Virtual Rights: A Second Look at Second Life

Imagine an outraged citizen who sues the government for confiscating his property. Well that’s essentially what Marc Bragg was doing when he launched his lawsuit against Linden Research, the makers of Second Life for seizing his virtual property within Second Life.  In the US case of Marc Bragg vs Linden Research, Inc., No. 06-4925 (ED Pa. May 30, 2007), the court analyzed the Second Life Terms of Service (TOS), which is the online contract governing the relationship between Linden Research and its customers. Linden tried to use the TOS to force Bragg into binding arbitration in San Francisco. The court decided that the mandatory arbitration provision in the TOS were unenforceable against Bragg for the following reasons:

“Taken together, the lack of mutuality, the costs of arbitration, the forum selection clause, and the confidentiality provision that Linden unilaterally imposes through the TOS demonstrate that the arbitration clause is not designed to provide Second Life participants an effective means of resolving disputes with Linden. Rather, it is a one-sided means which tilts unfairly, in almost all situations, in Linden’s favor.”

Ironically, the success of Second Life counted against it: one of the factors that the court pointed to was the lack of any “reasonably available market alternatives” to Second Life, and particularly Linden’s unique policy of permitting customers to retain intellectual property rights in their virtual creations and other virtual assets.

Linden lost this round, but responded by amending their TOS to provide for a clearer, more flexible arbitration process which defused many of the court’s objections.  This should bolster the enforceability of the TOS in future disputes.  

Another lawsuit was filed last week in Federal Court in New York, claiming damages for copyright infringement, trade-mark infringement and passing off – all of which is alleged to be taking place within Second Life. 

For further information in this interesting area, see the following additional resources:

Blog: Our earlier post

Article: Eight questions to ask before doing business in a virtual world

Paper: Intellectual Property Rights In Virtual Environments: Considering The Rights Of Owners, Programmers And Virtual Avatars


Calgary – 10:35 MST

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Reminder: Dot Asia Sunrise Period

dotasia.bmpCanadians doing business in Asia with registered marks there should not forget about the dot-asia sunrise period. In our earlier post  we refered to the general scope of the roll-out of the dot-asia domain.  The Sunrise 2a period is only open for few more days.  Generally, Sunrise Phase 2 is designed for holders of registered trademarks and/or service marks. Sunrise 2 divided into 3 sub-phases: Sunrise 2a (or “Early Bird Sunrise”), Sunrise 2b (or “General Registered Marks Sunrise”) and Sunrise 2c (for Extended Protection). Sunrise 3 allows registered “juristic entities” based in the DotAsia Community to apply for domain names corresponding to their registered name. Check the guidelines to see whether your organization fits into the definition of “juristic entity” based in Asia for these purposes. The relevant dates are:

· Sunrise 2a: from October 9, 2007 to October 30, 2007

· Sunrise 2b: from November 13, 2007 to January 15, 2008

· Sunrise 2c: from November 13, 2007 to January 15, 2008

· Sunrise 3: from November 13, 2007 to January 15, 2008

International trade-mark owners are queueing up, including Amazon, AOL, Sony Ericsson, Deutsche Telekom, the International Olympic Committee, Yahoo! and others.

More resources:

Detailed Sunrise Guidelines & FAQ (by Deloitte) 

Dot Asia Organization 


Calgary – 10:00 MST

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Do Canadian Websites Need to be Accessible to Blind Users?

In September in the case of National Federation of the Blind v. Target Corp. (N.D. Cal. Sept. 28, 2007), a federal district court in California certified a class action lawsuit on behalf of blind internet users against, the website of the Target chain of retail stores. The court also ruled that websites such as qualify as a kind of business establishment, advantage or facility for the purposes of the ADA — something that had previously been reserved for physical places such as bricks-and-mortar stores. The plaintiff is trying to force Target to comply with the World Wide Web Consortium‘s Web Content Accessibility Guidelines or one of the other standards which permit site-reading software to decode the visual content of websites for blind users.

Is this a development that Canadian website operators need to be concerned about? If a Canadian company operates an e-commerce website with significant US sales, it is certainly an issue to review and monitor as this class action proceeds. We’ll have to wait for the ultimate outcome. At this stage, the law in this area is still unclear, particularly as it might impact pure e-commerce companies, who have no bricks-and-mortar presence, and whether Canadian website operators may be caught up to the extent they are engaged in sales to US consumers.  There is no corresponding Canadian case-law in this area.
Calgary – 10:35 MST

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Canadian Copyright Reform

Last week’s Throne Speech made it clear that copyright reform is on the Canadian government’s legislative agenda.  Given the political landscape in Canada at the moment, many speculate [stories here and here] that the Conservative government may be preparing the way for US-style copyright laws to introduce digital-rights management protection and anti-circumvention provisions. In our earlier post,  we noted that the issue was already on the radar in the spring session, and now that Parliament is back to work, we can expect copyright law to come back into the spotlight.  We hope that the Canadian legislators will learn from US missteps in this area and achieve a balanced approach to copyright law in Canada.  We will continue to monitor this issue.

Calgary – 10:00 MST

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Costco’s Injunction Application Fails

Costco must have been pretty worried about the impact of a competitor’s mark PRICECO WAREHOUSE for retail sales. They assert that the competitive mark is confusing with their marks PRICE COSTCO and COSTCO. Costco opposed the mark in the Trade-marks Office in 2005, and then launched a trade-mark infringement lawsuit in 2007 against the competitor, seeking an injunction restraining the use of the competing mark. They even tendered expensive survey evidence to show the court how serious the risk of confusion was. The problem? The competitor hadn’t even started using the mark yet.

In Price Costco International, Inc. v. Welcome Warehouse Ltd., 2007 BCSC 1227 (CanLII) the judge was clear that:

“There has been no evidence of actual use of the PRICE WAREHOUSE mark, or anything similar, and no evidence of intention to use it until the Registrar rules in the defendant’s favour. On the contrary, the defendant has undertaken in writing not to use any such mark until that time.”

The lessons?

  • First, in high-stakes pre-emptive injunction application where there is no actual infringing use, there must at least be a “real probability of passing off or infringement”; that was not the case here.
  • Court is not the only option for fighting this kind of battle; the opposition procedure in the Trade-marks Office had yet to run its course, so those alternatives must be weighed.
  • Even though their application failed, Costco may have proved its point; it has done its homework and will be ready if and when the competing mark is ever actually used, provided their survey evidence is not out of date by then.

Calgary – 20:11 MST

2 comments One Year On

After being published for one year, has generated tens of thousands of hits, developed a loyal base of readers and demonstrated the value of a practical, Canadian-based review of intellectual property, trade-mark and internet law for businesses and practitioners. Here are just some of the sites where is listed :

Thanks to all our readers and we look forward to another interesting year in IP law.


Calgary – 13:42 MST

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Changes to Trade-marks Procedure

For our readers who are trade-mark agents, it is worth noting several recent practice changes:

September, 2007 Procedure before the Trade-marks Opposition Board as of October 1, 2007
August 2007 Official Marks pursuant Sub-paragraph 9(1)(n)(iii)
August 2007 Disclaimers

These practice notices will affect opposition procedures and the requirement for the use of disclaimers.  The notice regarding Section 9 official marks codifies recent case-law in this area and clarifies the test to be used in determining eligibility for “public authority” status under Section 9 of the Trade-marks Act.


Calgary – 10:15 MST

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USPTO Releases Post-KSR Guidelines

We wrote about the US Supreme Court decision in KSR International Co. v. Teleflex Inc. in our earlier post. The USPTO has just released Examination Guidelines to aid examiners in determining obviousness in the wake of the KSR decision.

Calgary – 22:50 MST

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Filesharing: Why Canadian Law is Different

The US recording industry finally had its day in court.  After suing thousands of individuals for copyright infringement (most settled out of court), one of the cases finally made its way through trial and resulted in a damage award of $220,000 against Jammie Thomas, a now famous Minnesota woman.  An award of $220,000 for filesharing 24 songs works out to about $9,000 a song.  The verdict on October 4th has generated headlines around the world.  Thomas has indicated she will appeal.

The recording industry wanted to send a message and it definitely achieved that goal. However, it’s a pyrrhic victory: the industry’s legal fees far outstrip any amount recovered; the industry comes away looking like an unreasonable bully; and filesharing continues unabated. 

In Canada, the recording industry has not had the same “success” in court. The first attempt in BMG Canada Inc. v. John Doe (F.C.A.), 2005 FCA 193, [2005] 4 F.C.R. 81 hit a brick wall when the record company failed to obtain the identities of the particular customers alleged to have infringed copyright. 

Even worse for the recording industry, the judge in the BMG case actually said “downloading a song for personal use does not amount to infringement” which has been widely interpreted as judicial blessing for filesharing.  Never mind that this line was challenged by the Federal Court of Appeal ; in some ways the judicial cat is already out of the bag.

Lastly, the Canadian copyright levy on digital media has generated millions for the recording industry, arguably providing a de-facto license for personal copying when using “audio recording medium” as defined by the Copyright Board. 

It will be interesting to see whether this will be a high water mark for the legal adventures of the recording industry, or whether this judgement will simply encourage more enforcement suits.


Calgary – 13:30 MST 


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US Lawsuit Tests Open Source

In what appears to be the first US case to test the limits of the GPL (General Public License), an organization known as the Software Freedom Law Centre (SFLC) has spearheaded a lawsuit against Monsoon Multimedia for alleged violation of the terms of the GPL. 

Monsoon uses an open source software application known as BusyBox, which is subject to the GPL, but it is alleged that Monsoon has failed to make the source code available to its customers.  Such a failure would violate the terms of the GPL.  By breaching the GPL Monsoon would lose its rights to use the BusyBox software.  The suit seeks an injunction preventing Monsoon from using the BusyBox software in its own products.  BusyBox is a popluar component included in Linux-based devices and applications developed by Nokia, IBM, Sharp, HP and others.

The case may settle if Monsoon releases the code.  If it proceeds to trial, the lawsuit will test the enforceability of the GPL and will provide much-needed guidance in this area.  So far in Canada and the US the GPL has been enforced informally but has never been directly tested in court.  It also serves as a reminder for businesses using open source software:

  • When developing software (in-house or out-sourced) be sure to have clear guidelines and policies regarding the use of open source applications;
  • Get advice on the license terms which apply to open source applications: not all open source licenses are the same;
  • Determine what the impact will be for proprietary software and what disclosure will be required to comply with the open source license terms.

Calgary 11:45 MST

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Taxman Grabs eBay Records

If you earn your living on eBay, then the tax collector is interested in you.  In another case which raises privacy questions in the world of e-commerce, the Canada Revenue Agency sought and won a Federal Court order forcing eBay to disclose the names, addresses, phone numbers and e-mail addresses of all its high-volume sellers, even though that data resides in servers located in the US.  eBay initially resisted the request on the basis that eBay Canada did not “own” or “possess” any such information in Canada.  The court decided that eBay Canada has access to the information and this was enough to permit the order for disclosure. 

Calgary – 11:50 MST


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