When a real-world store starts selling virtual goods in an online game, where does that leave intellectual property rights?
The opening of clothing firm American Apparel's newest store marks a departure from its usual range of hip fashion products. Famed for the quality of the material it uses and its no-nonsense styling, the brand has made a surprise move away from the high street with its latest venture: a virtual outlet selling clothing to be worn by digital avatars in the massive online world of Second Life.
"Selling our T-shirts in Second Life is not a profit-making venture. The prices of our garments in Second Life are merely a token sum," says Raz Schionning, the director of web services at American Apparel. "Our store in Second Life is an experiment in how we may establish relationships with our customers online.
"I have few expectations about generating significant revenue - it's not the objective at this point. As with all the marketing we do, we're being innovative and keeping our ears to the ground. We want to see how people will respond to our presence in Second Life."
It is no surprise that companies are becoming interested in marketing to Second Life's players. Figures obtained by American Apparel suggest that 80% of users were aged between 20 and 30, a very desirable demographic, and that they were evenly split by gender.
"Given that users must have broadband Internet access and reasonably powerful computers, we can infer that they are above average income earners and have attained above average education," says Schionning. "I would guess that we are looking at single people earning at least $45,000 (£24,400) a year and 60-70% holding a college degree." No doubt American apparel's virtual presence will translate to real-world sales, as players become more aware of the brand.
The Second Life world itself, created by the digital entertainment company Linden Labs, sees hundreds of thousands of players interact in any way they see fit. There aren't any defined objectives: the motivation for playing is socialisation, exploration and creation. All of the content for the world is built by users themselves, as the website says, "from the strobe lights in the nightclubs to the car (or spaceship) in your driveway".
Users retain full intellectual property protection for the content they create, and items are sold between players for an in-world currency, which can be converted to pounds and dollars at various online currency exchanges. Of these items, clothing is the most sought after, comprising around 40% of all purchasable content. It is not uncommon, however, for these virtual items to have the semblance of branded goods commonly found in the real world, such as Adidas shirts, or even Apple laptops. But now, with American Apparel opening an official in-world store, and other companies looking to do the same, there will be a much greater impetus for brands to seek out and eliminate instances of infringement.
"A sale of a virtual Apple Computer or a virtual Adidas shirt should be treated as a sale of a toy car or a toy anything bearing a recognisable trademark," explains Martin Schwimmer, a New York-based lawyer practising trademark, copyright and Internet law, and host of The Trademark Blog. "It is just one more example of licensed branded merchandise. The existence of the American Apparel store adds to the expectation of the user that the brands on virtual products are for real."
Following American Apparel's opening, questions have been raised over just how easy it will be for Linden Labs to enforce third party trademarks, and to what extent the company is liable for the actions of the users of Second Life. "Linden Labs has similarities to a landlord and a flea market operator," says Schwimmer. "There are many cases that discuss when a landlord or flea market operator does or does not have responsibility for the acts for its tenants. I note that while Linden Labs says that Second Life users own their properties, one would have to look at the underlying terms of service to see that in the final analysis, Linden Labs can remove anything."
This is where the US's Digital Millennium Copyright Act comes in. "The DMCA creates certain 'safe harbours' for the intermediary (say, an internet service provider or Linden Labs) in a copyright context." Under ordinary law, unwitting infringement is still infringement - so, without the DMCA, Linden Labs would be liable for copyright infringement caused by users of Second Life. But policing their own users would rapidly make Internet businesses of this kind unprofitable.
The introduction of the DMCA means that Linden Labs is protected from these sort of claims so long as the company sticks to certain guidelines and promptly blocks access to content if notified of an infringement by a copyright holder.
Trademarks are a different matter. They are not covered by the provisions in the DMCA because it was not thought necessary; to prove liability, the infringing mark must have been used "in commerce" by the defendant, a situation that would not commonly apply to service providers merely hosting the offending material. However, a landmark case in 2001 saw web-hosting firm Mindspring considered liable for contributory infringement of the Gucci trademark, when it failed to terminate services to a user selling falsely branded jewellery from his website.
As a result, Linden Labs has chosen to take an aggressive stance, removing all unauthorised trademarks from Second Life whenever they are discovered, even before a trademark holder contacts them. Linden Labs has proved to be highly motivated to deal with legal issues recently with the public banning of prolific blogger Robert Scoble, who permitted his underage son to play Second Life.
But Schwimmer is sceptical that the DMCA's failings are the whole reason for their diligence: "The ISP doesn't start having meaningful exposure for trademark infringement until it's placed on notice. Instead, Linden Labs may have a market motivation to do this. If they want to build a virtual world based on a real market economy, the consumers need to have trust in the products they buy, and strong brand enforcement is a way of achieving that."
In a statement to Jeremy Pepper's PR blog, Linden Labs described the practical implications of its policy: "The in-world Linden Lab aren't trademark experts. Indeed, given the global nature of Second Life, it's invertible (sic) that their ability to identify trademarks will be imperfect. While their work includes removing identified trademarks, they are not tasked with seeking out offending material and generally refrain from acting presumptively. Instead, we rely on the community itself to inform us of content that violates our policy."
Whether or not players will inform on their peers remains to be seen. "You bet it will work," says designer and high-profile Second Life community member Aimee Weber. "Linden Labs didn't even have to ask. As soon as Second Lifers log in they become crusaders for intellectual property rights. The underlying motives may have more to do with safe, anonymous drama than a genuine care and respect for IP. Regardless of the motivation, all residents are keeping an eye on you and are ready to report anything that looks like an infraction."
None the less, Weber anticipates a mixed reaction to the arrival of capitalistic forces in utopia. "People vested in the virtual fashion industry feel very threatened but residents who feel that Second Life is filled with amateurish work will welcome organisations willing to back quality creations with funding. The vast majority, however, are just curious."
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