Stephen S. Wu-- SL: Legal Writer, swu@ckwlaw.com, (650) 917-8045, 166 Main Street, Los Altos, CA 94022

Evans v. Linden Class Certified

The Evans v. Linden Research case finally generated some interesting results in late 2012, resulting in the certification of a subclass of plaintiffs and a court filing stating that the parties are planning on mediating the dispute on January 21, 2013. As part of the Court’s ruling, the order certifying the subclass held that the plaintiffs did not have standing to pursue claims on behalf of the main class of plaintiffs, which the Court said could encompass anyone who ever bought or sold virtual real or personal property on Second Life. Accordingly, the Court took a dim view of the main claims on behalf of the vast majority of plaintiffs and left the plaintiffs with only a small victory in a case that looks much smaller than the one they envisioned. Click here for a copy of the Court’s certification order.
Class actions are a form of collective legal action that permits a group of similarly situated plaintiffs to join their claims together in one suit. Class actions are helpful to plaintiffs in the video game and virtual world context since the dollars invested by users are fairly small, making it uneconomical for them to pursue individual actions against game vendors like Second Life’s Linden Research. In class actions, if plaintiffs can obtain the court’s approval to proceed in a class action -- called “certification” of the class -- then their ability to settle on favorable terms increases greatly. The larger the class and the greater the amount of damages per plaintiff the greater the settlement value of the case.

In this case, the plaintiffs sought certification of a very large class -- anyone who ever bought or sold property on Second Life. They also identified a subclass of plaintiffs whose accounts were disabled by Linden. The subclass plaintiffs could claim that Linden took their virtual property by virtue of preventing their access to their Second Life accounts.

Plaintiff’s counsel, Jason Archinaco, filed this action to challenge what he thought was Linden’s fraudulent representation that Second Life offered real ownership of virtual property. Linden now says that the only ownership that Second Life users have is over the intellectual property rights in the virtual property works that they create in Second Life. IP rights are not the same as ownership of the virtual objects and land. Indeed, defense counsel used the standby argument of saying “It’s a game on a computer” meaning Second Life is only a game and should not be thought of as a real space. This case had the potential of setting a precedent of deciding whether or not virtual property is really “property” within the meaning of the law. Further, it had the potential of setting a precedent to say that game and virtual world providers cannot offer ownership of virtual property and then deny such ownership later.

The Court ruled that plaintiffs do not have standing to pursue damages for Second Life users complaining in general of Second Life’s claim that they have no ownership of virtual property. It stated that they have not shown a concrete loss of money or property. In part, plaintiffs failed to come up with anyone willing to say that they would not have joined Second Life, or at least would have paid less, if they had known that full virtual property rights didn’t exist. Accordingly, the Court said that it would not certify a class of all Second Life property buyers or sellers. This ruling would also suggest that at least the Magistrate Judge who issued this opinion took a dim view of the merits of these claims and would recommend dismissing these claims if the defendants sought dismissal.

Given the impending mediation, I believe it is quite possible that the case will settle at the mediation. Now that the Court cut down the case to a small subclass of users whose accounts were disabled, the settlement value of the case went down considerably. On the other hand, the fact that the Court certified a class means that the defendants will want to limit their risk, and have some incentive to settle. I will continue to follow the case and let you know what happens.



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