Real Property Dispute in a Virtual World

Bragg v. Linden Research, Inc.,
487 F.Supp.2d 593
United States District Court for the Eastern District of Pennsylvania, 2007

In April 2006, Linden Research, Inc. (“Linden”), the online virtual world service provider of Second Life, terminated the account of a user, Marc Bragg, when it discovered that he had found a way to acquire land in the virtual world at a lower-than-market price. Bragg brought this suit in response.

Linden operates Second Life, a multiplayer role-playing game set in a virtual world. In Second Life, users create avatars to represent themselves and can interact with others in this virtual space. Second Life is quite popular with its users: Bragg asserts that people are living large amounts of time in the game, as well as “forming friendships with others, building and acquiring virtual property, forming contracts, substantial business relationships and forming social organizations.” Unlike some other games, Linden allows users to retain full intellectual property rights in their creations in-game. Linden also allows users to, for a fee, purchase virtual in-game property. Linden claimed that Bragg had improperly purchased a plot of land called “Taessot” for $300. This plot of land allegedly was purchased through an exploit. Linden took the property away and then promptly froze Bragg’s account, thereby confiscating all of his property and currency in his Second Life account.

Bragg’s complaint asserts that Linden expropriated his property by nullifying his transaction and freezing his account. Linden responded with a motion to dismiss for lack of jurisdiction, while also averring to an arbitration clause of the in the Second Life Terms of Service .

While this case was originally filed in West Chester District Court in Pennsylvania, Bragg later refiled and named Philip Rosedale, the creator of Second Life, as an independent defendant. Linden responded with three filings by attempting to: (1) remove the case to federal court, (2) dismiss claims against Rosedale due to lack of personal jurisdiction, and (3) compel Bragg to participate in mandatory arbitration as outlined in the Second Life Terms of Service.

With regard to Linden’s first filing, the Court granted the motion and removed the case to the United States District Court for the Eastern District of Pennsylvania.

With regard to Linden’s second filing, the Court denied Rosedale’s motion to dismiss for lack of personal jurisdiction. The Court found that Rosedale met the minimum contacts threshold for personal jurisdiction by virtue of his nationwide personal marketing efforts to publicize Second Life, including his in-game town hall meetings which discussed virtual property.

With regard to Linden’s third filing, the Court denied Linden’s motion to compel arbitration. Because Second Life’s Terms of Service were made available at a “take-it-or-leave-it” basis, the Terms of Service in Second Life represented an adhesion contract that was unjustly biased towards Linden. The Court further based its reasoning on the fact that, at the time, other than Second Life, there were no other available alternatives for people to retain property rights in a virtual world.

Shortly thereafter, in 2007, Linden announced that it had reached a confidential settlement with Bragg which included restoring Bragg’s Second Life account.

This case is an interesting snapshot of online game history, though it is unclear whether the same result would have been reached today. As mentioned above, the lack of alternatives to Second Life was an important part of the Court’s analysis and weighing of the enforceability of Second Life’s Terms of Service. Today, virtual worlds are more numerous and more expansive and, in cases such as Epic Systems Corp v. Lewis, 138 S.Ct. 1612 (2018) and Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524 (2019), the Supreme Court has recently ruled in favor of arbitration clauses in contracts.