Stephen S. Wu-- SL: Legal Writer,, (408) 573-5737, 50 W. San Fernando St., Ste. 750, San Jose, CA 95113

Lindens Answer the Eros, LLC Complaint

On October 30, 2009, Linden Research, Inc. and Linden Research International, Inc. filed an answer to the Complaint asserted against them by Eros, LLC and Shannon Grei in the Northern District of California. The Lindens had the option of filing a motion to test the legal sufficiency of the Complaint, move the Court to dismiss for some other reason, or answer the Complaint. And the Lindens chose to answer the Complaint (without filing a counterclaim against the plaintiffs).
The Lindens' Answer is not very enlightening for the most part. Most answers consist primarily of denials of the factual claims in the complaint, and the Linders' Answer is no exception. The Lindens denied every important allegation of the Complaint, as is typical. Two parts appear to be of interest, though.

First, paragraph 57 of the Complaint talks about an incident in which the Lindens allegedly stopped Eva Capalini from distributing assets that infringed on Eros' trademark rights by disabling access to Capalini's products, but later restored access, allegedly because of public outcry demanding that the Lindens restore access to them. This was apparently a problem for Eros, because the Capalini products were purportedly defective, and the public blamed Eros for Capalini's alleged defects, creating a public relations problem for Eros. I quote the claims in paragraph 57 of the Complaint here:

"57. Eva Capalini’s infringing activities are particularly notable. On June 17, 2008, Linden Lab disabled access by Second Life Residents to the SexGen-infringing assets created by Eva Capalini. Promptly thereafter, though, Linden Lab restored access to the disabled content because of public outcry within Second Life. Because the infringing content bore the SexGen mark, Residents blamed Eros for the broken content. As a result, Eros was forced to launch an extensive marketing campaign to rectify public perception (created by an infringer and Linden Lab) that Eros’s SexGen products are unreliable. Eros even offered genuine replacement products to unsuspecting purchasers of infringing content in order to salvage its reputation."

In the corresponding paragraph of the Answer, the Lindens admit that they "inadvertently disabled some content" but promptly "stopped that disabling." They characterize their disabling as "inadvertent," as opposed to trying to help Eros stop infringement. This may be a difficult allegation for the Lindens to respond to, since they might want to look helpful by saying that they started putting a stop to the infringement, but since they stopped the process, they can't take credit for helping Eros. Instead, they characterize the disabling as "inadvertent," which doesn't make the Lindens look very helpful, and may make it more difficult for the Lindens to show later that they had a competent, effective effort to take reasonable steps to control infringement. I quote the section of the Answer here:

"57. Linden admits that on or about June 17, 2008 LR inadvertently disabled some content within Second Life, and that promptly thereafter LR stopped that disabling. Linden lacks sufficient information to admit or deny the remaining allegations of this Paragraph, and on that basis denies them."

The second admission of some note is in paragraph 63 of the Answer. The Lindens admit, "Residents may acquire virtual land within Second Life subject to the Second Life Terms of Service." Implicitly, the Lindens are admitting that virtual land is actual property and that Residents obtain some kind of property rights over them. By contrast, other operators of virtual worlds and video games take the position that the users are only obtaining a "license" to use the virtual land, virtual goods, or other in-world items. Certainly, Eros' Complaint assumes that residents have property rights over the land. The Complaint speaks of the Lindens renting or selling virtual land. In other words, both parties are proceeding under the assumption that virtual land is actual property. If the Court were to recognize property rights explicitly in this case, that recognition would make explicit what many of us have said all along, which is that virtual property is actual property, and users have property rights that go along with the property.