Class action claims fraud in Second Life land sales

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Class action claims fraud in Second Life land sales

Tue Apr 20, 2010 @ 11:47AM PST

By Eriq Gardner

Second_life-nanobugle A new class action lawsuit is calling the virtual world "Second Life" a bait-and-switch scheme.

The plaintiffs claim that the virtual world, which was once looked at as the future of entertainment, lured thousands of customers by promising upon its launch in 2003 to confer property rights to users. Unlike Blizzard's World of Warcraft and Sony's Everquest, Linden Labs' "Second Life" didn't restrict user ownership interests in its terms of service and frequently touted that it was going to allow users (via their avatars) the right to buy and sell intellectual property such as homes and merchandise. 

Did the company go too far?

The environment is compared to Disney World, where licensed merchants sell goods, but unlike Disney World, "Linden has been in the business of selling the land inside the 'theme park.' Thus, Linden no longer owns the very world they created..."

The complaint goes on to allege that Linden had second thoughts, changing the representations made to customers about owning property. For instance, the plaintiffs cite educational literature on the company's website that once asked, "Why would I want to own land?" and now asks, "Why would I want to have land?"

More than 15 million people are claimed to have participated in Second Life, including 50,000 land buyers who spent somewhere between $50 million and $100 million in land purchases. Linden Labs allegedly creates "new" land for sale all the time.

The company then announced it was open-sourcing its software platform in an aim to move the company away from the land-selling business. Linden called this moment the "liquidity event," which plaintiffs say had the effect of rendering the value of all land in its virtual world pretty much worthless. The complaint argues that this all adds up Linden attempting to "defraud its customers to maximize profits."

This is not the first time that Linden has been targeted in a class action. In recent years, the company has been sued for not dealing with copyright and trademark abuse, financial and transactional issues, and sex codes, among other lawsuits. As always in these cases, jurisdiction and the definition of intellectual property take great interest.

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The Hollywood Reporter, Esq. blog focuses on how the entertainment and media industries are impacted and influenced by the law. It is edited by Matthew Belloni with contributions from veteran legal reporter Eriq Gardner and others. Before joining The Hollywood Reporter, Belloni was a lawyer at an entertainment litigation firm in Los Angeles. He writes a column for THR devoted to entertainment law. Gardner is a New York-based writer and legal journalist. Send tips or comments to Matthew.Belloni@thr.com

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