More on Second Life

A very prominent scholar requesting anonymity emailed me to challenge my post yesterday regarding Second Life. He writes,

I beg to differ. If you read all of the Second Life rules and terms of service, it does not get at most of what I was discussing in my post. With few exceptions, they deal with the vertical relationship between the user and Linden Labs. The Terms of Service do have a California choice of law clause and an arbitration provision that requires arbitration of disputes between a user and Linden Labs in San Francisco under the ICC Rules. Putting aside the enforceability of a prohibitively expensive ICC arbitration clause under the Green Tree standard, my main objection was to (1) the relative lawlessness in Second Life between users and (2) disputes between an outside real-world governing authority and a user.

The rules say very little about the horizontal relationship between users, other than the community standards. So let’s look at the horizontal governance we have in Second Life. We have Community Standards of the “Big Six”: intolerance, harassment, assault, disclosure, indecency, and disturbing the peace. We also have punishments of warnings, suspensions, and banishments. The question is whether the “Big Six” standards resolve all the issues of community governance between users. I think the answer has to be no. Indeed, Linden Labs acknowledges in the Terms of Service that “Linden Labs generally does not regulate the content of communications between users or users’ interactions with the Service.”

Let’s start with virtual sex with minors. The indecency rule says that “content, communication, or behavior which involves intense language or expletives, nudity or sexual content, the depiction of sex or violence, or anything else broadly offensive must be contained within private land in areas rated Mature (M).” Doesn’t that say that there is almost no regulation of indecency inside the mature area? Virtual sex with virtual minors is subject to no regulation in the mature area. And what about real minors? In the Terms of Service, Linden Labs says in Article 2.1 that it “cannot guarantee the accuracy of any information submitted by any user of the Service, nor any identity information about any user.” In Article 2.2 it says that “Linden Labs cannot absolutely control whether minors gain access to the Service other than the Teen Area, and makes no representation that users outside the Teen Area are not minors.” So is Linden Labs regulating virtual sex with real or imagined minors? No.

And what about damage to virtual property by one user against another? None of the community standards, not even disturbing the peace, clearly addresses the issue of virtual property damage. There is a provision in Article 5.1 of the Terms of Service for Linden Labs to exercise the “right but not the obligation” to resolve disputes between users. But such conflict resolution is “based solely on the general rules and standards of the Service and [Linden Labs] will not make judgments regarding legal issues or claims.” So if they don’t, who will? Is there even such a thing as a tort for virtual property damage that can be prosecuted in some real-world jurisdiction? Although I didn’t discuss it in my original post, the same would apply to virtual breaches of contract between users, to which the Linden Lab rules say almost nothing.

What about the tax consequences of ownership of virtual property? This post which I linked to before discusses the issue at length, highlighting the complexity of taxing virtual property, with or without a cash out. If a Chinese user becomes a real-world millionaire after cashing out his Linden virtual holdings, do the Linden rules resolve the question of which taxing authority, if any, should have the right to collect taxes? I don’t think so.

So I think it is safe to say that we have very little governance in Second Life. Six rules and three levels of punishment does not establish a virtual rule of law in Second Life. As the Terms of Service puts it in Article 1.2, “Linden Lab has very limited control, if any, over the quality, safety, morality, legality, truthfulness or accuracy of various aspects of the Service.” I agree with Linden Labs.

I think perhaps what my interlocutor was getting at was that contract law could govern most of the issues I addressed in my post. To that I agree. If the terms of service were written so that it provided detailed rules of conduct, an effective dispute resolution procedure, and a governing law clause between users, than many of the issues I discussed could be governed by applicable rules and laws. But that would not address all of the issues I discussed, such as possible civil or criminal misconduct relating to tax evasion or virtual sex with real minors.