This case was moved from court to private mediation on October 7, 2010 and plaintiffs filed for voluntary dismissal of the charges on March 15, 2011 under FRCP 41(a). Rule 41(a)(1) allows for the plaintiff to dismiss an action without a court order by filing a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment. In this case it appears that a satisfactory solution was reached in ADR leading the plaintiffs to end their civil court case. The court dismissed the case on March 16, 2011.

Case Update:

As many of you know, and as was discussed in our previous post, Linden Labs runs and operates the internet-based interactive computer simulation Second Life which allows participants to see, hear, use, and modify the simulated objects in the computer-generated environment. Second Life is famous for its free-market economy. Players of Second Life, called “Residents,” can buy and sell goods with Second Life currency (“L$”). L$ can be exchanged for real currency.

Eros, LLC (“Eros”) and Shannon Grei (“Grei”) have filed an Amended Complaint against Linden Research Inc. and Linden Research Int’l., Inc. (“Linden”) alleging violation of real-world intellectual property rights and infringement of the trademarks and copyrights owned by the Plaintiffs. Eros markets a line of erotic items within Second Life under the mark SexGen® (See U.S. Reg. No.3483253, registered on August 12, 2008). According to Eros, over 100,000 active Second Life Residents are customers. In the Amended Complaint, Eros alleges that its SexGen® products have been “counterfeited, cloned, and ripped off countless times by a multitude of Second Life Residents.” Similarly, Shannon Grei markets clothing and other coverings, including “skins” for Residents to wear within Second Life. The Amended Complaint indicates that since 2004, Grei has sold hundreds of thousands of her products within Second Life, making her one of the most popular and successful sellers in the game. Ms. Grei has allegedly suffered financial loss at the hand of pirates who have made and sold copies of her “skins” for real-world profit, and infringement of her rights in the copyright to “Nomine Araignee Set,” which was registered on September 24, 2007 as VAu000958340. Similarly to Eros, Ms. Grei alleges that the Defendant, Linden, has profited off of these pirates with each transaction.

The Amended Complaint reiterates many aspects of the original Complaint. It alleges that Linden “knowingly and willingly profits" from infringing activities through several mechanisms. As asserted by Eros and Grei "pirates must rent (for real-world currency) virtual world ‘locations.’ …Second, pirates must then ‘upload’ their infringing work, products or services into the Second Life virtual world, for which Defendants impose a fee. Third, all inworld transactions on Second Life are made through the exchange of Linden Dollars. …Not surprisingly, Linden Lab also operates the most widely used currency exchange platform in the Second Life community, LindeX, for use at which it imposes an exchange fee of 3.5%. Fourth, Linden Lab operates the website XStreetSL.com, which is an online marketplace for goods and services to be used in Second Life. Fifth, Linden Lab also operates an in-world classified ads system. Pirated works are available both on XStreetSL.com and the in-world classifieds system.”

Eros and Grei acknowledge that “[t]he Second Life Grid utilizes what is effectively a Digital Rights Management (‘DRM’) scheme," but allege that "the nature of the system allows third-party programs to bypass the DRM.” The Amended Complaint further alleges that “Linden Lab conducts little supervision or enforcement to insure that such content copying is eliminated, minimized, or detected. Moreover, whatever DRM-type protection Linden Lab offers against such piracy-enabling programs is easily circumvented and hopelessly ineffective.” The Plaintiffs acknowledge that use of such programs is against Linden’s Terms of Service and that may result in the Resident being banded, but according to the Complaint, Linden “will not ban a user for simply uploading or even selling copied content [and t]hese actions evidence that Linden Lab limits its enforcement of intellectual property law to that required by the ‘safe harbor’ provisions of the Digital Millennium Copyright Act, therefore filing a real-world lawsuit is necessary to protect ones interests.”

The Plaintiffs have alleged twelve (12) causes of action:

1. Trademark Infringement, 15 U.S.C. § 1114(1) (on behalf of Eros)





2. False Designation of Trademark Origin, 15 U.S.C. §1125 (on behalf of Eros)





3. Contributory Trademark Infringement, 15 U.S.C. §114 (on behalf of Eros)





4. Vicarious Trademark Infringement, 15 U.S.C. §1114 (on behalf of Eros)





5. Direct Copyright Infringement—Public Display, 17 U.S.C. §501 (on behalf of Grei)





6. Direct Copyright Infringement—Reproduction, 17 U.S.C. §501 (on behalf of Grei)





7. Contributory Copyright Infringement, 17 U.S.C. §501 (on behalf of Grei)





8. Vicarious Copyright Infringement, 17 U.S.C. §501 (on behalf of Grei)





9. Violation of Cal. Bus. Prof. Code §17200 (on behalf of all Plaintiffs)





10. Violation of Cal. Bus. Prof. Code §17500 (on behalf of all Plaintiffs)





11. Intentional Interference with Economic Relations (on behalf of all Plaintiffs)
    
    



12. Negligent Interferences with Economic Relations (on behalf of all Plaintiffs)
    

The Plaintiffs also allege that Linden’s acts of infringement have been willful, intentional, and purposeful, and that the Defendants have caused injury to both Plaintiffs in the form of lost sales and revenue, lost business reputation, and consumer confusion.

We will continue to monitor this case.

• Trademark infringement and dilution & contributory trademark infringement and dilution by Linden and Vezina (included as a John Doe defendant). Minsky alleged that Vezina’s SLART Garden infringed on his SLART trademark. The complaint states that by denying the validity of Minsky’s trademark, allowing Vezina to maintain SLART Garden, and refusing to identify Vezina so that Minsky could include him in the lawsuit, Linden contributed to trademark infringement.


• Tortious Interference by Linden when it hid Vezina and refused to take down infringing materials, which Minsky claimed Linden did in order “to try to intimidate and coerce [Minsky] into giving up [his] lawful trademark and rename [his] publication and other activities in a manner that would give them control of the content.”


• Fraud by Mitch Kapor (former Chairman of Linden), Philip Rosedale (former CEO and current Chairman of Linden) and Linden Research. Minsky claims they enticed people (including Minsky) to join Second Life by promising protection of their IP rights in the virtual world but then failed to provide that protection.

There's an interesting article on Law360 today:

Virtual-World Conflicts Lead To Real-World Suits.

Here's an excerpt from the article:

Law360, New York (June 08, 2010) -- As the market for online games expands and the debate over who has the right to control the virtual content heats up, website operators, their users and third parties could find themselves locked in real-world legal battles.

Disputes stemming from ownership of virtual property and operators’ terms of service agreements are starting to pop up more often, leading intellectual property experts to speculate that they may become the next hot-button issues to be played out in the courts.

The complete article can be found here.

The Patent Arcade is pleased to announce that a new book co-edited by our own Ross Dannenberg (i.e., me), and partly authored by our own Steve Chang, is now available for purchase from the ABA website:

BUY YOUR COPY TODAY!!! (the authors do not receive any royalties for this book--all proceeds benefit the American Bar Association's IP Section)

Well, it has finally happened. Someone got so upset that they filed a class action suit against Linden Research, the owner of Second Life.

In an interesting twist, Taser International voluntarily dismissed this case before Linden even answered the complaint. Taser filed a Notice of Voluntary Case Dismissal on May 5, 2009. Because Linden never filed an answer, the dismissal is without prejudice and Taser could choose to refile the case at a later time if desired. But for now, this case is closed.

The San Francisco Chronicle ran a nice article today about virtual law, including quotes from yours truly. The high point (at least in MY opinion):

But some attorneys set up virtual offices in the world as a kind of advertisement. Intellectual property specialists Banner & Witcoff did just that, and their virtual presence led to their attorney Ross Dannenberg representing one of the highest-profile virtual law cases so far.

Like the sex bed case, the Sailor's Cove case was not unlike many real-world disputes: It was an ownership conflict based on an alleged oral contract.

Dannenberg represented two users who assisted a virtual real estate developer in running a large group of islands in Second Life called Sailor's Cove. When the three parted ways, Dannenberg argued that the owner had previously made his two managers full partners and co-owners in the venture. But the owner of record claimed full ownership.

The case was settled out of court, with Dannenberg's clients receiving a financial settlement.

You can read the entire article here.

I'm short on time today, but Bloomberg reported a new lawsuit filed by Taser against Second Life (via its parent Linden Research Inc.). No sense in recreating the wheel, and Virtual World News has already posted a nice intro to the case here.

The case is Taser Interntional v. Linden Research in the District Court for Arizona, case 2:09-cv-00811-ROS, filed April 17, 2009.

We'll monitor developments and keep you posted.

From Leigh Jones, Associate editor at the National Law Journal:

--In what is considered the first event of its kind, Santa Clara University School of Law is holding an open house in the virtual world of Second Life on Jan. 22.

Visitors to Second Life, an Internet-based universe where real-life users assign themselves as cartoon characters and go to virtual, animated locations, will travel virtually to Santa Clara Island to see the school.

The event is designed to attract potential students and emphasize the law school's close ties with the technology industry in the Silicon Valley area of California.

"We need to meet prospective law students where they are, and more and more, we find potential law students on various online arenas, including virtual worlds," said Julia Yaffee, senior assistant dean of external relations, in a press release.

Hosting the two-hour event that begins at 6 p.m. West Coast time is Jeanette Leach, dean of admissions. She will attend as her own self-created avatar character, Penny Canucci. Second Life residents — who total 15 million — can tour the school and see a video of Dean Donald Polden as himself, not an avatar. Visitors also can ask admissions staff questions and get information about applying to the school.--

Kudos to Santa Clara Law School for this unique event. I'll probably stop by and check it out, too, so be on the lookout for my avatar (Aviator Kidd).

Its not every day that we get to report TRADEMARK news, so this is a refreshing change from the norm. On Nov. 11, 2008, the United States Patent & Trademark Office granted what is believed to be the first trademark registration for a user's avatar as an indication of the source of goods & services. Registration number 3,531,683 is for Computer programming services, namely, content creation for virtual worlds and three dimensional platforms. The interesting part, however, is the mark itself (pictured at left), which is an actual avatar in the virtual world of Second Life. The mark was registered on the Principal Register, meaning that the mark inherently has secondary meaning as a source of origin of goods and/or services (i.e., the mark is not generic or descriptive). The description of the mark reads: "The color(s) black, white, green, peach and blue is/are claimed as a feature of the mark. The color blue appears in the wings and the hair accessories. The color green appears in the shirt and skirt. The color black appears in the hair, eyes, eyebrows, lips, glasses, necklace, bra, waistband, in the striped pattern on the arms and stockings, as well as the toe and calf areas of the boots. All the elements of the drawing are also outlined in black. The color white appears in the eyes, the striped pattern on the arms and legs, as highlights on the black toes of the boots, on the front of the boots, and in the laces. The color peach appears in the skin."

As the boundary between virtual world and real world continues to blur, trademark owners are now more likely than ever to consider enforcing trademark rights across real/virtual world boundaries. It's also nice that the USPTO considers use of a trademark in a virtual world to be a use in interstate commerce (a requirement for obtaining a federal trademark registration, because federal trademark rights originate under the commerce clause of the United States Constitution).

Score 1 for virtual world IP rights.

Banner & Witcoff Secures Favorable Settlement for Client Regarding Intellectual Property and Land Dispute in Second Life

(Washington, D.C., July 22, 2008) - Banner & Witcoff Ltd., one of the largest law firms in the United States dedicated solely to the practice of intellectual property law, is pleased to announce they have secured a favorable settlement on behalf of its client regarding a dispute in Second Life regarding ownership of regions of virtual land, and associated intellectual property. Second Life is an online virtual world, owned by Linden Research, Inc., and created by its millions of residents around the world.

The land in dispute is Sailor’s Cove, a collection of twenty-one regions (private islands) within the virtual world of Second Life. Sailor’s Cove was developed by three parties and designed as a waterfront community that allows avatars to purchase land, participate in virtual yachting and sailing events, and become active in the community of residents of Sailor’s Cove.

The property and ownership dispute was between Patrick Leavitt, owner of record of Sailor’s Cove with Linden Research, Inc., and Izabella Bentham and Tasha Kostolany. While not owners of record with Linden Research, Inc., Bentham and Kostolany were each publicly acknowledged within Sailor’s Cove as “Owner and Sailor’s Cove Partner,” and were instrumental in the development and success of Sailor’s Cove. Patrick Leavitt had subsequently asserted sole ownership of Sailor’s Cove.

Ross A. Dannenberg, partner at Banner & Witcoff, represented Bentham and Kostolany. Dannenberg successfully avoided litigation and secured financial compensation for Bentham’s and Kostolany’s contributions to Sailor’s Cove. Dannenberg states “while Second Life may be a virtual world, the intellectual property is real, the contracts are real, and residents are still subject to real world laws.”

Dannenberg is one of several attorneys at Banner & Witcoff that specializes in protecting intellectual property rights for clients in the video game, virtual world, and computer industries. Collectively, Banner & Witcoff attorneys have decades of experience counseling clients and litigating cases involving computers, video gaming and virtual worlds, and electronic arts. Please visit our website at www.bannerwitcoff.com for more information regarding Ross Dannenberg and Banner & Witcoff.

*Please note: to protect individual privacy, all parties involved in the case are referred to by their Second Life avatar name, except Ross Dannenberg (SL avatar: Aviator Kidd).

Please direct all media inquires to Colleen Strasser at cstrasser@bannerwitcoff.com or 312.463.5465

About Banner & Witcoff, Ltd.

Banner & Witcoff, Ltd. is dedicated to excellence in the specialized practice of intellectual property law, including patent, trademark, copyright, trade secret, computer, franchise and unfair competition law. The firm actively engages in the procurement, enforcement and litigation of intellectual property rights throughout the world, including all federal and state agencies, and the distribution of such rights through licensing and franchising. The firm has over 90 attorneys and agents in its Chicago, Washington, DC, Boston and Portland, OR offices.

Please note, the facts of every case are different. Prior results don't guarantee future success.

Somehow this well reported case got overlooked here at the Patent Arcade, and that appears to be because I thought I'd already written about it. In any event, it now gets its own post...

On October 24, 2007, six content owners in Second Life sued Thomas Simon, aka Rase Kenzo, for infringing their copyrights in various online goods. Also included in the complaint were counts for unfair competition and false description of origin, conspiracy, and counterfeiting. The goods included clothing and scripted furniture (aka, sex beds), among other things. After only two months it appears that Mr. Simon saw the light and the plaintiffs proved their point--the case settled in December, 2007, for about $525, and an agreement by Mr. Simon to cease his questionable activities.

At the very least this case is important because it demonstrates the seriousness that many Second Life content creators give to their businesses, treating their intellectual property just as any other business would. The stakes will only get higher as virtual worlds such as Second Life get bigger, and the players have even more money at stake.

Documents:

Complaint-07_10_24_eros_et_al_v_simon_complaint.pdf

Settlement-ecf.nyed.uscourts.gov_cgi-bin_show_temp.pdf

IBM said today that it would become the first company to host private regions of the virtual world Second Life on its own computer servers.
The project is in testing and will go live within several weeks. This appears to be part of "the Grid," which marks a new focus by Second Life's parent company, Linden Lab, on providing software and services to corporate customers who want to use the virtual world for collaboration and teleconferencing with more assurances of privacy and security than is offered by Linden Labs.

Read more here.

I now have a presence in Second Life, on the PG (i.e., ok for all ages) region of Pumori. My XboxLIVE gamertage is Aviator, so naturally keeping with the theme my SL avatar is Aviator Kidd. Our Second Life Outpost is lakeside in Pumori. Stop by and say hello.

Second Life URL (SLURL) (if you have Second Life installed, you can click the link to teleport to our outpost)

Here is the SLURL if you want the details: http://slurl.com/secondlife/Pumori/144/111/31

As Second Life matures, they are taking some fairly customary steps, one of which is to take a more proactive role to protect their own intellectual property. In this vein, Linden Labs has created the Second Life Brand Center, which details the proper and improper use of Linden Labs trademarks. In addition, Linden Labs has created the "inSL" mark for users to use under certain conditions to signify their presence in Second Life. The Brand Center is online here.

Sorry I've been radio silent for a while. Life has been busy, you know how it goes...

In any event, it appears that Cory Ondrejka, employee No. 4 at San Francisco-based Linden Lab, which owns Second Life, quit Tuesday and will depart at the end of the year. Ondrejka spearheaded the company's decision to allow users to retain intellectual property rights to their creations. That's encouraged a thriving e-commerce market where users spend real dollars to buy virtual real estate, clothes, cars and other items. So it will be interesting to see where the company goes next.

Read more here.

More Second Life news: As reported in the New York Post, a half-dozen entrepreneurs are suing a Queens man, charging him with counterfeiting and selling versions of their products. Here's the catch: The products aren't real, and the alleged crimes took place in the virtual world of Second Life on the Web.

Read full story here.

We'll keep monitoring this case and let you know as we learn more.

As originally reported on Terra Nova, Linden Labs appears to have made a potentially significant change to the wording on its home page. The home page used to read:

“Second Life is a 3D online digital world imagined, created and owned by its residents”

But now it reads:

“Second Life is a 3D online digital world imagined and created by its residents”

The post on Terra Nova has an interesting string of comments. Check it out. It will be interesting to see if anything comes of this.

Ok, I've spent the better part of two evenings finishing the campaign mode in Halo 3, so it's about time to come out of my self-induced Halo 3 fog. A colleague of mine and I were discussing about a month or so ago the fact that Linden Lab's terms of service for Second Life are very prohibitive of patents and patent rights being enforced by SL residents. Well there is a fairly comprehensive post on Virtually Blind regarding the topic that I feel compelled to link to. It's an interesting read. Enjoy.

Well it was really only a matter of time. When an industry gets large enough, we need awards to distinguish the good from the bad. MMOs and Virtual Worlds are the latest addition to the awards fray, with "live" ceremonies to be held in Second Life and Entropia Universe.

Read more here.

I guess it's true: IP begets IP.