Chapter 1 –

“Innovation makes enemies of all who prospered under the old regime, and only lukewarm support is forthcoming from those who would prosper under the new. Their support is indifferent partly from fear and partly because they are genuinely incredulous, never really trusting new things unless they have tested them by experience.”

The internet has produced an increasing number of shared virtual reality spaces, with a combined population well into the millions. The term “virtual reality (VR)” is used to describe an environment that is simulated by a computer. Most virtual reality environments use visual experiences predominantly which are displayed either on a computer screen or through special stereoscopic goggles. In addition, some simulations include additional sensory information, such as sound through speakers. The space allows users to manipulate the VR environment, either through standard input devices like a keyboard, or through specially designed devices like a cyberglove. The simulated interactive environment may range from real world simulations (i.e., pilot or combat training) to purely imagined worlds of aliens or elves, as in VR games. In practice, the better the technology and processing power, the more convincing the virtual reality experience becomes. Immersive VR have developed a number of unique characteristics which can be summarized as follows:
• Head-referenced viewing provides a natural interface for the navigation in three-dimensional space and allows for look-around, walk-around, and fly-through capabilities in virtual environments.
• Stereoscopic viewing enhances the perception of depth and the sense of space.
• The virtual world is presented in full scale and relates properly to the human size.
• Realistic interactions with virtual objects via data glove and similar devices allow for manipulation, operation, and control of virtual worlds.
• The convincing illusion of being fully immersed in an artificial world can be enhanced by auditory, haptic, and other non-visual technologies.
• Networked applications allow for shared virtual environments. (Beier)
This book will examine the legal realities which are emerging from Massively Multiplayer Online Role-playing Games (MMORPGs). MMORPGs are any computer network-mediated games in which at least 1,000 players are role-playing simultaneously in a graphical environment. They are also known as virtual worlds. The term virtual reality was coined by Jaron Lanier in 1989. Lanier is one of the pioneers of the field, founding the company VPL Research (from Virtual Programming Languages) which built some of the first systems in the 1980s. The related term artificial reality has been in use since the 1970s and cyberspace dates to 1984.

These virtual worlds demonstrate many of the traits we associate with the Earth world: interpersonal relationships, economic transactions, organic political institutions, and so on. These virtual worlds are continuing to evolve daily into virtual communities with separate rules and expectations. They operate under their own system of private laws which often deviate abruptly from those of the physical world. Because they exist only online, they seek to ‘legally link’ the online world and the physical world through the agreements that create private rules in the absence of effective jurisdiction by real world governments and the potential development of “self-regulatory structures on the net.” (Johnson & Post, 1996) Most citizens of these communities are unaware of these contractual restrictions until they unknowingly breach one of the provisions.

“[A] virtual world is a place you co-habit with hundreds of thousands of other people simultaneously. It’s persistent in that the world exists independent of your presence, and in that your actions can permanently shape the world. The fact that you exist with other real people from around the globe adds a level of immersion that just has to be experienced to be believed.” (Ultima Online) Welcome to a virtual paradise. A place where a blacksmith can live in the castle of his dreams, if he does not mind working eighty hours a week hoarding digital dung and double-clicking pig iron. The economy is distinguished by extreme inequality. Yet the life there is still very attractive to those who come to visit and then remain. The population swells every day with hundreds of immigrants from different places around the world, but especially the United States and China. There are an estimated 12.5 million people subscribing to 32 major virtual worlds. (Woodcock, 2008)

An interesting thing about the new world is its location. For example, Norrath is the virtual world of EverQuest that exists entirely on forty computers in San Diego, California. (Marks, 2003) Unlike many internet ventures, virtual worlds are making money – – with annual revenues expected to be US$7.3 billion by 2005. (Entertainment Software Association, Press Release, 2005) This translates to commerce within these worlds generating in excess of US$2 billion. The total value of transactions within one of the more popular worlds exceeds US$20 million in one month alone. (Sipress, 2006)

Considering, if network effects are comparable with other internet innovations, then virtual worlds could become the centre point for most online activity. In 2001, the estimated gross national product of Norrath was equal to that of Bulgaria. (Castronova, 2002) Since then, the value of virtual economies has continued to grow, with estimates claiming a $200 million market for virtual items. (Leupold, 2005; Ondrejka, 2005) In fact, the information technology industry’s largest group of professional research analysts, Gartner, Inc., has predicted that by 2011, 80% of active internet users will soon join the growing body of participants in virtual worlds.

This rapid increase in popularity and economic value has resulted in a conflict with respect to virtual world object ownership. As such, virtual world designers have a duty to appreciate and comprehend the laws that apply to their creations. More importantly, the people who make and interpret laws, in turn, have a duty to recognize, or at the very least be aware of, virtual worlds. If they do not understand what they are regulating, how can they know how to regulate it? This book aspires to provide understanding of the interface between the laws of the real world and the laws of the virtual worlds. First, the need for a right of personality will be argued. Second, the case for property rights will be made. Finally, this book will use the three qualities of man as defined by Frederic Bastiat to examine these propositions.

A. Interface & Frederic Bastiat
“Existence, faculties, assimilation – in other words, personality, liberty, property – that is what man is.
Of these three things one may say, without any demagogic quibbling, that they are anterior and superior to all human legislation.
It is not because men have passed laws that personality, liberty, and property exist.
On the contrary, it is because personality, liberty, and property already exist that men make laws.”
Frederic Bastiat

The French philosopher, Frederic Bastiat, succinctly summed up what defines a person: ‘Existence, faculties and assimilation’ or ‘personality, liberty and property’. Avatars are the reflection of people in virtual worlds. People, now, can and do explore these concepts in greater detail via massively multi-player online role playing games via their avatars. As these spaces become increasingly lifelike, powerful and significant, they will come to be used for more than storytelling and entertainment. They will be used for research. Hunter Hoffman in Scientific American (2004) described treatment advances in the use of virtual reality technology where patients gets relief from pain or overcome phobias through immersion in a virtual world. Education: The virtual world, Second Life, created by Linden Lab, reports that six university classes in disciplines ranging from urban planning to theatre use the gamespace to conduct class. (Delwiche, 2004) At the end of the day, the people who gather in these virtual worlds want to participate in the building of a new world, not just shooting space invaders. These people do not act alone. They collaborate in this pursuit, and what they are pursuing is a civil society.
So although it would be easy to write off virtual worlds as sophisticated virtual reality systems or just games, the fact remains that these worlds are part of everyday life for many people globally. They are becoming important means of commerce and communications. Another emerging technology similar to virtual worlds is ubiquitous computing. It shares the same technological characteristics of virtual worlds such that it would make a displacement of property rights in real world objects possible in the same way that virtual world technology makes such a displacement possible for potential property rights in virtual world objects. (Boone, 2008)

As a general rule, courts are reluctant to intrude into the rules of a game, but they will do so if the court believes that it is necessary. (Chein, 2006) Some scholars have called for separate treatment of virtual worlds because they believe that these worlds are separate and distinct from the real world and thus entitled to their own courts and laws. (Lastowka & Hunter, 2004) However, as individuals invest their time, personality, and finances into these environments, the legal rules that apply to all other aspects of their lives are sure to follow. (Kennedy, 2009)
In order to investigate this concept further a foundation regarding the nature of games and virtual worlds will be explored including an examination of what is real versus what is virtual. Ideas regarding interactivity, physicality and persistence will be analysed. The first of Frederic Bastiat’s qualities, property or in this case virtual property, will be delved into including a study of the difference between crafting and creating. Bastiat’s second quality, personality, will be surveyed via an examination of the personhood of avatars because identity is a key notion in virtual reality. It substantiates the notions of property, especially intellectual property.

These virtual spaces rely on a distinct culture of shared norms and common values. (McMurdo, 1995) In virtual worlds, any division between “rights” and “property” is an artificial and false dichotomy. “Property” is information, and “power” is the ability to control information. (Gibbons, 1997) Property rights are not absolute. Unlike physical property which can physically possessed, property rights in information are intangible. Numerous individuals can possess the same information. Economists describe this as ‘public goods’. A “public good” is a good for which “it is possible at no cost for additional persons to enjoy the same unit.” (Demsetz, 1970) Rivalrousness needs to be considered. Once the secret is out, property interests in information can only be protected through statutory or contractual rights. A legal analysis will follow regarding the means of protecting authorship rights and other copyrights which are possibly generated by these virtual worlds.

Finally, Bastiat’s third quality, liberty; some virtual world creators try to limit the liberties the players try to acquire. Others, on the other hand, have embraced the idea of granting intellectual property rights of all kind to their participants. To this end, end user license agreements will be thoroughly discussed. As many of these MMORPGs are based in the United States, the focus shall be on the laws of the United States with comparisons to other jurisdictions when helpful. Because virtual worlds are beginning to impinge upon the real world more and more, tort law and criminal law will be examined in relation to actions which cross over between the two. A conclusion suggesting an interface between the real and virtual shall be offered. But first, a digression shall be taken into how virtual worlds came into being in the first place.

B. From Gutenberg to Digitisation
Imagine that you find yourself in the fifteenth century, when Johannes Gutenberg wanders into town with one of his first printing presses. He describes it in great, passionate detail and offers three options. First, purchase a book. Second, buy a printing press to make your own book. Third, buy shares in his company, Gutenberg Press. Considering what is now known and everything that can be reasonably traced to the invention of the printing press – immense changes in politics and religion, development of capitalism, universal literacy, and the creation of communities across geographic boundaries – what choice do you make? (Kennedy, 2001) Johannes then looked into the future with and that future appears to be digital. Digital technologies have been producing the some of the greatest changes in the way information is distributed since Gutenberg first set up shop.
Nicholas Negroponte (1996) summed up the future nicely. “The information superhighway is about the global movement of weightless bits at the speed of light. As one industry after another looks at itself in the mirror and asks about its future in a digital world, that future is driven almost 100 percent by the ability of that company’s product or services to be rendered in digital form.” “The rise of an electronic medium that disregards geographical boundaries throws the law into disarray by creating entirely new phenomena that need to become the subject of clear legal rules but that cannot be governed, satisfactorily, by any current territorially based sovereign.” (Johnson and Post, 1996) As is usual, technological innovation outpaces legal innovation. This advancement is taking place in two parallel ways. First is digitisation which is exploited further via the second advancement of the internet.

Digitisation is an enabling technology which breaks down complex information into a series of simple instructions which a microprocessor can understand. It is the translation of information (including text, speech, paintings, photographs, animation, film, video, music and other sounds) into a common ‘language’ consisting of simple binary codes which can be recorded, stored and manipulated by computers. The combination of these various elements is the essence of multimedia. Once digitised, such copyrightable creations as films, sound recordings, books, plays, and works of art can be stored, manipulated, and transferred swiftly to sites around the world. Digitisation of the familiar types of creative works is stretching the existing categories of copyright as multimedia becomes the norm for new creative works. The development of increasingly more technically sophisticated personal computers is facilitating the one-to-many broadcasting of electronic media to be united with the one-to-one interaction of the telephone. People are now beginning to be able to take part within many-to-many forms of cultural and social communications.

Most people know of the internet without being able to properly define it. Commentators generally agree that the internet can be described as an international public network of networks. “A network is a group of computers that are physically linked together and which run the same particular software that allows them to recognise that they are all part of the same group.” (Terrett and Monaghan, 2000) The internet is a very large version of this. There are numerous services available on the internet. The one that concerns this book is The Web.

The Web can be depicted as a wide-area hypermedia information retrieval initiative aiming to give universal access to a large universe of documents. The hypermedia being created behaves like a database which may be retrieved on demand by individuals as well as a repository for users’ own material. The development process begins with the creation of digital versions of pre-existing types of cultural expression, i.e., text, audio, visual, and graphics. Following this is the emergence of another type of hypermedia which leads to the invention of completely new cultural genres.

Hypermedia is the term used for the new cultural and social forms emerging from the convergence of the media, computing and telecommunications. This convergence is driven by the adoption of digital technologies across these three sectors. The word is a logical extension of the term hypertext, in which audio, video, plain text, and non-linear hyperlinks intertwine to create a generally non-linear medium of information. This contrasts with multimedia, which, although often capable of random access in terms of the physical medium, is essentially linear in nature. The World Wide Web is a classic example of hypermedia, whereas a movie on a DVD is an example of standard multimedia. Of course, the lines between the two can (and often do) blur depending on how a particular technological medium is implemented. In other words, it is a system of linking together hundreds of millions of electronic documents (web pages) on millions of computers (web sites) together across the internet, each of which are reachable via a unique but changeable name or Universal Resource Locator (URL). Information and business is now being conducted internationally in a digital format.
Massively Multiplayer Online Games (MMOGs) are the epitome of this.

“MMOGs function as communication networks in at least three different ways:
• As one-to-many networks (developer to community). Virtual worlds, in other words, are created by a team of developers and include assumptions, values and beliefs in the structure, design, and art of the game.
• As many-to-many networks. Virtual worlds are networked communication systems, which allow for interactive chat, internal email, and private and public messaging. Communication can occur among and between any of the online participants in a multitude of configurations.
• As one-to-many networks (player to community). Virtual worlds also offer individual players increasing access to a new form of ‘broadcast’ from things as basic as avatar appearance and selection to the ability to create and display objects or messages in public forums or virtual space. Digital technologies are producing huge changes in the way information is distributed.”(Fouts, 2005)

C. Cyberspace: From Fiction to Reality
William Gibson’s novel Neuromancer (1984) gave us the term ‘cyberspace’. William S. Byassee (1995) summarized the term cyberspace as: “In Gibson’s vision, cyberspace is a ‘consensual hallucination that felt and looked like a physical space but actually was a computer-generated construct representing abstract data.’ As commonly used today, cyberspace is the conceptual ‘location’ of the electronic interactivity available using one’s computer. Cyberspace is a place ‘without physical walls or even physical dimensions’ in which interaction occurs as if it happened in the real world and in real time, but constitutes only a ‘virtual reality’. Cyberspace is the manifestation of the words, human relationships, data wealth, and power . . . by people using [computer-mediated communications].” (Byassee, 1995)

This fantasy of ‘meatless’ subjects incorporated into a computer resonates with the hopes and anxieties stemming from the internet as a new medium shaping the public sphere. Gibson, however, did not have the internet in mind when he coined the term cyberspace. He found his inspiration in video games:
“[In arcades] I could see in the physical intensity of their postures how rapt these kids were. It was like one of those closed systems out of a Pynchon novel: you had this feedback loop, with photons coming off the screen into the kids’ eyes, the neurons moving through their bodies, electrons moving through the computer. And these kids clearly believed in the space these games projected. Everyone who works with computers seems to develop an intuitive faith that there’s some kind of actual space behind the screen.” (Turkle, 1995)

Gibson sees the player as already being subsumed by computer, already as a cyborg, a hybrid of machine and organism, a creature of social reality as well as a creature of fiction. Video games epitomize a new cyborgian relationship with entertainment technologies, linking our everyday social space and computer technologies to virtual spaces and futuristic technologies. (Lahti, 2003) They “represent the most complete symbiosis generally available between human and computer – a fusion of spaces, goals, options, and perspectives.” (Bukatman, 1993) Others claim that humans will functionally fuse with technology but will never fully merge with them. In other words, we will never be cyborgs, half humans-half machines, but rather fryborgs, that is, functionally using technology even if it is within the body without losing our physical boundaries; this is the kind of world we already live in where we rely on tools, devices, and gadgets to orient ourselves. (Stock, 2002)

Already many current computing devices have had this effect. The most ubiquitous device is the mobile phone and the characteristics of the services associated with it. (Giradin & Nova, 2006) This ubiquitous computing has been described as the “colonization of everyday life” (Greenfield, 2006) by computers and information technology. In a ubiquitous computing premise, computing functionality is embedded and mobile in an environment of universal connectivity that produces a high level of automation.

An illustration of this comes from another author, Philip K. Dick (1969). The following conversation takes place between the protagonist and his front door in the short story, Ubik:
The door refused to open. It said, “Five cents, please.”
He searched his pockets. No more coins; nothing. “I’ll pay you tomorrow,” he told the door. Again he tried the knob. Again it remained locked tight. “What I pay you,” he informed it, “is in the nature of a gratuity; I don’t have to pay you.”
“I think otherwise,” the door said. “Look in the purchase contract you signed when you bought this [condominium].”
In his desk drawer, he found the contract . . . . Sure enough; payment to his door for opening and shutting constituted a mandatory fee. Not a tip.
“You discover I’m right,” the door said. It sounded smug.
From the drawer beside the sink [he] got a stainless steel knife; with it he began systematically to unscrew the bolt assembly of his [condominium’s] money gulping door.
“I’ll sue you,” the door said as the first screw fell out.
[He] said, “I’ve never been sued by a door before. But I guess I can live through it.” (Id.)

Ubiquitous computing and virtual worlds both involve the application of computing technology to environments, whether physical or virtual. Because the characteristics of both environments flow from their computer-mediated nature, a ubiquitous computing world can serve as useful source of information about virtual worlds.

D. Once upon a time. . .
A John Dugger, 43 year-old Wonder Bread delivery man, logged on to eBay and bought himself a large beautiful house. This three storied home had nine rooms, a rooftop patio, and walls of solid stonework. Mr. Dugger’s modest redbrick ranch house in Stillwater, Oklahoma could not compare. His new home had an excellent location, situated at the foot of a quiet coastal hill. The house was a pleasant walk from a quaint seaside village and a short commute from two lively cosmopolitan cities. His new home was perfect, except for one small detail. The house was imaginary, as were its grounds and gardens, the ocean view, the neighbouring cities, and just about everything else associated with it. Only Dugger himself, the man he bought it from, and the money he paid were real. Dugger’s winning bid of $750 for this property set him back more than a week’s wages. This may seem an incredible amount of money for what he actually purchased: one very small piece of Britannia, the fantasy world in which the networked role-playing game Ultima Online unfolds. (Dibbell, 2003)
This traffic in virtual goods has been perceived by economists to be not merely a new market, but a whole new species of economy. (Castronova, 2002) Virtual worlds use electronically-simulated physical context as means of conveying large amounts of information quickly to computer users. Humans do not process things in lists, but via context. For example, if you are shopping for a sofa on the internet, you cannot know whether it will fit your living room or whether it will match your other furniture. If you were shopping for a sofa through the medium of a virtual world, you could arrange the furniture in a virtual simulacrum of your home, before buying it. Ikea offers a basic version of this service, but only for its products and not for different manufacturers.

The world’s economy has moved from the tangible to the intangible. Industry gave way to services which in turn has yielded to post-industry. The selling of actual products has progressed to the selling of the brand of those products. Gold bricks in steel vaults have evolved into financial derivatives half a dozen levels of abstraction removed from physical reality. Knowledge is the key to any successful business. Knowledge content is becoming more important even in traditional agricultural or industrial products. Farmers today know how to produce five times more corn per acre than they could in 1920. Four-fifths of the costs spent on manufacturing a pair of Levi jeans goes to information and marketing i.e., the branding, not to actual production. (Stewart, 1997) This is developing into products that in essence are pure knowledge, without any physical shape, or at least without any significant shape. The intention was to develop a so-called virtual economy – a realm of atomless digital products traded by cyborgian consumers in frictionless digital environments for paperless digital cash. (Negroponte, 1996) Perhaps it has. However, did anyone guess that this would so literally consist of the buying and selling of castles in the air?

Now that a background to this phenomenon has been provided, the next chapter explores how and why these virtual universes are so engaging and so important. How did the unreal become as significant as the real? The ideas of interactivity, physicality and persistence will be explained in relation to MMORPGs. An in-depth review of what defines a virtual world will be made with an emphasis as to its rivalrous or non-rivalrous nature. After all, is it not all just a game?

1. Bastiat, F. (1993). The Law, trans. Dean Russell. New York: The Foundation for Economic Education.
2. Boone, M.S. (2008) Ubiquitous Computing, Virtual Worlds, and the Displacement of Property Rights 4 I/S: J. L. & Pol’y for Info. Soc’y 91.
3. Beier, K.P. Virtual Reality: A Short Introduction, available at
4. Byassee, W.S. (1995). Jurisdiction of Cyberspace: Applying Real World Precedent to the Virtual Community, 30 Wake Forest L. Rev. 197.
5. Bukatman, S. (1993). Terminal Identity: The Virtual Subject in Post-Modern Science Fiction. Durham, NC: Duke University Press.
6. Castronova, E. (2002). On Virtual Economies The Gruter Institute of Working Papers on Law, CESifo Working Paper No. 752.
7. Chein, A. (2006) A Practical Look at Virtual Property, 80 St. John’s L. Rev. 1059
8. Delwiche, A. (2004) Massively Multiplayer Online Games in the College Classroom, N.Y. L. Sch. L. Rev. (online publication) at
9. Demsetz, H. (1970). The Private Production of Public Goods, 13 J.L. & Econ. 293.
10. Dibbell, J. (2003). The Unreal Estate Boom: 79th Richest Nation on Earth Doesn’t Exist Wired Magazine
11. Dick, P. (1969) Ubik 
12. Entertainment Software Association, Press Release. (Jan. 26, 2005). Computer and Video Game Software Sales Reach Record $7.3 Billion in 2004, at _vi.php
13. Fouts, J. (2005, June). Internationalism: Worlds at Play. Paper presented at the International DiGRA Conference, Vancouver, British Columbia, Canada.
14. Gartner, Inc. (2007) Gartner Symposium/ITXpo. Gartner Says 80% of Active Internet Users will have a “Second Life” in the Virtual World by the End of 2011, 
15. Giradin, F. & Nova, N. (2006) Getting Real with Ubiquitous Computing: The Impact of Discrepancies on Collaboration, 1 eMinds: Int'l J. on Human-Computer Interaction 60.
16. Gibbons, L.J. (1997). No Regulation, Government Regulation, or Self-Regulation: Social Enforcement or Social Contracting for Governance in Cyberspace, 6 Cornell J.L. & Pub. Pol’y 475.
17. Gibson, W. (1984). Neuromancer. London: HaperCollins Publishers.
18. Greenfield, A. (2006) Everyware: The Dawn of Ubiquitous Computing
19. Hoffman, H. (2004) Virtual Reality Therapy. Scientific American 58.
20. Johnson, D.R. and Post, D. (1996). Law and Borders – The Rise of Law in Cyberspace, 48 Stan L. Rev. 1367.
21. Kennedy, D. (2001). Key Legal Concerns in E-commerce: The Law comes to the New Frontier 18 T.M. Cooley L. Rev. 17.
22. Kennedy, R. (2009) Law in Virtual Worlds 12 No. 10 J. Internet L. 2.
23. Lahti, M. (2003). As We Become Machines – Corporealized Pleasures in Video Games. In Wolf, M.J.P. and Perron, B. (ed.) The Video Game Theory Reader. London: Routledge. 
24. Lastowka, G. and Hunter, D. (2004) The Laws of the Virtual World, 92 Calif. L. Rev. 1.
25. Leupold, T. (6 May 2005). Virtual Economies Break Out of Cyberspace, Gamespot, at 
26. Machiavelli, N. (1992) The Prince, 2nd ed. London: W.W. Norton.
27. Marks, R.B. EverQuest Companion: The Inside Lore of a Gameworld (Berkeley, CA: New Riders Publishing, 2003)
28. McMurdo, G. (1995). Netiquette for Networkers, 21 J. Info. Science 305.
29. Negroponte, N. (1996). Being Digital. London: Hodder and Stoughton.
30. Stewart, T.A. (1997). Intellectual Capital: The New Wealth of Organizations. New York: Currency.
31. Ondrejka, C. (May 7, 2005). A $200 Million Market?, Terra Nova, at 
32. Sipress, A. (Dec. 26, 2006) Where Real Money Meets Virtual Reality, the Jury is Still Out, The Washington Post, 
33. Stock, G. (2002) Redesigning Humans: Our Inevitable Genetic Future 
34. Terrett, A. and Monaghan, I. (2000). The Internet – An Introduction for Lawyers in Edwards, L. and Waelde, C. (ed.) Law & the Internet: a framework for electronic commerce. Oxford: Hart Publishing.
35. Turkle, S. (1995) Life on the Screen: Identity in the Age of the Internet. New York: Simon & Schuster. quoting Greenland, C. (1993) “A Nod to the Apocalypse: An Interview with William Gibson”, Foundation 36 (Summer).
36. “Ultima Online Visitor’s Center: What is a Virtual World?” at
37. Woodcock, B.S. (2008) An Analysis of MMOG Subscription Growth at http://ww

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s