- Connie McMahon"Procedurally and substantively unconscionable" is how US District Court Judge Eduardo C. Robreno described the clause of Second Life's Terms of Service (TOS) that require disputes be submitted to binding arbitration rather than to the courts. At issue is a suit brought by March Bragg, an attorney and Second Life Resident from Pennsylvania, alleging that Linden Research unlawfully confiscated his "virtual property" when it terminated his right to keep playing the game and holding that California-based Linden Research and its CEO, Philip Rosedale, were both subject to suit in Pennsylvania. The court denied Linden Research's motion to compel arbitration, holding that the Second Life Terms of Service agreement -- which called for arbitration -- was procedurally and substantively unconscionable.Ironically Linden’s own enthusiastic announcement in November 2003 that it would recognize residents’ intellectual property rights in the content that they created or owned in Second Life may now be working against it. By recognizing virtual property rights, including the right to own “virtual land”, Linden hoped to set itself apart from all other “virtual worlds” existing on the internet, thereby increasing participation in Second Life. “We believe our new policy recognizes the fact that persistent world users are making significant contributions to building these worlds and should be able to both own the content they create and share in the value that is created,” said Rosedale at the time. “The preservation of users’ property rights is a necessary step toward the emergence of genuinely real online worlds.”As late as June 2004 Linden was still trumpeting the innovative virtual ownership rights they had created. “What you have in Second Life is real and it is yours. It doesn’t belong to us,” Rosedale said in an interview in USA Today. “You can make money.”At issue in the suit is a parcel of Second Life land (Taessot) which Bragg acquired in April 2006 at a cost of $300US. Shortly thereafter, Linden advised Bragg in an email that the parcel had been improperly purchased and that they were reclaiming it. Linden then froze Bragg’s account, denying him access to the game and the numerous other parcels which he had purchased over the previous year. Bragg brought suit to force Linden to return his property. Linden countered with a motion to compel the suit be referred to arbitration based on Second Life’s TOS.Judge Robreno found that Linden Research had superior bargaining power over Bragg and that there were no reasonable available market alternatives to Second Life. By its own admission, of all the virtual worlds only Second Life granted its users property rights in virtual land. Judge Robreno also faulted Linden for putting the arbitration provision in a "lengthy paragraph under the benign heading `GENERAL PROVISIONS.' "The court found numerous objections to the arbitration requirement, including:
- The requirement that arbitration occur in San Francisco, CA, and that this imposed an unreasonable burden on Bragg given “the respective circumstances of the parties”.
- The cost of arbitration to Bragg was likely to exceed the cost of his bringing suit in the courts.
- The TOS force a plaintiff to submit to arbitration to resolve a dispute while reserving to Linden Research a choice of remedies, including the seizure of property and currency associated with an account and the denial of access.
- Linden Research’s inability to prove to the court’s satisfaction that there was any substantive business reason justifying the “one-sidedness of the dispute resolution scheme.”
The court concluded that the arbitration clause was “a one-sided means which tilts unfairly, in almost all situations, in Linden’s favor” and refused to enforce it. This allows the case to proceed in the US Federal court rather than through arbitration. Given the unusual and unique issues of cyber property law that the case raises, its implications are likely to extend far beyond Linden Research and Second Life. And the invalidation of the mandatory arbitration provision of TOS may encourage challenges to other unilateral and wildly unpopular Linden policies such as SSN+4 age verification and censorship of SL residents’ activities.The original court documentation may be found at Bragg v. Linden Research Inc., No. 06-4925 (E.D. Pa. May 30, 2007).
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