A Lawyer’s Views on MMORPG Legalities

It’s a given that massively multiplayer games ask players to accept an EULA in order to play, and that in-game loot can amass profits on eBay, but what are the legal reprecussions? A new Q&A on Okratas with lawyer Don Shelkey discusses those very aspects of MMORPGs. One of the loot farming questions to follow:

Q: The sale of credits and items between players in virtual worlds is common, though standard property law does not quite cover virtual property and companies running these games that may have rights to the contents inside their games. Therefore, what does the law say on this topic? What are your views on this topic?

A: Because we are now starting to cross into MMOG-specific topics, I feel the need to make a disclaimer (being a lawyer and all). For these MMOG-specific questions, my thoughts are my thoughts alone, and not the thoughts of Brad McQuaid or anyone else at Sigil.

Most main stream companies out there now handle the sale of virtual goods in a simple manner. They prohibit it in the EULA. EULAs are enforceable contracts and there is nothing to indicate that a clause prohibiting the sale of online goods wouldn’t be enforced. So, courts should enforce the EULA in the company’s favor based on a breach of contract if the company were to proceed to trial on the matter.

The practical considerations are vitally important to this discussion. First and foremost, litigation is expensive, even for a big company. If it can be avoided, it should be. I think the prevailing opinion out there now is that companies would rather put the money into improving their games rather than chasing down some virtual profiteer. Every company to date has pretty much stopped at the practical steps (prohibiting it, banning accounts, etc.), and have not taken the next, more costly step legal action.

There are some legal issues that have to be addressed. You might be surprised to learn that a breach of contract alone is not enough to win a big recovery in court. The goal of contract law is generally not to “punish” dirty rotten contract breakers, but instead to make the aggrieved party be in as good a position as if the contract was performed. Stated another way, the aggrieved party (in this case, the game developer) must suffer “damages.” Furthermore, the damages must be quantifiable. It would be easy to quantify a MMOG developer’s damages if, on each day that an illegal virtual sale was conducted, 5 customers left. But it doesn’t work that way. It is hard to tell what “damage” has been suffered by the company based on virtual profiteering.

Marching into court and telling the judge tales about “Oloh’s Dungeon of Ill Fated Pharming” which has been overcrowded by pharmers may not be the type of damage that the court is looking at to determine a monetary reward. The same can be said of games that are less “fun” because of virtual profiteering.

Of course, a company can always try and get non-monetary rewards, such as an injunction that prohibits further breaches, but that could cost a lot of money simply to cut off one supplier. While an injunction should solve the problem with that particular company, others will pick up the slack. Compare that to a company getting hit with a multimillion dollar lawsuit, which generally will have a chilling effect on other companies (money speaks louder than injunctions, I assure you).

Now, a lot of you may be saying “so what?” Let them sell virtual property, it is not that big of a deal. There are a few reasons why that is not the proper response for the good of the genre as a whole. Consider the following examples:

The more liquid virtual property comes, the more likely it is to be taxed. (Man, I would LOVE to loot that Cloak of Flames, but I cannot afford to pay income tax on it. By the way, have you filled out your tax report for the Akkirus’ Codpiece of the Risen you looted last week?)

The more real world value items have, the more likely a court may decide that players have a property interest in the virtual property. (Unfortunately, OlohCorp cannot nerf the Moss Covered Twig because we cannot afford to compensate the players for their loss of property. Please be advised of the situation.). Far fetched? See http://www.cnn.com/2003/TECH/fun.games/12/19/china.gamer.reut/

So where do I see the problem of virtual sales going? I think that virtual profiteers are becoming more organized and entrenched. At the moment, there is a lot of money to be made, and I don’t see it going away any time soon. I think it will be expensive to root them out legally, and unless a solution is found that gives a company a reasonable way to enforce its rights and recoup some of the costs for doing so, companies will continue to rely on “in game” means, rather than legal means, to curtail the problem.