Second Life Activities: First Life Cash

Today the Washington Post had an interesting article on the many questions surrounding the selling of virtual goods and services on a site like Second Life. Click here for the article. Highlighted was the online lingerie business of Veronica Brown (online alter ego Simone Stern), which sells virtual garments to virtual people in this popular online community. Veronica is one of the lucky (or perhaps enterprising) online entrepreneurs who make a real world living in this somewhat unorthodox manner.

She is also in the midst of a range of copyright, ownership, tax, patent and trademark issues surrounding this unique community. For those who aren’t aware, Second Life rocked the online boat by allowing users to maintain control and ownership of any content they create on the site, opening the flood gates to this kind of business development. Recently, some equally enterprising souls have created an online “copybot” that can be used to quickly and easily reproduce the products of business people like Veronica. In the real world, copying another’s work word for word (or stitch for stitch) might land one in court. At a minimum, knock offs, like the fake Rolex’s and Kate Spade bags being sold by street vendors from DC to LA, can be recognized as off inferior quality – as irritating as it is for the creators, the knock offs might actually drive the desire of those who can afford it to obtain the “real thing.” Imitation is, in fact, the sincerest form of flattery.

But in the virtual world, different questions arise. These items aren’t being “knocked off” in an inferior way: they are being copied or even cloned, if you will. One couldn’t tell the difference between the original and a copy with a magnifying glass. That seems to argue for protection of intellectual property. On the other hand, both the shop owners in Second Life and the copybot creators have basically created a software service, not a real world product. Do the shop owners have more right to their software service than the copybot creators?

The issues in Second Life and similar online venues are complex, which may be why District Court Judge Richard Posner appeared in Second Life talking about the issue of property rights in virtual reality. He foresees the development of a new line of law for the virtual world – along the lines of the special set of rules known as maritime law.

Congress is getting into the act, not surprisingly. And it’s also not surprising that the main focus is on the tax implications of Second Life – expect hearings early in the year on whether people like Veronica should pay taxes on the income generated from their online activities.