In the recent 10 years there were several news and cases about virtual goods and their presumed values that echoed beyond their virtual environment into the real world and changed the judgement of video games. Before that a layman would have thought that video games are offering mere entertainment for the players, and even though some are willing to pay extra money in order to succeed faster in the game, there is no real world value within; since everything that is in the video game stays in the video game – just a bunch of bits and bytes.
However, after hearing that a virtual planet has been “sold” for 6 million US Dollars (game: Entropia Universe; subject: Planet Calypso; seller: MindArk; buyer: SEE Virtual Worlds) any layman would change his former view. More and more people start to wonder “how real are these virtual goods?”, “what is being bought – bunch of electronic data, a property or just a specific license?”, “what can players do with expensive virtual items locked in a virtual environment controlled by the game operator?”.
As the video game market grew and evolved in line with expectations of the gamer public, different virtual items started to emerge within the virtual environments. Some of these items were created by the game producer and represented some kind of a value (through an in-game advantage or social status) within the game. Other virtual items were created by the users within the video game as so called user created content (hereinafter: UCC). Due to their exceptional rarity or features or in-game purchase value (like virtual currencies) these virtual items or goods are very desirable by the players. And this desire moved the video game players towards the development of a market for such virtual goods irrespectively whether such exchanges and transactions are supported by the game operator or not. The in-game possession of such virtual items and the related virtual economy in many aspects resemble the real world property. Therefore, I believe that virtual goods deserve the legal status reflecting their in-game features and values, namely the acknowledgement of virtual goods as property (or as a specific type of property – virtual property incorporating several property rights).
There is a serious discrepancy between the above described game user/player tendencies and the contractual background governing the relevant virtual environment and relationship between the game operator and the players. Players who invest plenty of time and money in a game play tend to respect the obtained virtual items as their own property since it is under the exclusive control of the player. In most of the cases the terms of the End User License Agreement (hereinafter: EULA) of the given game prepared unilaterally by the game operator/producer states otherwise by retaining all rights and title with respect the video game and its in-game elements. Game producers and operators prefer to keep the regulation of in-game virtual items as it is – within the realm of contractual terms of the license agreement that keeps the operators safe from any liability and allows them to exploit and/or handle the given virtual items without any limitation. Even game producers that admit the ownership/IP rights of the user for UCC, like Minecraft (“You only own what you created; you do not own our code or content.”) or Second Life (“You retain any and all Intellectual Property Rights you already hold under applicable law in Content you upload, publish, and submit […]”) regulate such content within the EULA without going in to details.
Surprisingly, the video game that holds the Guinness records for the most expensive virtual items ever sold (Planet Calypso for 6 million USD and Club Neverdie on an orbiting asteroid for 635,000 USD) – the Entropia Universe does not acknowledge any user ownership right in its EULA with respect to virtual items existing in the realm of the game with exception to so called “participant content” submitted by the user to the Entropia Universe. Furthermore, MindArk (producer and operator of Entropia Universe) clearly declares that “Despite the similarity in terminology, all Virtual Items, including virtual currency, are part of the Entropia Universe System and/or features of the Entropia Universe, and MindArk and/or respective Mindark’s Planet Partner(s) retains all rights, title, and interest in all parts including, but not limited to Avatars, Skills and Virtual Items. These retained rights include, without limitation, patent, copyright, trademark, trade secret and other proprietary rights throughout the world. Notwithstanding any other language or context to the contrary, as used in this EULA and/or in the Entropia Universe in the context of Virtual Items, [the user] expressly acknowledge[s] that all terms like “exchange of”, “trade with”, “purchase of”, “sale of” or “use of” Virtual Items, and all similar terms in context of transactions with Virtual Items, refers to the licensed right to use a certain feature of the Entropia Universe or the Entropia Universe System in accordance with the terms and conditions of this EULA.” In addition to all that, MindArk and its partners retain all rights, title and interest to all virtual items the user has created “in-world”. After all of these restrictions why would anyone spend any money on an intangible virtual item existing only within the limits of the virtual environment controlled by the game operator. The answer lies within the internal “Real Cash Economy” of the game which is directly connected with the real world money through its virtual currency (Project Entropia Dollars or PED) that players can withdraw as real-world funds (at 10:1 exchange rate with the US Dollar). According to EntropiaPlanets.com “in 2010 alone, that economy supported $428 million in player-to-player transactions”.
One might think that Entropia Universe’s success despite its licensing terms proves that virtual items should not be granted the status of a property, since the in-game economy is perfectly functioning without it and people are willing to pay even real world money for mere using rights. Nevertheless, let us not miss two aspects of this game. Firstly, if we examine carefully the EULA of Entropia Universe we will find that the listed and defined virtual items (such as avatars, accounts, virtual currency, “real estate”, “cloths”, “house”, “rifle”, “tools”, “armour”, “coat” and even skills) are treated as property of the game producer who grants the right to use and usufruct through the license agreement. Secondly, through the usufruct right and the “real cash economy” system the player/user can extract all its investments (time, money and creative efforts) from the virtual world to the real world by withdrawing the accumulated virtual currency in to USD at the fixed exchange rate. Thus, even though the player is denied of any property rights (except the right to use, possess and usufruct for a certain term) with respect the virtual items, the player is fairly compensated for any and all of its investments that are commercially viable and profitable within the virtual economy of the game. In case we borrow for the sake of comparison the concepts of inaedificatio and accessio from Roman law, we find confirmation of the game operator’s entitlement for ownership over goods that were added to or mixed with a more valuable good. I admit, that this comparison is highly abstract when we try to apply it to virtual goods and time/work/money investments made by the player that together result in a new virtual item. Although, I believe it might point us in the right direction of property right distribution.
The business model of Entropia Universe is a very particular one with clear virtual item ownership and currency rules which provide fair and reasonably balanced system that rewards its users for their activity in the virtual economy of the game with real world money (if desired so). Other game producers, like Activision Blizzard try to draw a distinct line between their virtual currency and the real world money. For example, in Diablo 3 Blizzard does not allow in its EULA the sale of in-game virtual items of the game’s market place (the auction house has been closed down in 2014 and all virtual items are ‘bind on account’). Although there are games whose players continue trading on eBay or other external forums designed especially for such interaction. Furthermore, some game producers even encourage such commercial activity by constantly introducing new and/or rare items (e.g. Counter Strike: Global Offensive (CS:GO)) to the game that boost the demand and trading on specially dedicated auction sites, like playersauction.com for real world currency. Lots of auction sites even introduced some sort of virtual item lottery that due to the lack of regulation is available to minors as well and may involve virtual items with monetary value from the higher end (e.g. a bundle of items for 1,000 USD). Similarly, the CS:GO case opening shows lots of resemblance with scratch cards that normally fall under the gambling regulation of the competent jurisdiction. There are some rumours on gamer forums that Valve as producer of CS:GO has a nice 15 per cent cut from such transactions, although I could not find any credible confirmation. I could not access the terms for the CS:GO either in order to review the statement about the virtual item ownership. Nevertheless, this picture clearly shows that there is a big need for a proper transparent and predictable legal status of virtual items that already attract tremendous amounts of real world investments. Especially, because there are plenty of smaller game producers who intentionally try to lure in with aggressive technics players (particularly minors) to pay for additional achievements or virtual items (usually in so called free-to-play (F2P) game applications) with real world money (sometimes by intentionally blurring the distinction between the in-game and real world currency). Such uncontrolled proliferation of lucrative businesses established on virtual goods shall be regulated soon due to its increasing adverse effects on the consumers. This approach was envisaged by Paul Gardner and the venturebeat.com (Dean Takashi) in connection with a conference held in Amsterdam in 2014 about necessary restrictions in the video game industry for enhancement of fair trading practices. These issues are very pressing due to major influence on the gaming community of minors. Just to mention an extreme case besides kids that drain their parents accounts for in-game item purchases, The Telegraph reported about a Russian 16 years old boy who won 1 month in a hotel with a Russian porn star on one of CS:GO auction sites. I believe it is obvious that the current legislation and contractual terms applied by the game producers are insufficient in most of the cases to bring a balanced, transparent, fair, predictable and audience-suitable gaming and virtual item trading environment without making clear declarations regarding the status of virtual items.
The constantly increasing investments on behalf of the players/users of video games made in the form of time, money and creative efforts are reaching enormous levels and they cannot and should not proceed unattended from legal perspective. The economic value of investments is tremendous and calls for a certain level of legal protection, since undoubtedly the video games’ virtual economies have an increasing level of externalities in the real world economy (not to mention other social effects).
Even though, virtual items that were provided within the frame work of the game by the gaming system are usually declared as property of the game producer and the player has only the right to exclusively and uninterruptedly enjoy the possession and use of such virtual item, the players expect to have a protection of such right and interest. The possession rights granted within the frame work of the given game should be respected just as in real life. This user expectation was supported by the decision of the Dutch Supreme Court in case of the RuneScape theft, where the court held that the given virtual items are goods that were stolen from possession of the user, a 13-year-old boy who was beaten up in real life and forced to drop the virtual items held in his possession in the virtual environment.
All virtual items in the video games that bear in-game and even external/real world values share the features of real world properties: (i) they are limited in number, sometimes even one of a kind; (ii) they are constantly present in their virtual environment (although some can be subject to programmed decay); (iii) they can be enjoyed/possessed by one player at a time, although other players may experience its presence at the same time; (iv) the exclusive right of enjoyment/possession is desired by the players; (v) they can bear fruits to its possessor; (vi) they can be changed or destroyed by its owner (if it is not in conflict with the rights of the possessor) Inter alia, this latter feature can be the source of the unregulated virtual items related biggest conflicts between the game operators as owners and players as rightful possessors.
The fact that virtual items are basically electronic data does not make them less property like. The electronic registry of currencies on a bank account and dematerialised securities are mere data as well and they have acknowledged ownership and property features and form a substantial part of the world commerce due to their assumed value and protected property rights despite their existence in a virtual environment across the world. Just like the electronic currencies and securities, the virtual items have their market, although it is regulated only through contractual terms and influenced by the behaviour of the gamers, speculators and the game operators.
If we consider the UCC which is created by the player with investment of time, money and – sometimes, but not necessarily – creativity, in my opinion, players are making valid claims and expectations to treat such virtual items as if their own (unless they are not properly compensated for the lack or limited property rights). Since the game operator provided only the platform and maybe some tools for the creation of such virtual item, thus served as a media provider, meanwhile the player made all the relevant investments. These investments are not protected under the EULAs of the video games. For example, Second Life expressly states in its EULA (Section 1.2.) the risk assumption of the player for any loss occurred in the virtual environment (“You acknowledge that your use of the Service is subject to this risk and that you knowingly assume it and make your decisions to participate in the Service, contribute Content and spend your money accordingly.”). Basically the player may make significant contributions in the game through its activities and investments, but there is no protection granted to the player under the EULA for such investment. This issue was raised in the case of Marc Bragg v. Linden Research, Inc., where the entire virtual possession of the player (with estimated investment value of approx. 5,000 USD) has been confiscated by the game operator. Eventually, the case was closed with a settlement and the court did not give any guidance with respect to legal status of virtual properties. Mr. Bragg stated that his investments into virtual properties (“real estate purchase and development”) of Second Life were induced by the communication of the game producer. Nevertheless, the legal protection of this investment was not tested against the EULA terms. Though Linden does not recognise any player ownership right with respect to virtual items (only IP rights for submitted user content) in the Second Life, players are encouraged to create and obtain virtual items and goods within the realm of the game through their investments which are obviously unprotected and uncertain despite of their volume. This is a clearly unbalanced contractual situation between the participating parties, where the game producer/operator holds control over everything within the virtual environment, even over the investments made by the players who are rarely offered proper compensation for such imbalance.
In my opinion, it should be beyond any dispute that UCC deserves the legal protection equivalent to its in-game value and efforts invested by the player. Players deserve the credit for their efforts invested in the virtual environment and resulted virtual creations and should be allowed to exploit them to their full potential on the relevant market. Simply because the license agreements of the video game (forced over the users on a take-it-or-leave-it basis) remain silent with respect to any property right acknowledgements for UCC or claim all the rights without due reward, it does not mean that it is a fair practice. There is a significant amount of investment on behalf of the users which is completely separate from the legally protected investments of the game producer. By transformation of their own resources (time, money and creative work) and use of the virtual media game players create new content within the virtual environment that they should be allowed to call their own based on the ownership of used resources. Alternatively, if they are denied of such ownership due to any technical or regulatory reason, they should be fairly compensated and/or be granted the right to exploit the created virtual object to its full potential.
Following the review of several EULAs of big MMORPGs that stimulated the appearance of virtual item markets we may conclude that virtual items appearing in the realms of video games’ virtual environments are acknowledged and treated by the game providers/operators as their properties by claiming all rights, title and sometimes clearly the ownership over all virtual items irrespectively whether those are resemblances of real life subjects (e.g. real estate, armour, creatures, people or avatars, currencies) or virtual skills and achievements, or even user accounts as a whole. Furthermore, this claim in many cases is extended to in-game UCC. Obviously the omnipotence of the game operators in the virtual environment puts them in the position of the owners of each and any virtual item. It is within the game operators’ power to decide what is going to happen to a virtual item, who can access it, possess it, use it, transfer it, change it or destroy it. This is why it is reasonable for game producers to provide under EULAs only limited licensed property rights to its users/players with entitlement to exclusively possess and use (exploit) or transform given virtual items or goods. Therefore, the game operators/producers could be truly regarded as owners of all in-game virtual goods (even if it is UCC) with entitlement to delegate/distribute certain property rights to its users, however, the fair protection of users’ investments has to be granted at least on a contractual level. Game producers currently enjoy the benefits of virtual goods’ ownership and control in the virtual environment through accumulation of players’ investments and contributions without the obligation to provide fair remuneration for such contributions or without any liability. Any and all externalities of such enjoyment revealed in the outside world currently rarely brings up any liability on the game operators/producers’ end. Ownership comes with responsibility.