Even arbitration awards, known for their conservatism, have been in the millions. In February, Ubisoft Entertainment won a $13.2-million award against MGA Entertainment for breach of a video-game licence agreement involving the popular Bratz dolls. MGM is involved in a high-stakes battle with Mattel over whether the toymaker actually created the dolls. The case is set for trial in the spring.
Most intriguing, however, are the unscripted games, called real-world games or virtual worlds. Examples include Active Worlds, Everquest, There, The Sims Online and Red Light Center. The most popular however, is Second Life, created and operated by Linden Research Inc., also known as Linden Lab.
The twist, from an intellectual property (IP) point of view, is that users, known as "residents," create most of the content. A three-dimensional modelling tool allows them to build virtual landscapes, buildings, vehicles, machines and other objects to use, trade and sell. Because residents own their creations, a thriving market economy using a synthetic currency -- "Linden dollars" -- freely convertible to real-world currency has emerged. It includes both a currency exchange and a stock exchange.
No surprise, then, that many household brands and other companies, including financial institutions, law firms, universities and professional organizations like the American Bar Association have a presence on Second Life. Countries such as Sweden, Estonia and the Maldives have even opened embassies there.
Companies go to Second Life to do business, test new products, advertise real-world goods and services, build brand awareness and showcase innovation. All of this means, however, that virtual worlds are ripe for intellectual-property disputes. The freedom that users have to create virtual assets makes it as easy for them to create and sell infringing items as it is to create original non-infringing items. It's equally simple for users to create digital replicas of real-world content branded with real-world trademarks.
But IP enforcement is elusive, because the law has yet to confront the divide -- or lack of it -- between real and virtual.
For example, it's unclear whether someone who commercializes a virtual copy of a patented real-world object commits patent infringement and if so, in which jurisdiction. It's also unclear whether someone who develops a trademark used only to identify virtual goods and services generates enforceable trademark rights in the real world. And it's not known whether making virtual use of a trademark, which can be confused with a real-world trademark, amounts to trademark infringement. But rights holders can't really stand around waiting for the courts to decide the law.
Eros, a company that created virtual beds that it sold to online users so they could have virtual sex, faced this problem when an unknown person created unauthorized replicas of the beds that it sold for a lower price. Eros identified the infringer, however, by obtaining court-ordered subpoenas directing Linden Lab and Internet service providers to release information about the anonymous defendant, who has since been identified.