TOSes in trouble?
I am not a lawyer.
But this court ruling regarding the Bragg/Linden case (pdf) seems to me to have some serious implications for how virtual worlds do business.
Let’s walk through the bare bones in plain language, as I understand it:
- Linden and Philip Rosedale make a point of saying that you can make money in Second Life.
- A guy named Bragg hears this. He downloads the client, agrees to the terms of service, and plays Second Life.
- He exploits some software flaw to get a parcel of land on the cheap.
- Linden catches him at it and confiscates the land (and by implication, his real actual investment).
- He sues Rosedale.
- Linden moves that Rosedale be dismissed from the suit. They also move that the case go to arbitration, per the Terms of Service.
- The court concludes that Rosedale did lots of publicly saying “you can make real money in Second Life” and therefore should stay on the suit. This much isn’t that different really from how such cases would go.
Then comes the arbitration clause.
The court says “the company is a Delaware company, but run in California, and the plaintiff is in Pennsylvania, so this is interstate commerce, so we’re gonna judge this arbitration clause based on federal law.”
Under federal law, arbitration must be agreed to by both parties in writing, and in case there’s disagreement afterwards, the court is supposed to lean towards the person who doesn’t want arbitration.
Bragg doesn’t want arbitration, he wants a court case. He opposes it on the grounds that the arbitration clause is “unconscionable.”
“Unconscionable” by law has to be defined by California. They define it as “oppression” because of “unequal bargaining positions”; and the use of “surprise through hidden terms.” Most specifically, this conjures up the question of “contracts of adhesion.”
A contract of adhesion, in turn, is a “standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.”
Which sounds a lot like a Yes/No button on a Terms of Service agreement. Indeed, the court finds a precedent under California law that says,
“An arbitration agreement that is an essential part of a ‘take it or leave it’ employment condition, without more, is procedurally unconscionable.”
What’s more, the arbitration clause was, to use the court’s language, “buried” in the middle of a long paragraph way down in the TOS, and didn’t have its own heading.
Even then, though, there’s the additional hoop of whether the nature of the arbitration clause is also unfair. In California, the standard is that the clause has to be somewhat bilateral. Forcing the weaker party to arbitration, but letting the stronger party pick the venue, for example, is not considered bilateral. There’s the question of costs of arbitration and how they get split up, there’s the question of whether one party can force the proceedings to be confidential, etc. I won’t bother going into all that.
What it boils down to, though, is that the court is saying that some pretty common elements of TOS agreements may be considered unfair by law — and in this case, the fact that Linden deals in real money makes this point especially acute. Ironically, the fact that Bragg is a lawyer himself actually hurts his case (since it can be deduced that he of all people should have been able to parse the TOS before agreeing to it).
Now, of course virtual world operators want to work towards minimizing exploits — and there seemed to be agreement a year ago, when this case was first filed, that Bragg was indeed exploiting a bug in some way (though my memory is hazy, I admit). This ruling seems to, if not remove a tool from the VW operator’s arsenal, at the very least set some boundaries on its use.
As more worlds start allowing virtual commerce, these issues are sure to come up again and again. Bottom line on this one seems to be “when you ban a bug exploiter, do you refund their cash?” And how much, the original amount or the ill-gotten gains? And is it ill-gotten if it’s an exploit, and not a bug? (Exploit being defined as a design/software oversight, as opposed to error in implementation).
Lots of questions. I feel sorry for the courts who are about to get a crash course in virtuality. 🙂
Edit: more comments at The Forge.
32 Responses to “TOSes in trouble?”
Sorry, the comment form is closed at this time.
Hey, Rob here. We ve recently been toying with the idea of producing a multivariate testing tool in light of a few technical and otherwise problems with Google s offering. In terms of conversions, it s money for nothing. … TOSes in trouble? I am not a lawyer. But this court ruling regarding the Bragg/Linden case (pdf) seems to me to have some serious implications for how virtual worlds do business. Let s walk through the bare bones in plain language, as I understand it:
Robreno found the arbitration clause both procedurally and substantively unconscionable and that Linden appears to be attempting to insulate itself contractually from any meaningful challenge to its alleged practices. According to one game designer, the decision has some serious implications for how virtual worlds do business … [T]he court is saying that some pretty common elements of TOS agreements may be considered unfair by law.
Hey, Rob here. We ve recently been toying with the idea of producing a multivariate testing tool in light of a few technical and otherwise problems with Google s offering. In terms of conversions, it s money for nothing. …TOSes in trouble?I am not a lawyer. But this court ruling regarding the Bragg/Linden case (pdf) seems to me to have some serious implications for how virtual worlds do business. Let s walk through the bare bones in plain language, as I understand it:
[…] Edit: Raph has blogged about it too. […]
[…] commented on by Raph Koster and Matt Mihaly, a ruling came through in the Bragg v. Linden lawsuit: Linden Labs gets spanked […]
iirc, this wasn’t a software flaw as in the SL client, but a simple cut ‘n paste to a url on a website.
(Now to sit back and continue watching this travel through the blogosphere. Fun day.)
Csven is correct. Basically, Linden Lab had not-yet-available plots of land for auction available via the auction interface if you manually entered the URL.
So, the Land was effectively, available, just not publicized.
Also, Linden Lab processed the transaction (and then revoked it).
If your world is going to be about “making money” – it is kind of hard to defend sloppy implementations.
… if you are going to do virtual / real commerce, you had better make sure you don’t have exploits.
As an aside, as a general user of software, I am glad there is some push back on these increasingly ridiculous TOS “agreements”.
[…] Terms of Service case This is pretty interesting for us MMO players: https://www.raphkoster.com/2007/05/31/toses-in-trouble/ The key point that I take away: "What it boils down to, though, is that the court is saying […]
[…] Oh, Part One Wut Oh, Part One: “As commented on by Raph Koster and Matt Mihaly, a ruling came through in the Bragg v. Linden lawsuit: Linden Labs gets spanked […]
[…] so it isn’t an M59 event. But, it’s an issue that has been spreading around like wildfire. Long story short: a court has thrown out a provision in Second Life’s (SL) […]
[…] Second Labs doesn’t fair so well when holding their TOS up in front of a judge. From Raph: What it boils down to, though, is that the court is saying that […]
[…] Station Exchange? This is a case to watch going forward. See additional discussion at ValleyWag, Raph Koster and The Forge. Share and Enjoy:These icons link to social bookmarking sites where readers can […]
And after refreshing my memory (with the help of the official forum posts from last year)…
a) Residents found “to be auctioned” land using the Second Life client (color coded “auction” land shows up on the map)
b) By going to the virtual land in Second Life, people could read the auction number off the land description pop-up window (“About Land”)
c) Those numbers could be plugged into a typical auction page URL allowing residents to place bids *without* activating a “+$1000” mechanism on webpage
Here’s what the URL would look like: http://secondlife.com/auctions/detail.php?id=0626198493
People would just replace the numbers. Easy.
–
One could argue that because Linden Lab provided the numbers in this way, they did, in a sense, publicize it.
[…] more comments at The Forge. 댓글달기 https://www.raphkoster.com/2007/05/31/toses-in-trouble/#comments Multiverse gets more funding Raph 2007-06-01 03:17 작성 | Game talk Good news for Bill […]
[…] A Pennsylvania judge has ruled that Linden Lab’s terms of service for Second Life residents are not legally binding, according to court papers filed on Wednesday, reports Reuters. The ruling came in the case of Bragg v. Linden Research. Marc Bragg, a lawyer from West Chester, Pa., filed suit in 2006 claiming that Linden unfairly terminated his account, causing the loss of his virtual business venture. Linden filed motions to dismiss the suit and compel Bragg to arbitrate his claim out of court, consistent with Linden’s Terms of Service. more here from Reuters. Raph Koster, founder of Areae, puts it this way: "Bragg/Linden case (pdf) seems to me to have some serious implications for how virtual worlds do business." Raph Koster has a look at the details […]
Not that SL is a game, but I would look at solving this type of problem by making exploiting part of the game. Instead of banning players and closing accounts give them ingame punishments such as server transfers to prison. I remember UO doing this type of deal ingame for some borderline cases, and I wonder if a player could sue you over it?
Wolfe, I think you might be on to something. If the court were to rule against what your saying, then they would have to rule against player death, especially when your death makes you lose something. Where does the court stand on in game governance?
This could become a very interesting mess in the future.
[…] https://www.raphkoster.com/2007/05/31/toses-in-trouble/ Interesting points brought up about TOS agreements on Raph’s blog, This case is something to watch, I always knew those little "contracts" that basically say sign me or you can not use the product you paid for are fishy… Basically Linden’s provision in their TOS, that disputes be settled by an independent arbitrator, was struck down. It is going to Civil court, I wish they would put this case on Court TV instead of some pornographic exploitation of violent misery. […]
Hmm I dunno…I kinda read it like this
Linden Labs: OWN! Hey everybody guess what! OWN! Come spend money at our place cause if ya do, you OWN OWN OWN OWN what you buy! OWN! It’s yours! OWN! No really! OWN! Come play now! OWN! Click the button! OWN! Yeah the one that says “I agree”! OWN! Good! OWN! Welcome to your Second Ownership Life! OWN!
Bragg: OMG really? Hell ya. Property ownership, here I come!
Linden Labs: Hi Mr Bragg.. let’s just set you up with all your OWNED property here. Okey dokey. Congratulations! All this stuff is YOURS! Now let’s just put the final touches on that.. uh..hmm.. oh wait a minute.. you know what.. actually, I don’t like what you did there with one of the many things I gave you. You know what? BANHAMMER! Give me ALL that stuff back! Get the hell outta here!
Bragg: ZOMGWTFBBQ?! You can’t do that. You said I owned it. If I own it, you can’t just take it from me. There’s these things called property laws…
Linden Labs: lalalalala. I can’t hear you. Read what our agreement again. I can do whatever the hell I want. Take your “laws” and shove it. Don’t like it? Shouldn’t have clicked Agree. (Hmm.. maybe next update we can add a TOS clause in there to take our customers’ first born children and sell them for profit…)
Bragg: Please help me out, legal system!
Court: Y hallo thar! Mr CEO, you said people ‘OWN’ things and Bragg here says you took what he owned which means that you didn’t actually intend him to own it. If that’s true, that’s not very nice and also not very legal. Either it’s his stuff or it’s not. And according to your TOS here, it says that — OH GOOD HOLY J3SUS M0THER OF CHR1ST WHAT THE HELLZ0RS IS THIS THING?!!? Ok you know what, this thing is so ridiculously unfair, it reminds me of when Paypal tried to make sure none of its business practices could be successfully challenged by its customers. There’s a word for that in Cali: Illegal. And since deception is at issue and public statements by you, CEO, regarding ownership are alleged to be fraudulent, which also happens to be illegal.. maybe Bragg has a point.. let’s find out. -DENIED-
Though I’m also not a lawyer so I have no idea wtf really just happened here either. I dunno.. kinda sounds like CEO saying one thing and company doing something different. That’s not too cool. I don’t think there’s such thing as “Indian giver” doctrine in the US legal system. If that’s the kind of stuff they’re doing to big shot lawyers, imagine what they’re doing to everybody else.
[…] After writing the above I find that Raph has done a far more eloquent job. I suggest that you read his take on this situation. […]
I despised lawyers! I have always heard that “a contract is a contract is a contract”. This one will be good … one sleazy laywer vs. a bunch of sleazy lawyers (I am speaking virtually, of course). Now we have a virtual lawyer (that means he’s not really a lawyer) vs. a virtual world problem (does that means it is not really a problem?). The lawyers in real life are bad enough. This guy, Bragg, needs to get a real life ….. not a Second Life 🙂
[…] May was the month that legal action almost outpaced Eve Online drama. As reported by Raph and Lum, the Bragg v. Linden Labs lawsuit that the Terra Nova crowd decried as the temper tantrum […]
Troon, let’s be fair now, the lawyer plaintiff disputes Linden Lab’s version of events on how his account was terminated (and I’ve heard the get a real life joke so many times by now already, it hurts).
But ya know…now that I think about it, maybe Linden Labs really did mean OWN. But like: Hahaha you really believe what we said? Lawl! BAN! 0WN3D!
Software companies have been putting more and more in TOS’s that they had to be advised by their lawyers were shady at best.
You can’t sign away essential rights.
Now I know the companies have a lot to protect on their side, but many have became too overzealous. The industry really needs to examine what is legally fair before they err on the side of the almighty dollar, or they’ll get burned in the end.
There are many contracts, not just software TOS and EULA, where one party decides to put in terms that are well known to be prohibited under law. In almost all cases, employers, landlords, you name it, choose language specifically so that it encourages the other party not to sue them. Almost every lease I signed before I bought my first home had provisions that were illegal based on my state’s landlord-tenant law. Lawyers aren’t idiots. They will, however, try to get away with stuff, hoping the terms never get reviewed by a judge.
It’s apparent to me that if Linden really wanted to use arbitration to settle disputes, their attorneys would have worded the provisions to be in compliance with California and federal law.
What’s pleasurable about this decision is that some smart VW operators might go back and revisit their own EULA and TOS, in attempt to make them worth something.
[…] IRE younglings) and Ralph Koster's blogshttp://forge.ironrealms.com/2007/05/31/bragg-vs-linden/https://www.raphkoster.com/2007/05/31/toses-in-trouble/ ——————– QUOTE(The Aethercity of Deepnight): Arix says, "At some point, Richter […]
Regardless of Csven’s nitpicking here on any technical meaning of the word “software flaw” or by implication use of the word “hack” or “exploit,” what Bragg did was indeed *exploit* (or “hack” in an ordinary sense) the system by pasting a URL that forced an auction to go up for $1 instead of $1000 when it hadn’t been set yet by a Linden. The loophole was quickly closed. Bragg had knowledge of the norms of the auction, which was that sim auctions were always opened at $1000. He took the lot number from inworld, plugged it into a URL, and illicitly cranked up the auction. It’s like buying electronics in Radio Shack by taking the price off a $1.00 thing and putting it on the $1000 thing and going through the cashier — but then getting caught at the door. LL then took all his possessions even legally gained when it could reasonably only take the stolen sim. That’s the essence of the case. The case also tries to knock down the distinction between the marketing techniques calling the server space “land” you can “own” and the fine print in the TOS saying it is essentially fictional and can be taken you “for any reason or no reason”.
I love it that the TOS is declared “unconscionable” and that these games/worlds all got a little bit less oppressive and put on notice with that ruling.
I’m not loving it that a bad case might lead to a good law (never happens) — because it means that thugs who steal and fence hot sims and harass a virtual world company in court get to wrest something back from them that they only have due to that virtual world company. It means that virtual world companies, like OB/GYNs, will become hugely aware of malpractice suits and become more cautious and expensive.
First, I want to clarify one part of the order. chambless is exactly right. One of the things the court focuses on is that Linden/Rosedale seemingly made representations that users own the virtual land they buy. The issue isn’t that they claimed users can make money, as you describe, but that they claimed “what you have in Second Life is real and it is yours.” Incidentally, the court’s framing of this issue could wind up being very instructive because they almost seem to be taking virtual property ownership for granted.
Second, and related to that last point, I was surprised not to see more about the virtual property discussions in this order. The court is pretty transparently confused about the differences between copyright rights and virtual property rights — it even goes so far as to say Linden recognized property rights in virtual land, when in fact the ToS do exactly the opposite.
I wrote more about this on my blog. I’d be interested to hear your thoughts.
[…] taken a major twist this week as a Pennsylvania court judge is essentially saying, in court, that Linden Labs’ terms of service agreement is meaningless. You see, Bragg has included Linden Labs CEO Philip Rosedale in the suit. Linden moved to get […]
[…] on this case says that games’ terms of service (TOS) clauses are largely meaningless. Reaction: https://www.raphkoster.com/2007/05/31/toses-in-trouble/ […]
[…] sued. Judge ruled that the TOS unfairly favored Linden for arbitration and dispute resolution. A blog of the origional suit_________________~ Life is temporary – Science is forever ~ Mr. Wizard http://www.werena.com – it’s […]
[…] Station Exchange? This is a case to watch going forward. See additional discussion at ValleyWag, Raph Koster and The […]