.

Slobodan Trivić 08/966, Virtual property, Law Faculty University of Belgrade
December, 2009.
Summary
1. Introduction 3 pg
2. Definition of virtual property 5 pg.
3. Virtual goods in the virtual world 6 pg.
4. Regulation of virtual property in virtual worlds 8 pg.
5. Facts & Figures 10 pg.
6. Conclusion 11 pg.
7. References 12 pg.
Page | 2
1. Introduction
“Imagine a world with millions of people communicating and transacting. Imagine a world
♣
just like ours except that it is made entirely out of bits instead of atoms.”
This research paper refers to one of the emerging social relations, in which people do
not relate each other as a person to person, but as a user to user. The background of this kind
of social realm is the “network of all networks”, the internet. Internet is an information
sharing system of networks, based on the interaction between users.1 Revolution of this kind
of communication resulted with emerging of different spheres in already established systems
of economy, law, etc. In the past years, certain principles of economy had been used in
explaining the relations between users and their virtual goods in internet games, the way they
use them and various situations where people behave rational in an imagined world. This
resulted with a new economical aspect, virtual economy.2
Even though Internet had been created for an entire different purpose3, nowadays it
has become a playground of investment, advertising, commerce, where vast quantum of
profit has been made.
One of the main tools of presenting the content of any kind is through web sites,
specially designed web pages on which users can find information of their interest. Web
pages are registered through internet domains, regulated by ICANN4, which makes them
different from all other pages (sources) of information on the network.
What is also an interesting phenomenon is the creation of Massive Multiplayer Online
Games (MMOG), where millions of users interact between each other, as virtual characters.
Games like “Second life” and “Warcraft” are a revolution in gaming, where people (users)
are presented by virtual characters created by them, living a “virtual life” in the “virtual
world”, made by the creator of the game.

Viktor Mayer-Schönberger and John Crowley, Napster's Second Life? - The Regulatory
Challenges of Virtual Worlds, Harvard University, http://ssrn.com/abstract=822385
1
Encyclopedia Britannica, www.britannica.com
2
Also known as “synthetic economy”, it analyses the usage, and exchange of virtual
goods in the aspect of an internet game.
3
The first computer networks were dedicated special-purpose systems such as SABRE
(an airline reservation system) and AUTODIN I (a defense command-and-control system),
both designed and implemented in the late 1950s and early 1960s, See more on
www.britannica.com
4
International Corporation for Assigned Names and Numbers
Page | 3
A virtual world is a computer-based simulated environment intended for its users to

inhabit and interact via avatars. These avatars (“av” or “avi”) are usually depicted as textual,
two-dimensional, or three-dimensional graphical representations.5 Avatars represent the
consumer in the game as an “in game persona”6. Users are legally bond with the creator of
the game with EULAs7, contracts which restrain them from unauthorized redistributing of the
product they are using, because the creator of the game keeps all the rights of intellectual
property to himself. These contracts are made online, before the installation of the game
itself. In practice, people usually do not read the content of the EULA, and are not aware of
the legal consequences that arise from this kind of contract8.
The player, as the consumer of the game, has the possibility to use all the features of
the game, including the creation of certain virtual objects, which can become virtual goods,
depending of their value in the virtual world. A virtual good is a virtual object, created in a
virtual world, which has a value on the market, because other players of the game are willing
to pay for it. Numerous are examples of players who create these goods in the game, and then
sell them on the real market, like E – bay. The seller makes a proposal in the real world, the
buyer pays the price in the real world, and then the object of the sale is transferred in the
virtual world.9 This kind of profit making is a direct violation of the Intellectual rights of the
game creator.
Basic questions of this research paper are related to the subject of the virtual property,
how does somebody become one, what are the means of protection of the virtual property’s
object, and how can we regulate it efficiently.
5
Virtual World Crime, Council of Europe Octopus Interface Conference, held on March
2009 by Marc Goodman, senior advisor in Interpol Steering Committee on Information
Technology Crime
6
TEŠIĆ NENAD, Is there a property in the virtual world, Pravni život, br. 11/2008
7
End User License Agreement; in which the creator keeps the right to the economical
benefits from the distribution of the game, the right to change the content of the game,
etc.
8
Online contracts usually work on a “double click principle”, where the contract can be
agreed upon only after a minimum of two clicks: starting the installation, reading the
EULA, agreeing to the terms of the agreement, finishing the installation.
9
Page | 4
2. Definition of virtual property
Virtual by definition represents a mimic of reality, creating the impression of the real
world throughout digital means.10 By analogy, we could say that virtual property mimics real
property throughout digital means. One thing we have to remember always is that every
virtual object is in fact a code of information, which tells what that object is, how does it look
like, etc. Every virtual object can be multiplied numerously, without any cost or difference
between the original and the copy, what makes a problem to define what virtual property is.
There are three legally relevant characteristics of virtual property11: rivalrousness,
persistence and interconnectivity.
Rivalrousness gives the right to the owner to exclude all other subjects from using the
object of his property. Fro example, no one but the owner can post new information on web
site he owns, because he is the only one registered as the owner of the internet address of the
web site. Others can only view the information on the web site, without any possibility of
changing its content.
Persistence is the possibility of the owner to use the code he is entitled to from every
device that is capable of running this king of operations (PC, laptop, PDA, etc.) without
loosing the quality of usage in the future. The code of the virtual property stays permanent for
non defined time of usage, through all compatible technological means of usage, for the
owner of the code.
Interconnectivity means that while the owner uses his virtual good, others can
experience the impression of that virtual good. This is an important characteristic of virtual
goods, because Internet as a whole is based on the concept of interconnectivity, where people
share information and experience it though contact.
There are similar views on these characteristics that say these characteristics are
relative12 for the reason of the relation between the owner of the virtual good and the provider
that maintains the virtual good during the time when the owner is not on line. Also there is a
gap between the owner and his virtual good in cases of unpaid subscription fees, etc.
10
See more on, www.wikipedia.org
11
Virtual Property, Joshua Fairfield, Indiana University School of Law, Research Papers
2005, http://ssrn.com/abstract=807966
12
Page | 5
These characteristics are of vital importance, because they give the security for the
owner, and please to the interest of all others who are information sharers. While
rivalrousness gives the security to the owner that he alone is entitled to control and to design
the content of this virtual good, with persistence that secures that the content will stay even
when the owner goes of line, interconnectivity gives the possibility to all others to experience
the content of the virtual good, in compliance to the rights of the owner.
3. Virtual goods in the virtual world
Virtual goods are the means of expressing information or real goods through the
means of digital technology. Virtual good represents a digitalized entity that is entirely
defined by the code that gives the information of its appearance (shape, look, color, etc.) and
function (program, file, icon, etc.). So, virtual goods do not exist outside the computer we are
using.
An URL13 is an internet address consisting from an internet protocol (http), a domain
name (www.ius.bg.ac.yu) and occasional additional information.14 URL is a virtual good,
because it is owned by the person who is registered to it, entitled to use and modify the
content of it in any way that is not prohibited by the law. The owner can exclude everyone
else in interfering with his content; he can modify it at any time, with the guarantee of
persistent content of his virtual good, with also the possibility of others to interact with the
content, within the boundaries set by the owner.
E – Mail account is a virtual good also. Two persons can’t have a same e – mail
account, with the same e – mail address. Nobody but the owner of the account can use it,
because it is protected by the provider with the code that is only known to the user, and to the
provider. If the user gives the code to another person, it can use the account, and this makes a
problem of the importance of the identity of the person that uses the account. For now, the
identity of the user is not relevant to the provider, because it would violate the right to
privacy of individuals when having obligatory statements of their identity in the sign up
process. User is the person that has the log in password – from the point of view of the
13
Uniform Resource Locator
14
Virtual Property, Joshua Fairfield, Indiana University School of Law, Research Papers
2005, http://ssrn.com/abstract=807966
Page | 6
provider. If anybody uses else’s account without authorization, that person is violating the
privacy of information of the owner, prescribed by the criminal law.15
Bank account is one of the most important issues in e – commerce. With bank
accounts persons can buy, sale and transact with other economical subjects on the Internet.
The regulation of bank accounts are mutatis mutandis to e – mail accounts, but with a
difference of strict rules of usage, sometimes bond with identity check, for the security of the
user.
One of the most controversial virtual goods is the one made in the concept of an
online game, like MMORPG. In these games, the player has the right to play the game and to
use all the features given in the game, for what he is obliged to pay a certain amount of
money. In games like Second life or Warcraft, players have the opportunity to make certain
objects, including those that have never been in the game before. Then the question arises
who is the owner of the new made virtual good if it never existed before in the game?
Firstly, to set one principle clear, intellectual property arises from the creation of a
new, original product, and it is bond to the creator. The creator of the game is entitled to the
game, to distribute, modify, or to destroy it, without any obligations to other persons. By
buying an installation CD, or downloading the installation file, others gain the property over
the CD, file or any other mean of installing the game, not the game itself. This is reason of
signing EULAs, to protect the owner of the game from unauthorized usage of the game.
On one side, the company “Blizard entertainment” keeps all the virtual goods under
its ownership; no matter how inventive or original is the virtual good made. The entire
concept of the game is entitled to the company, without exceptions. On the other hand,
“Linden lab”, the owner of Second life gives the credit to the players who create new
elements in the game, or who make a part of a similar activity.
15
Article 302, Criminal law, RS, 72/2009
Page | 7
4. Regulation of virtual property in virtual worlds
The protection and establishment of virtual property, in order to comply with the
interest of the consumers is a must to the law system. But there are certain complications
regarding the protection of the individual consumer, because of the specific law principles
this kind of property lies on.
Firstly, everybody is entitled to the protection of his/her virtual goods, granted by the
norms of the criminal law, which protects the public interest. The criminal law recognizes
virtual goods as computer data, and equals them with movable goods. 16 The result of this
recognition is a fine or a maximum prison sentence of three years.17
The regulation within the contract between the provider and the consumer sets an
opportunity for the player to modify, change or introduce new elements in the game, and for
the provider to economically exploit the game. The private interest for the player is to enjoy
playing the game, using the given features, for what he is obliged to pay. On the other hand,
the provider has to maintain the game play system, because it gains economical benefit from
the game in form of player fees and advertisement. What happens when the provider shuts
down the game, or changes the content, and by that inflicting certain consequences to the
players who are consumers of the provided service? In most cases, providers protect
themselves through EULAs, stating that their right, as the owners of the Intellectual property
over the game, is to change the content, or to shut the game down, without the consent of the
users.18
This is the crucial distinction between the virtual property and real property. In real
property, individual’s constitutional guaranteed right is the compensation for the property that
is taken away or restricted.19
16
“Movable goods are also regarded as created or gathered energy (…) so as computer
data.”, Article 12, Criminal law, RS, 72/2009
17
Article 201 and 301, Criminal law, RS, 72/2009
18
“Linden lab” has the right at any time for any reason or no reason to change and/or
eliminate any aspect(s) of the Service as it sees fit in its sole discretion.”, See more on,
www.secondlife.com
19
“The right to property can be taken or restricted only with the compensation that can
not be lower that the market price.” , Article 58, Constitution of Republic of Serbia,
98/2006
Page | 8
The Constitution also recognizes the equality between all forms of property, and a
guarantee for private property rights to individuals.20 Only exception that the Constitution
makes is the case when the property is in the ownership of the state, where property can be
put out of commerce during the time of its usage in the public interest.21
E – Mail property22 can be viewed from two aspects, the sender’s and the receiver’s.
The sender is the owner of the e – mail in the time of its creation. When the e mail gets to the
destination, to the receiver’s inbox, it is still in the property of the sender. When the receiver
opens the content, he/she becomes the possessor of the e – mail de facto. But the original
maker of the e –mail is still the creator, because the content still stays in his account, in the
“sent” compartment. When the user who received the e – mail deletes it, it is assumed that
he/she doesn’t want to have it in his/her property, so he/she didn’t get the right of virtual
property over the e – mail ab initio. This presumption goes mainly for the spam (junk) e –
mail that users usually receive.
One case23 in the USA made an issue whether the content of the e – mail account of a
deceased soldier who was in Iraq should be given to his family, which intended to publish his
e – mails, as a book of war memoirs. The provider, “Yahoo Inc” said that its authority can not
go over the privacy of the users, and that the content of the e –mails is entitled to the user, no
one else. “Yahoo Inc” stated that its job is to store the information, not to go inside the
content of the users, because the agreement between the user and the provider regulates the
confidentiality between these two sides. The case ended with the court’s decision to give the
family the content of the soldier’s e – mail account to his family, and with that overruling the
agreement between the provider and the user.
Facebook’s virtual property is one of the most controversial issues nowadays.
Facebook community is a virtual social platform, where users make their profiles giving
information about themselves, including interests, hobbies, pictures, etc. The problem is that
the Facebook Company claims the ownership over the whole information that is given on the
server. So, when the user posts a picture, some info bout himself/herself, that data is
automatically under the property of the provider. In the EULA that consumers agree upon,
there is a part where it says: “Facebook Company keeps all the rights to the information given
20
Article 86, Constitution of the Republic of Serbia
21
Law of means in the property of the Republic of Serbia, 101/205, and Law of free
access to information of public interest, 54/207
22
23
See more on, Tresa Baldas, Slain Soldier’s E – mail Spurs legal Debate, Nat’l L.J. , 2005,
www.law.com/jsp/article.jsp/law
Page | 9
from the user, during and after the usage of the services provided.” 24 There had been cases of
people being deceased for a period of time, who kept on “living on Facebook”. What also
happens is that when the user deletes its account, the data in the account doesn’t get deleted,
but it stays in the property of the Facebook Company. The provider also kept the right to use
the data of the users in commercial purposes, what makes the users as targets of targeted
advertising.25
5. Facts & Figures26
About 20% of common users of MMORPG27 say that they primarily live in the virtual
world, naming the real world “meat space”, where they sleep, eat and fulfill their
physiological needs.
In January, 2008, residents spent 28,274,505 hours playing “Second life”.
The game “Second life” has its own economy, Linden Dollar, with an official
exchange rate of 250L$ to 1$28. It also has its own virtual institutions, public happenings,
newspapers, etc.
“Virtual world population”:
- Second life – 16 million subscribed users
- Warcraft – 12 million subscribed users
- Disney’s Club Penguin – expected 30 million subscribed users for the end of
2009
This “virtual world population” exceeds with its number the population of a number
of real world countries (Canada, Ireland, Australia, etc.)
24
See more on, www.facebook.com
25
Targeted advertising is a way of advertising to a certain group of people of interests
compatible to what the product offers, but in this case the interests of the people are
sold de facto, not anticipated or predicted.
26
Information taken from, Virtual World Crime, Council of Europe Octopus Interface
Conference, held on March 2009 by Marc Goodman, senior advisor in Interpol Steering
Committee on Information Technology Crime
27
Massive Multiplayer Online Roll Playing Game
28
Exchange rate of fictional currencies can be found on:
www.wikipedia.org/wiki/List_of_fictional_currencies
Page | 10
6. Conclusion
Virtual property is a plena in re poestas in the digitalized world.29 The owner of the
virtual good is entitled to do everything with his property, as long as it does not violate the
right of somebody else. The owner is also protected from all others in using his right to
virtual property and can exclude them from using the object of his virtual property.
But what we can say is that this property is not absolute. The reasons are the state
regulations and the interest of the provider to keep as much of discretion in giving the service
to the users. Also it is not always clear who is the actual owner, depending on the agreement
parties make and agree upon.
What still stays in a blur is what happens to the object of the virtual property when its
owner dies, and how can this be settled without violating the interests and obligations of the
provider, and in the same time taking the interests of the successors into account. For now, it
is up to the courts’ decisions on whether it will go on one or the other side.
Finally, the controversial issue of providers who keep the data in their own property
gives us the glimpse of future cases and disputes over the ownership on certain virtual goods
between the provider and the user, what could result with precedents that could shape this
kind of relation between the two sides in a more narrow way.
What is undisputable is the value and significance of virtual property in the real
world, and the emerging need to regulate the “user to user” relations which have become a
widespread way of interaction between people.
In the future, it will also be the bit that will count next to the atom.
29
Page | 11
7. References
- TEŠIĆ NENAD, Is there a property in the virtual world, Pravni život, br. 11/2008
- Virtual Property, Joshua Fairfield, Indiana University School of Law, Research
Papers 2005, http://ssrn.com
- Viktor Mayer-Schönberger and John Crowley, Napster's Second Life? - The
Regulatory Challenges of Virtual Worlds, Harvard University,
http://ssrn.com/abstract=822385
- Virtual World Crime, Council of Europe Octopus Interface Conference, held on
March 2009 by Marc Goodman, senior advisor in Interpol Steering Committee on
Information Technology Crime
- www.wikipedia.org
- www.britanica.com
Page | 12

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Law Faculty

© Slobodan Trivić 08/966

All rights reserved. Including the right to virtual property.

A virtual world is a computer-based simulated environment intended for its users to

2. Definition of virtual property

3. Virtual goods in the virtual world

4. Regulation of virtual property in virtual worlds

5. Facts & Figures26

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