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

Eros v. Linden - Case Closed

Without much fanfare, the Eros v. Linden Research case closed quietly in March 2011. Two named plaintiffs filed this putative class action, Eros, LLC and Shannon Grei, both of whom offer products on the Second Life® virtual world. The plaintiffs contended that Linden Research did not do enough to protect their intellectual property rights, and in fact had profited from infringements. In March, Eros and Grei both filed stipulated dismissals of their claims with prejudice, which means that they cannot later refile their action. Apparently, the parties entered into a settlement, and the plaintiffs dismissed their action in carrying out the settlement.
The plaintiffs filed the Eros dismissal and the Grei dismissal on March 16, 2011. Linden Research agreed to the dismissals. The docket shows that the parties had earlier agreed to mediation, an alternative dispute resolution mechanism by which a mediator helps the parties reach a settlement. It may be that the mediation produced the settlement and the parties later followed up with these dismissals under the settlement agreement.

I was hoping that the case would produce a reported decision or verdict to see how merchants could fare against Linden Research on the important issue of who bears the burden of policing intellectual property rights on a virtual world, the rights holder or the operator. This case had the potential for providing the kind of guidance in the virtual world context seen in the Viacom v. YouTube case. The district court in the Viacom case, which is on appeal, held that a company following the Digital Millennium Copyright Act procedures has a safe harbor from secondary infringement claims. A company is outside the safe harbor only if it is has actual or constructive knowledge of specific incidents of infringement. The burden remained on the rights holder to bring specific incidents of infringement to the site operator’s attention. Generalized knowledge that infringement is occurring is not good enough.

The Eros case had the same kind of potential to lay out, in the virtual world context, whether a virtual world operator with knowledge generally that infringement is occurring must police the copyright rights of content providers, or whether the rights holders must police their own rights. Perhaps the Court of Appeals’ decision in YouTube will shed new light on this issue. In any case, with the settlement of the Eros case, we will need to wait for another case to see practical guidance on this issue in the virtual worlds context.
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