INTRODUCTION TO THE LAW OF VIRTUAL AND AUGMENTED REALITY

PART I

INTRODUCTION TO THE LAW OF VIRTUAL AND AUGMENTED REALITY

• 1. The law of virtual reality and increasingly smart virtual avatars

Woodrow Barfield and Alexander Williams

• 1. INTRODUCTION

Advances in virtual and augmented reality technology, and in the software to produce virtual worlds, have allowed virtual avatars to be used with increasing frequency for a range of activities. But with improvements in the technology to create virtual and augmented reality worlds and decreases in equipment costs have come corresponding issues of law and policy applying to the avatars which represent the human presence in virtual environments. This chapter discusses several issues of law which relate to the design and use of virtual avatars, with a specific focus on avatars that are gaining in intelligence and operating with more and more autonomy from humans.1 To introduce this topic we present an overview of legal disputes brought forth by virtual and augmented reality worlds, including those implicated when virtual avatars are used for commercial activities. After the initial discussion focusing on legal disputes within virtual and augmented reality worlds, the remainder of this chapter focuses on issues of law and policy which relate more specifically to the design and use of increasingly smart virtual avatars. For the purposes of this chapter, we note that virtual avatars are increasingly taking a form in which they are not simply computer-generated “puppets” manipulated by real-world users, as is the case in many online virtual reality games, but rather are becoming more autonomous actors, generating their own decisions and solutions to problems which may not always be intelligible or transparent to the real-world users they represent. Further, it is the case that “familiar” virtual avatars controlled almost entirely by real-world users bring up a host of legal issues, such as whether the avatar uses copyrighted or trademarked material and, if it does, who is liable. But while increasingly smart avatars operating with greater autonomy will raise many of the same legal issues as do current avatars, they will also raise further significant legal issues, such as whether the avatars themselves deserve rights. While many current avatars represent alter egos of real-world users in a virtual world, the concept of an avatar is expansive and can refer to any character or perhaps any object in the virtual world—and may even represent no natural person outside the virtual world.

A virtual environment (or virtual world) is an interactive computer simulation which lets its participants see, hear, use, and even modify the simulated objects in the computergenerated environment.2 Within a virtual environment, the user may be stimulated by a range of sensory information, including spacialized sound, stereoscopic imagery, olfactory cues, and force or tactile feedback. Some commentators have even suggested that developments in virtual environments are occurring so rapidly that humans may “inhabit” these environments within the foreseeable future. Although this may seem like a bold prediction, many people are already spending significant amounts of time in virtual environments engaging in activities such as learning skills or performing recreational activities. One reason for the time spent in virtual and augmented reality is that the participants may experience a sense of presence, which is generally regarded as the suspension of disbelief that one is viewing a simulation, that is, the experience of actually “being there” in the virtual or augmented reality world.3 More realistic virtual environments lead to a higher sense of presence, and it has been shown that one way to increase the realism of a virtual environment is by projecting avatars in the virtual world that have the ability to interact with humans and, in some cases, to serve as an alter ego for a human creator.

Participation in a virtual world through the use of a virtual avatar is a compelling experience, especially for those who play massively multiplayer online roleplaying games and for those that experience virtual reality through head-mounted, stereoscopic 3D displays. The virtual avatar(s) representing people enable thousands of participants to interact simultaneously within the same virtual world, and in such settings these participants effectively become the avatars they have created, often looking through their eyes and engaging with other such virtual beings. Virtual avatars can be thought of as computer programs consisting of datasets and algorithms, along with a visual representation. As such, they may receive the legal protection that is awarded software, and the protection awarded images from copyright and trademark law. However, unlike standard software programs, intelligent avatars may deviate from their original programming until they are no longer recognizable to the original programmer(s), raising a host of legal issues beyond the scope of current virtual avatars. These issues are the focus of this chapter.

• 2. THE USE OF AVATARS FOR COMMERCIAL ACTIVITIES

Since increasingly “smart” avatars are being used more and more in commercial activities, in this section we introduce examples and legal issues which relate to the use of virtual avatars for marketing and branding purposes. We then move on to other issues of law relating to virtual worlds and increasingly smart virtual avatars. Certainly, introducing real-world brands, in some form or another, within virtual worlds is a viable means of engaging in commerce, and is an area that has generated several legal disputes. Additionally, an interesting question of commerce for virtual reality is whether avatars will actually buy real-world products that are marketed in virtual worlds, in effect purchasing real-world goods for their creators, just as those creators buy virtual-world paraphernalia for them. Could an avatar who currently spends Linden dollars to buy a virtual dress from another avatar’s designer clothing store in Second Life be enticed, while visiting an in-world Gap retail outlet, to click on a cash register and use his or her creator’s credit card to buy a real-world Gap sweater that would be shipped to the creator’s doorstep?4

In terms of efforts to market real-world products in virtual worlds, companies are beginning to look beyond the overall market itself and to think about the potential individual customer, which may be the person behind the avatar or, with increasing intelligence, the avatar itself rather than its creator.5 The virtual avatar, as a distinct creation of the user’s psyche, can influence its creator’s purchasing behavior and even make its own purchases of real-world products in the virtual world, deliverable to the user’s real-world door. At the least, avatars offer a window into people’s hidden preferences and a means for achieving sustained consumer engagement with a brand.6 According to writer Paul Hemp, the avatar arguably represents a distinctly different “shadow” consumer, one able to influence its creator’s purchase of real-world products and conceivably make its own real-world purchases in the virtual world.7 At the least, it may offer insights into its creator’s hidden tastes. Further, online virtual worlds offer untapped marketing potential for real-world products and services, particularly because of their ability to generate sustained consumer engagement with a brand. This occurs through interactions with “avatars,” the “virtual beings” users create as representations of themselves and through which they live and relate to others in these worlds.

Increasingly smart virtual avatars might also be enlisted to play a direct role in marketing, in that they could use their virtual-world experience in creating virtual property to design products with real-world potential. For example, several Second Life clothing designers have been approached by real-world fashion houses, and at least one business makes real-world versions of furniture based on virtual “furni” designed by Second Life residents.8 Avatar brokers could link real-world companies with virtual landowners willing to rent space for the companies’ marketing initiatives. This implicates the laws of property and of licensing. Avatars ultimately could run virtual-world stores selling real-world products and paid to publicize, overtly or not, those same products. This implicates the law of contract, and the terms of contracts for virtual reality games have already been an issue of dispute within virtual worlds. For example, in Evans v. Linden Research, Inc.9 the plaintiffs were in litigation with Linden Lab over their virtual property rights, arguing that by suspending their accounts Linden had deprived them of their virtual goods. The company asserted that, according to its terms of service agreement, the plaintiffs only had rights to the intellectual property of goods created in-world, not to the goods themselves.10

Further, many commercial brands that are placed in the virtual world will be protected by trademark law. In general, trademark law protects against the unauthorized use of a trademark in a manner that causes a reasonable consumer to believe that the trademark owner either was the source of the goods or endorsed or sponsored such goods. What if the virtual reality experience lets a person drive a virtual Mercedes? Will the virtual-world participant think that Mercedes created the virtual reality experience or sponsored it? If so, the consumer may believe that Mercedes endorsed the use of their brand in the virtual world—and if the brand is shown in an unfavorable light, a trademark cause of action may be warranted. Further, what if the virtual environment participant and not the virtual reality company imported the trademarked item into the virtual world, and what if the user can sell the trademarked item they imported for virtual or actual cash?

Under US law, there are two pieces of legislation that provide significant liability protection for those who host interactive online media such as the virtual game world of Second Life. The Communications Decency Act (CDA) of 1996 (aimed at liability for defamation cases), and specifically Section 230, subsection (c)(1) of the Act, states: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”11 Additionally, under the Digital Millennium Copyright Act (DMCA)12 an internet service provider may not be considered to be the publisher of the content itself, and therefore may not be liable for the actions of their users (this is the so-called safe harbor provision of the DMCA, applicable for copyright infringement).13 The concept behind the safe harbor Section 512 in the DMCA is that providers are shielded from the burdens of knowing and policing the contents of their network. The cumulative protections provided by the CDA and DMCA can potentially eliminate liability for copyright infringement (DMCA) and defamation (CDA) for those who host virtual environments populated by users’ avatars.

Under US law the safe harbor provisions of the DMCA do not protect virtual reality companies from trademark claims, but by analogy to general trademark infringement cases, such as Tiffany v. eBay,14 the virtual reality companies should be protected from contributory infringement claims as long as they either are not aware of the conduct or take action to remove the infringing content if they become aware of it. Furthermore, under the US Federal Trademark Anti-Dilution Act,15 nationally known brands can sue if the use of their trademark by others in advertising or branding a product “tarnishes” or “blurs” the trademark. This Act applies whether or not consumers are confused as to the source of the goods, so it is more analogous to a copyright claim than a trademark claim. Thus, virtual reality companies should be diligent not to include any images of nationally known brands in their advertisements, such as online trailers, teasers, or opening web pages.

In addition, augmented reality—which superimposes virtual imagery onto real-world environments, as popularized by the Pokemon Go craze—is also exploring the use of virtual images projected in the physical world for advertising purposes. For years, major brands have offered mobile augmented reality apps that create interactive 3D digital models of their product. But with augmented reality, some interesting issues of law have arisen as users view the virtual images throughout the real-world environment. For example, Pokemon Go allows users to “capture” Pokemon on private property, which has resulted in trespassing lawsuits and injuries to participants despite the game featuring warnings such as “Remember to be alert at all times. Stay aware of your surroundings.” Another issue is that with augmented reality there is a responsibility to ensure that the digital representations of a product faithfully convey the product’s actual features; if this is not the case, several causes of action are available. For example, if the augmented reality demonstration of a product materially misleads or misinforms the consumer about a product’s features, the advertiser could find itself liable for false advertising. In the US the primary legal authority creating the right to sue for such actions is the Lanham Act, which also regulates the use of trademarks. False advertising claims may be filed by a regulatory agency or by a private party whose interests may be negatively affected by the challenged activity. The difficulty involved in precise 3D rendering of virtual images could likewise result in augmented ads that are similarly unrealistic. In the automotive realm, for example, a digital artist may leave out or oversimplify important features when rendering a product, in ways that mislead consumers into believing things about the product that are not accurate. By definition, digitally enhancing physical reality is a fundamental element of what virtual and augmented reality do; yet without careful attention to the design or products displayed in the virtual worlds, a company may find itself subject to a lawsuit.

• 3. DISPUTES IN VIRTUAL AND AUGMENTED REALITY

Continuing the discussion on how the law applies to virtual worlds, we observe that the law of tort may be relevant if a person using virtual reality technology is injured or property is damaged.16 To illustrate this idea, consider the possibility of “real-world” injuries or property damage which may occur when one plays a virtual reality game. To proactively counter claims of negligence and product liability tort actions, virtual reality manufacturers and “publishers” of the content displayed in virtual reality typically use “warning” stickers and disclaimer language in license agreements, to limit liability for manufacturers of virtual reality technology and for software designers of virtual and augmented reality games.

Since the development of virtual reality games by companies such as Nintendo, various personal injury claims—such as for sprained wrists and dislocated shoulders arising from the use of the equipment to interact with the virtual world—have arisen. For example, Nintendo’s Wii Tennis and Wii Boxing were both the subject of civil action,17 regarding use of the controller’s safety strap.18 In Elvig v. Nintendo of America, Inc., a class action lawsuit which involved, among others, breach of implied warranty, product liability, and negligence, the court held that the danger involved in losing possession of the Wii controller while playing a game, namely that it could act as a “damaging missile,” were covered by the company’s repeated warnings in that regard.19 More specifically, on the product liability claim, Nintendo argued that it gave players adequate warning of the need to retain possession of the controller and advised them of the possibility that release of the controller during vigorous motion could result in breakage of the strap and lead to damage to persons or property. In agreement, the court noted that Nintendo advised players via a safety card included with the Wii system that “If you use excessive motion and let go of the Wii Remote, the wrist strap may break and you could lose control of the Wii Remote. This could injure people nearby or cause damage to other objects.”20 This, coupled with repeated instructions on the safety card that advised players “DO NOT LET GO OF THE REMOTE DURING GAME PLAY,” ensured that, if the player followed Nintendo’s instructions and heeded its warnings, the Wii system would not pose an unreasonable danger. On the implied warranty action, the court cited a lack of evidence to indicate just what the intended purpose of the strap was. To withstand summary judgment, the plaintiff needed to show more than an alternate plausible theory on the purpose of the strap; rather, the plaintiff needed evidence of the ordinary purpose of the strap and proof that it failed the ordinary purpose (the plaintiff failed to provide this). Based on the above reasoning the court granted summary judgment for the defendant on all claims.21

Additionally, game platforms for virtual reality games and service providers have sought to limit their liability for user generated content and in particular, user comments which could result in a cause of action for defamation. This they do by refraining from actively moderating games, to avoid serving as a publisher of content.22 Further, to avoid liability, content providers may establish takedown policies and procedures to quickly remove infringing content, and also to require users of virtual worlds to sign robust terms of use policies regulating how users interact with one another in the virtual world. Defamation may also be relevant for avatars communicating in virtual worlds. An interesting question is: How will (or should?) real-world defamation laws be used to protect the rights of avatars, for example, avatars that appear in the popular online game Second Life? In general, defamation laws are designed to protect a person from having their reputation tarnished in their community by another person making false claims about them. Additionally, an action for defamation may occur when a communication is made about a person that harms their reputation in the eyes of at least a substantial minority in the community, or deters others from associating with that person. But what happens if an avatar makes defaming communications about a second avatar that lowers the second avatar’s reputation in a virtual world such as Second Life and as a result other avatars will not associate with them (commercially or socially)? What steps, if any, can the real person behind the defamed avatar take in order to rectify this situation? And with increasing intelligence and autonomy, would the avatar itself have any rights?23

An interesting case involving virtual images, Amaretto Ranch Breedables, LLC v. Ozimals, Inc., was litigated in a United States District Court and involved a DMCA takedown notice between companies that produced virtual animals in Second Life.24"4 The plaintiff brought forth several legal issues such as copyright, defamation, and trade libel claims which were based on one Second Life trading entity competing against another.25 The defamation action arose from comments made in-game with regard to a copyright dispute and potential damages it may have caused. For a takedown claim arising from activities in the virtual world, the DMCA permits content owners to prevent infringement by seeking a court order that requires an internet service provider to block or remove access to content that allegedly infringes copyrighted content. More specifically, the DMCA permits content owners to prevent infringement by seeking a court order that requires an internet service provider to block or remove access to content that allegedly infringes copyrighted content. In this case, Ozimals’ copyright claim alleged that Amaretto Ranch Breedables’ virtual horses infringed on their virtual bunnies and filed a takedown notice for their virtual horses and feed. Amaretto sued for a temporary restraining order and preliminary injunction, which was granted by the court and which barred Linden Research, the operator of Second Life, from removing their products. Had the DMCA order gone through, it would have cut off Amaretto’s source of income before it could challenge Ozimal’s copyright claim. Ultimately, the court granted Amaretto the temporary restraining order against Linden Research, stopping it from removing the horses until a preliminary injunction ruling was made.

A leading jurisdiction for tort law disputes is California. Under California law,26 the elements of a defamation claim are: publication of a statement of fact that is false, that is unprivileged, and that has a natural tendency to injure or cause “special damage,” where the defendant’s fault in publishing the statement amounts to at least negligence. Publication could involve the output (or speech) of virtual avatars, may be written or oral, and involves communication to a third person (or avatar?) who understands the defamatory meaning of the statement and its application to the person to whom reference is made. Publication need not be to the “public” at large; communication to a single individual other than the plaintiff is sufficient. However, republication of a defamatory statement made by another is generally not protected. Further, under California law, a plaintiff need not show special damages—for example, damages to the plaintiff’s

The law of virtual reality and increasingly smart virtual avatars 9 property, business, trade, profession, or occupation, including expenditures that resulted from the defamation—if the statement is defamation per se. A statement is defamation per se if it defames the plaintiff on its face, that is, without the need for extrinsic evidence to explain the statement’s defamatory nature.27 California courts recognize a number of privileges and defenses in the context of defamation actions, including the fair report privilege, the opinion and fair comment privileges, and substantial truth; all of these could be applicable to virtual worlds in a defamation action occurring with virtual avatars.

As indicated above, another major area of law, the law of property, is also being challenged by the buying and selling of virtual images/property. For example, Linden Lab, the company behind Second Life, allows users to lease virtual land to other players, on which they can build and sell virtual items and services within the game. This raises the interesting question of whether the ownership of virtual goods should be treated as analogous to ownership of real property and goods in the real world as opposed to a licensed service provided by the operator of the virtual reality world and governed by the End User License Agreement (EULA). An example case is Bragg v. Linden Research, Inc.,28 in which players of Second Life were allowed to build objects, explore the world, interact with other players, and purchase land with real-world money. In 2003, Linden announced that it would recognize participants’ full intellectual property protection for the digital content they created or otherwise owned in Second Life, such as cars, homes, or slot machines. Players were also able to purchase “virtual land,” make improvements to that land, exclude other players from entering onto the land, rent the land, or sell the land to other players for a profit. The plaintiff, Bragg, had purchased numerous parcels of land in Second Life, including a parcel of virtual land named “Taesot.” However, Linden sent Bragg an email advising him that Taesot had been improperly purchased through an “exploit,” and as a result Linden took Taesot away. It then froze Bragg’s account, effectively confiscating the virtual property and currency that he maintained on his account with Second Life. When Bragg sued Linden, Linden argued that their agreement required mandatory arbitration, a clause which was central to the dispute.

Before a person is permitted to participate in Second Life, they must accept the terms of service by clicking a button indicating acceptance. Bragg resisted enforcement of the terms of service arbitration provision on the basis that it was “both procedurally and substantively unconscionable.” In California law, the procedural component of an unconscionable contract can be satisfied by showing oppression through the existence of unequal bargaining positions, and surprise through hidden terms common in the context of adhesion contracts. The court stated that a contract is procedurally unconscionable if it is a contract of adhesion.29 A contract of adhesion 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.” In this case, the Second Life terms of service comprised a standardized contract which only allowed the customer to agree to it or reject it.30 The court held: “When the weaker party is presented the clause and told to ‘take it or leave it’ without the opportunity for meaningful

negotiation, oppression, and therefore procedural unconscionability, are present.”31 An arbitration agreement that is an essential part of a “take it or leave it” employment condition, without more, is procedurally unconscionable. In this case, there was no alternative to Second Life in the market at the time—so if Mr Bragg did not accept these terms he could not play Second Life or any other similar game or service, which created an unconscionable take-it-or-leave-it situation. Linden also had superior bargaining strength over Mr Bragg, and the contract was therefore one of adhesion. The plaintiff’s suit was ultimately settled before a final decision was reached; however, the District Court decided that the Second Life terms of service’s mandatory arbitration provision was unenforceable and, interestingly, that interaction with a person visiting a virtual world could be a factor to satisfy a state’s “minimum contacts” requirement for personal jurisdiction.

If legal systems ultimately decide that virtual reality purchased and acquired content should be afforded similar status as real-world goods and property, this will have profound effects on the virtual reality business model and lead to further questions relating to common law contract law—and, in the US, the Uniform Commercial Code (UCC)— such as: Will users be able to buy and sell their virtual content in the real world? Does software used to create virtual worlds fall under the banner of goods or services? Are virtual images/objects used in virtual worlds goods or services? Will we see a move away from trying to deal with ownership and the rights around virtual content under the End User Terms and Conditions and a move toward discussing “leases” of virtual property, and therefore implicating the law of landlords and tenants? Furthermore, how will the theft of virtual goods and content by another user be dealt with? While courts in South Korea have, through the Game Industry Promotion Act, actively considered the question of the legal status of virtual reality goods,32 many jurisdictions have not addressed the issue of property rights in virtual and augmented reality. Surely this is an area requiring legislation, not to mention a body of case law to aid courts in deciding property disputes occurring in virtual and augmented reality worlds.

As another important issue involving virtual and augmented reality worlds, consider the problem of determining jurisdiction for the actions occurring within virtual worlds especially when virtual avatars perform activities across state and international boundaries. In the US, the Federal Rules of Civil Procedure and states’ long-arm statutes apply. If a dispute arises in the virtual world, which real-world law and jurisdiction applies? The answer can be complex and may in part depend upon the nature of the dispute and the jurisdiction laws of a particular physical location. In virtual worlds, the service provider will typically seek to rely upon the laws and jurisdiction set out in its terms of service agreement. However, where a contract is made between a business and a consumer domiciled in the European Union (EU), e-commerce regulations provide that the business-to-consumer contract cannot deprive the consumer of the protection of the laws of the country in which he or she resides. This is fine in a commercial dispute, but what about situations occurring in virtual reality where a criminal offense has taken place—for

The law of virtual reality and increasingly smart virtual avatars 11 example, where the avatar of one player is alleged to have virtually assaulted or stolen from another player? Should this be decided by the criminal courts or is this a commercial dispute, and in either case, which law and jurisdiction applies? Do the related terms of service provide the framework from which to derive jurisdiction for multiuser programs and in determining which governmental regulations should be brought forth to interpret them? As mentioned above, in Bragg, the defendant filed a motion to remove himself from the litigation based on a lack of personal jurisdiction. Although much of the court’s discussion of minimum contacts is fairly boilerplate, the judge’s analysis included a unique twist when he recognized that the defendant’s avatar may have actually interacted with Bragg’s avatar within the virtual world: Once inside Second Life, participants could view virtual property, read additional materials about purchasing virtual property, interact with other avatars who owned virtual property, and, ultimately, purchase virtual property themselves.33 Significantly, participants could even interact with the defendant’s avatar in Second Life during town hall meetings. These are factors occurring in virtual worlds that courts may consider in determining jurisdiction. As another example of an emerging area of law where virtual environments have been implicated, consider the reconstruction of evidence of a crime scene. For example, in a criminal law case, the defendant was convicted and sentenced to 20 years’ confinement. As part of the evidence presented, a virtual reality recreation of the route driven to strike the victim was shown. The Court of Appeals of Texas upheld the allowance of this evidence, concluding that the probative value of the virtual reality crime scene recreation was not substantially outweighed by the danger of misleading the jury.34

Additionally, a topic for a law of virtual reality is whether “real-world” crimes such as those listed in the US Model Penal Code can be committed in virtual worlds. Given that there are few cases or legislation specifically addressing how virtual acts map to real-world criminal law, we must examine related cases and statutes for a sense of how courts might decide such issues. In the United Kingdom, for example, an individual hacked into games publisher Zynga’s social games platform and transferred 400 billion virtual poker chips into his account. Consider another example in which real-world crime bled into virtual worlds to the extent that the term “virtual mugging” was coined. It was argued that when some players of the virtual reality game Lineage II used bots to defeat other players’ characters and take their items, they were essentially mugging virtual avatars. Some countries have even introduced special police investigation units to cover “virtual crimes.” For instance, in the US the FBI’s White Collar Crime Division investigates fraud committed by business and government professionals, and particularly money laundering—a number and variety of methods are used by criminals to launder money, including the use of virtual currency. Similar agencies exist in other law enforcement bodies which focus on cybercrimes, such as Homeland Security’s Cyber Crimes Center, Europol’s European Cybercrime Centre, and England’s National Cyber Crime Unit. Undoubtedly, as virtual systems are increasingly used, examples of virtual crime will capture the attention of national and international enforcement agencies, with all of their established procedure and jurisdiction. Still, we expect that new legislation and international treaties will be

needed to address the increasing incidences of virtual crime occurring across international boundaries.

Further, intellectual property law will have a major role to play in virtual worlds, and particularly in rights for virtual avatars. For instance, virtual reality software (object and source code) such as software for other applications is primarily protected under copyright, and database rights may also be available. Historically, computer programs were not effectively protected by copyrights because computer programs were not viewed as a fixed, tangible object, and in the early days object code was viewed as a utilitarian good produced from source code rather than as a creative work. Due to lack of precedent, this outcome was reached while deciding how to handle computer program copyright. In 1974 the Commission on New Technological Uses of Copyrighted Works (CONTU) was established, which decided that computer programs, to the extent that they embody an author’s original creation, are proper copyright subject matter. In 1980, the United States Congress added the definition of “computer program” to 17 U.S.C. § 101 (the Copyright Act) and amended 17 U.S.C. § 117 to allow the owner of the program to make another copy or adaptation for use on a computer. In the US this legislation, plus court decisions such as Apple Computer, Inc. v. Franklin Computer Corp in 1983, clarified that the Copyright Act gave computer programs the copyright status of literary works.35 In response, many companies began to claim that they “licensed” but did not sell their products, in order to avoid transfer of rights to the enduser via the doctrine of first sale.36 These software license agreements are often labeled as EULAs.

In 1998 the US Congress passed the Digital Millennium Copyright Act (DMCA) (discussed above in Amaretto Ranch Breedables), which criminalized evasion of copy protection (with certain exceptions) and destruction or mismanagement of copyright management information, but included a clause to exempt ISPs from liability of infringement if one of their subscribers infringed. In addition, the DMCA extended protection to those who copied a program for maintenance, repair, or backup as long as these copies were “destroyed in the event that continued possession of the computer program should cease to be rightful.”37 In particular, “owners of copies” may make additional copies for archival purposes, “as an essential step in the utilization of the computer program,” or for maintenance purposes. Furthermore, “owners of copies” have the right to resell their copies under the first sale doctrine and 17 U.S.C. § 109. These rights only apply to “owners of copies.” Most software vendors claim that their products are “licensed, not sold,” thus sidestepping 17 U.S.C. § 117 (which relates to limitations on exclusive rights and computer programs). American courts have taken varying approaches when confronted with these software license agreements. For example, in MAI Systems Corp. v. Peak Computer, Inc.38 and Microsoft v Harmony39 different federal courts held that “licensed, not sold” language in a EULA was effective. However, other courts have held that no brightline rule distinguishes mere licenses from sales. So, given the differences in court decisions, how will virtual avatars be viewed? Will they be licensed, or the property of those who create them? Under some EULAs, the owner of the avatar retains copyright to the avatar. Of course, the question arises: As avatars become smarter and create other avatars, who then is the owner?

• 4. VIRTUAL ENVIRONMENTS, GAMES, AND AVATARS

One type of virtual environment that is accessed by millions of users, and that has generated significant interest from legal scholars, is the massively multiplayer online roleplaying game (MMORPG).40 Once a player enters a MMORPG, they engage in a variety of activities with other players who are accessing the game in the same way from all over the world. MMORPG developers are in charge of supervising the virtual world and guarantee the continuing interest of players by offering an updated set of tasks and activities to perform in the virtual environment.41 Many MMORPGs have been designed for profit: A player must either purchase the client software or pay a monthly fee in order to access the virtual world. An interesting feature of a MMORPG is that it allows its participants to design a virtual representation of their identity which is displayed in the online virtual environment. As noted throughout this chapter, such an identity is termed an avatar.

Generally, the term “virtual avatar” (or avatar) is used to describe the simulation of a graphical form representing a particular person in a virtual environment. The most sophisticated avatars can become a sort of visual and cognitive prosthesis, representing an extension of self in the virtual world, or what the virtual environment visitor would like to be, or appear to be, in the virtual world. Virtual avatars may also represent the actions of a user, different aspects of a user’s persona, or the user’s social status in the virtual environment. A virtual avatar can take on almost any form, such as a realistic representation of the human that owns or created the avatar, another person’s identity (such as a living or deceased actor or historic figure), an animal, or even a mythical creature. Interestingly, the form the avatar takes can implicate several areas of law, such as copyright, trademark, and right of publicity.

How easy is it to create a virtual avatar? Commercial software has been designed to allow people to create their own interactive, emoting 3D avatar using photographs of their individual faces, and their own unique voices, as templates. Further, when a person chats in a 3D online world or plays an online computer game, they are operating a synthetic character or avatar. What makes for an interesting and effective avatar depends on the purpose for which the avatar is used. In the case of a virtual world where communication is important, facial features and expressiveness must be well supported. Additionally, in the case of action games, the physics of the virtual world and interaction within the world must be well supported.

A recent development in virtual avatars is that they are getting smarter.42 Capable of performing a range of tasks, virtual avatars can write poetry, play chess, compose music, and portray a range of emotions and facial expressions. In electronic commerce, avatars are forming contracts;43 in the field of entertainment they are replacing actors;44 and in online games they are interacting with humans and other virtual avatars.45 In addition, in medicine, virtual avatars are helping to train medical students by playing the role of patient. For example, the Virtual Standardized Patient is an avatar that interacts with medical practitioners in much the same way as an actor would if hired to play the role of patient.46 The Virtual Standardized Patient uses natural language, emotion, behavior modeling, and composite facial expression and lipshape modeling to produce a natural patient-practitioner dialogue.47 When avatars interact with humans, facial expressions are key for communicating emotions in face-to-face conversation made simultaneously with speech. In some virtual avatar designs, collaborative virtual environments may force the user to explicitly set avatar emotions after they have entered text or voice input. However, some researchers are investigating a procedure based on an expert system that can be used to parse emotive expressions so that these emotions can be automatically displayed on the corresponding virtual avatar’s appearance.48 In many online games, a user must input avatar body language and facial expressions via key presses, which means it is almost impossible for users to chat and emote at the same time. To appear realistic, an avatar must react as humans do when communicating with each other, and facial expressions are a step toward designing “humanlike” avatars.

Additionally, virtual environments can be designed for single inhabitants—such as a solo flight trainee—or for many, simultaneous participants. When a virtual environment supports multiple users, it can give rise to a virtual community. It has been estimated that some of the millions of people who visit virtual worlds spend more time in the virtual environment than the real world. These people are not just passively viewing the environment. They, or their virtual representatives, are interacting with other people or with virtual avatars of increasing intellectual capabilities. Further, people who spend significant amounts of time in virtual environments are doing more than playing video games; they are creating virtual worlds where they can assume identities, build wealth and social status, and generally participate in creating new worlds.

An important issue in online roleplaying games is whether the licensor or participant owns the intellectual property (such as copyright to a virtual avatar) created while the game is being played.49 In an early version of Second Life, the terms of service agreement gave residents of the virtual world the right to retain full intellectual property protection for the digital content they create in the game, including avatar characters, clothing, scripts, textures, objects, and designs. Such rights have real-world consequences for the objects created in the virtual world. More recently, Second Life has indicated that users have “the non-exclusive, unrestricted . . . [full use of] . . . all or any portion of your User Content.”50

An example of a legal dispute involving virtual worlds is Eros LLC v. Doe,51 in which a copyright and trademark infringement action was pursued against the defendant. Eros created adult entertainment products in the virtual world of Second Life, which it sold to other Second Life users for Linden dollars (which can be converted into US dollars). Another Second Life user, with the avatar name “Volkov Catteneo,” allegedly copied Eros’s products and sold them to other Second Life users without authorization. The products at issue are beds that allow users of Second Life to have virtual sex in them.52 To protect their identity, Eros initiated a “John Doe” lawsuit for copyright and trademark infringement in federal court in Florida. The amended complaint alleged that the company Leatherwood acted in concert with unknown parties to make and sell unauthorized copies of Eros’s products. Eros reached a settlement with the defendant (known only as Second Life avatar Volkov Catteneo).53 The terms include an agreement that Leatherwood will not do any more copying; as noted, Eros had alleged that the defendant sold unauthorized copies of the company’s popular “SexGeb” avatar-animation products.54

In summary, what one can conclude from the above cases is that as people and virtual avatars spend significant amounts of time in virtual reality, more cases will be litigated across a broad range of legal topics, from intellectual property to criminal law, and from contracts to torts. Given the increased use of virtual avatars in virtual environments for tasks such as psychotherapy, teaching, and electronic commerce, future causes of action could be directed at the virtual avatars themselves. If avatars continue to gain in intelligence and autonomy a host of compelling legal issues will be raised. For example, would intelligent avatars be able to bring forth claims involving their own civil liberties?55 And just what civil liberties would be awarded to intelligent virtual avatars? Professor George Wright has discussed the issue of equal protection under the law in the context of “enhanced humans,” concluding that “if there develops a typically unbridgeable gulf separating groups of contemporaries, we must adopt a substantially realistic understanding of equal protection that involves significant resource and opportunity transfers.”56 Wright’s comments were directed at the differences between enhanced and unenhanced humans; however, the possibility of “enhanced” intelligent avatars raises a host of new issues concerning equal protection under the law. In the context of humans, it may be possible to provide those requesting upgrades access to the appropriate technology. However, if intelligent avatars surpassed humans in intelligence, would technology be available to upgrade the humans to the level of the intelligent avatars? And if an intelligent avatar gained a level of intelligence such that they were superior to humans, would humans then be able to bring forth an equal protection claim against intelligent avatars? To best serve humanity’s interests, public policy may benefit by granting intelligent entities legal rights—if for no other reason than that they could then be regulated.

• 5. TOWARD MORE INTELLIGENT VIRTUAL AVATARS

The present format for the protection of virtual avatars’ rights is based on determining who their owner is and then analyzing that person’s rights with respect to the avatar or the avatar’s actions.57 In this model, the rights protected are those of the owner and not those of the virtual avatar (which lacks legal person status). However, as virtual avatars gain in intelligence and create works independent of human input, this analysis may become outdated. In this scenario, avatars themselves may need legal protection based on their own actions and actions directed against them. If avatars do continue to gain in intelligence and people spend more time in virtual worlds interacting with them, significant legal and policy issues will arise.58 For example, since many virtual worlds are created

The law of virtual reality and increasingly smart virtual avatars 17 by private companies