How can the rights of human beings and property be protected in a virtual world? How can they be enforced, and who should bear that cost? These are just a few of the complex issues currently facing online worlds, where virtual lives and goods have real value to users, and at the SXSW conference in Austin, a panel of industry experts gathered to discuss possible solutions.

GoPets CEO Erik Bethke, Live Gamer co-founder Andrew Schneider and attorney Greg Boyd spoke on the panel, while Charles River Ventures' Susan Wu, long an advocate of online world businesses, moderated.
What are virtual property rights?

The Precedents

Wu began by discussing the recent Bragg v. Linden Labs court case -- in brief, a legal battle between a Second Life user and the world's parent company over land that Bragg apparently improperly acquired, resulting in a ban from the world by Linden. That case, Wu says, was a landmark in that it demonstrated that virtual property rights have tangible value in the court system.

In another recent incident, a Dutch teenager was arrested for stealing $6000 in virtual furniture from Sulake's Habbo Hotel. He was arrested for burglary, rather than hacking.

"What are the prevailing customs that should apply?" Wu asked. "Is it the country where the company is based? Is it the country where the customer lives? We don’t even know what the basic virtual property rights are that we should be concerned with."

Boyd opined that users have a license to use virtual property, and Wu suggested that perspective indicates governance by prevailing perspectives.

Said Schneider, "It’s all about the terms of service, especially for a company like mine that does allow the cashing out of virtual goods for money. The terms of service need to be absolutely rock solid. We’re talking about limited licenses. What are the rights you are granted? What happens if the servers go down? What happens if you’re banned? It’s almost as though every MMO and virtual world has its own constitution."

If that's the case, asked Wu, doesn't that create a lot of confusion for the consumers?

Stated Bethke, "I consider WoW the biggest MMO failure ever. The gameplay is amazing, and graphics, and everything. But at the end of the day, people know it doesn’t mean anything. Their stuff can be taken away from them. They can be banned at any moment. I believe what they earn becomes their property."

"That's kind of extreme," Wu opined. "But how do we reconcile the rights of a player to sell items and so forth?"

"At the end of the day, it’s a limited-use license," Schneider noted.

A Question of Ownership

Bethke suggested it might be the litigious environment that prevents a solution to the problem. "The law comes from common law, which comes from expectations and how people work together," he added. "I think we want to match people’s expectations."

Said Boyd, "I fundamentally believe developers should be able to do whatever they want. But you should go into that with your eyes open. Once you say to a player, 'you own this sword,” you invoke a lot of legal precedent regarding property rights.

So full ownership doesn’t exist because publishers are scared?

Admitted Boyd, "You are buying a lot more risk if you go out and say, 'you guys own this.'"

Wu wondered whether there's a difference between a world's citizens and those who are merely 'tourists.' -- in other words, paying versus free users.

Replied Bethke, "If you’re a tourist, I’m not going to grant you all these property and human rights, because you could simply be a griefer. If you’re paying me money, you could still be a griefer, but at least you’re paying me money."

He continued, "If you’re a paid citizen, the stuff you buy is your stuff. If you lose it, we will replace it. I’m not going to give you fair market value. If you do anything wrong, we offer four locations of arbitration and if we need to, we take away your stuff and that’s it."

In a world with very explicit broad rights, much of which are tied to real world value, at some point courts of law recognize content as real property. Wu asked the panelists a key question -- do they have the legal right to enforce punishments or codes of behavior against those rights?

"We have three avenues to ensure fairness," Bethke explained. "If it ever got to litigation, I’m pretty confident we would prevail."

Do property rights automatically mean microtransactions?

"Putting a monetary value on something is more black and white," conceded Schneider, "but time has value too."

Said Boyd, "You cannot think about property rights without thinking of RMT. You need to consider gambling regulation, banking regulation, money laundering, taxes. These are not really things that we know yet. All these are magnified when you go full ownership over license and when you have a cash-out component. These are things we are sorting out right now."

And how quickly will the law catch up to practice?

Bethe pointed out, "40 million people make sales on eBay, and you’re supposed to pay taxes on that. But many people do not. That’s a lot of money. There are bigger economic things happening. And I’m confident they will be hit before we’ll be hit."

Boyd – There’s a web video out there of me in 2004 saying, “we’re totally going to have this virtual world thing sorted out by 2007.” (laughs)

Said Schneider, "Tackling this issue involves a lot of heavy lifting. We have quite a few lawyers trying to figure out this stuff. We want to do the right thing; It is not a black-and-white issue. Some things are a state by state issue, and not a federal issue. Part of our challenge is to figure out the landscape and the regulatory issues involved in being compliant."

But all of the panelists agree some kind of resolution is inevitable: "If you think about things that gain a lot of people’s attention… you need a lot of people to invest money, time, and creativity. You’re going to need to give them property rights to get those things."

[Jessica Maguire contributed this report.]