An article on Law of the Level takes a look at whether using real brands on virtual goods in online worlds—by someone other than the trademark owner—could be interpreted as trademark infringement.

A publication of the law firm Sheppard Mullin, the blog was written by Thayer Preece, a lawyer in the firm’s Video Game Industry Group. She begins to answer the question by noting that several real world brands have taken exception to counterfeit virtual goods sold online, especially when the money from these sales line someone else’s pocket.

One way to deal with infringements is to sue. Taser International, Inc. filed a lawsuit against Second Life creator Linden Labs (along with others) earlier this year, which alleged that fake Taser-branded products were being sold in Second Life and infringing on the company’s sales. Taser sought $75,000 in damages but eventually dropped the suit.

Another way to fight the knock-offs is to join the virtual world and pump out your own branded goods. Law of the Level writes that this is the tact Herman Miller took. In response to a number of fake Herman Miller goods offered on Second Life, the designer launched its own official presence in the world and even replaced “fake” Herman Miller products with “real” ones.

What would happen if a virtual world trademark infringement lawsuit made it to court? Breece writes:

At present, there is no legal precedent on this subject. But as the popularity of virtual worlds continues to grow, it seems likely that it will only be a matter of time before the courts make a decision on the issue. In the meantime, it will be up to each brand holder individually to decide how to respond to the emergence of this growing marketplace and its potential opportunities and pitfalls.

TASER International has - at least for now - dropped a trademark infringement suit against Linden Lab, which operates Second Life.

As GamePolitics reported in April, the maker of the controversial stun guns, filed suit after it discovered virtual TASER replica items being sold in Second Life as gear for SL avatars (see pic at left).TASER also alleged that its brand would be damaged via association with virtual sex and virtual drug use occuring within Second Life.

Virtual World News reports:

Taser filed a Notice of Voluntary Case Dismissal... and adds that because Linden never filed an answer to the original complaint, the dismissal is "without prejudice" -- meaning Taser could choose to refile at a later date.

If you're a Swede who has unloaded an unwanted MMO account for a few extra Kronas, the taxman would like a word.

On the other hand, if you're an American who has sold your account to a Swede, the taxman would still like a word.

GameCulture points out a Stockholm News report detailing efforts by Swedish tax officials to come to grips with e-commerce. To that end, the Skatteverket is even taking a look at small fish like gamers:

The Swedish Tax Agency hold that you have to pay tax for selling an avatar from a computer game. The agency has investigated the trading in avatars during a 14 month period and found the advertised sum of avatars for sale by Swedes to be 662 million SEK. But no one has ever declared any income for trading in avatars to the Tax Agency.

But even U.S. citizens could be subject to Swedish taxation on such virtual transactions, according to the Economics of Virtual Worlds blog:

[Note that] a sale has taken place in Sweden if the seller is a Swedish trader who sells [to]... a private person in Sweden or another EC [European Community] country. A sale from a foreign trader to a Swedish trader has also [legally] taken place in Sweden. The same applies if a trader from outside the EC sells services to Swedish private persons.

Thus, even U.S. citizens are subject to Swedish taxes in virtual worlds, as long as one of the participants is Swedish. The implication is that if similar tax rules are adopted around the globe, U.S. citizens could end up owing taxes to Sweden, Japan, South Korea, and other nations (depending on which and how many worlds they are part of) – all because they played some games...

Skatteverket states that gamers should send invoices to each other. It’s unreasonable stuff they’re talking about. The [game] users [typically] don’t know who they’re interacting with...

Earlier this week GamePolitics covered a story by Information Week which reported that new Chinese regulations on virtual currency would outlaw gold farming.

But there appears to be confusion about whether the practice of gathering in-game MMO currency and then re-selling it for real cash will be affected by the new regulations.

incgamers disputes the report, citing the University of Manchester's Prof. Richard Heeks:

This [new Chinese law] therefore is not about what gold farming clients do: use real money to buy these virtual currencies; it’s the mirror image.  And it’s not about the major trade in gold farming such as World of Warcraft, which relates to other types of virtual currency.  And it’s not about buying/selling in-game items.  And it’s not about the power-levelling of avatars. Bottom line: it’s not about gold farming.

In any case, Dean Takahashi of Venture Beat writes, a ban on gold farming may be difficult for Chinese authorities to enforce:

The practice of trading virtual goods for real money is easy to make illegal, but hard to enforce. The gold farmers may not be affected... because of a technicality. Most of China’s gold farmers, who operate in sweatshops with dozens of fellow farmers, operate on servers on foreign soil. The government can only control what goes on with domestic servers...

The New York Times, which did not challenge the notion that the rules would impact gold farming, quoted Indiana University Prof. Edward Castronova, an authority on MMOs. In lauding the Chinese government action, Castonova offered what, to some, may seem like an alarmist view of in-game currency:

This action shows that at least one government is concerned about the way virtual worlds challenge its control of society. As virtual currencies take over more and more purchasing power, control over the effective money supply shifts from the central bank to the game developers.

If you are planning on buying gold for your World of Warcraft character, act quickly. The price may be going up soon because of an official crackdown which should affect availability in a negative way.

Information Week reports that on Friday the Chinese government enacted new virtual currency regulations which, among other provisions, make gold farming illegal: 

The ruling is likely to affect many of the more than 300 million Internet users in China, as well as those in other countries involved in virtual currency trading. In the context of online role playing games like World of Warcraft, virtual currency trading is often called gold farming...

The trading of virtual currency for real cash employs hundreds of thousands of people worldwide and generates between $200 million and $1 billion annually, according to a 2008 survey conducted by Richard Heeks at the University of Manchester.

He estimates that between 80% and 85% of gold farmers are based in China.

Following China's lead, Sweden and Korea are working to clarify tax regulations to include in-game trade of virtual items, according to the BBC.

To be clear, we're not referring to the transfer of goods  based on real money sales of in-game gold and other items. That's a cash business and already subject to tax laws.

The theory - at least in Sweden and Korea - seems to be that since some virtual items are readily exchangeable for cold, hard cash, swapping such goods may trigger a taxable event. Professor Edward Castronova of Indiana University, noted for his research into virtual game worlds, is not a fan of the idea:

I think it's an extraordinarily dangerous development. It's as if every time I played soccer in my backyard and scored a goal, I would have to pay the government three euros. It takes away the game's contribution to human happiness.

But Loyola Law School prof Theodore Seto explained the legal rationale for taxation:

You can exchange your Lindens for dollars or Euros on a floating exchange rate any day at any time, without limit... It's easier to tax virtual transactions than it is to tax real-world transactions. The neat thing about it is, all transactions can be recorded. In the real world, we don't have that...

 

If 'gold' is not exchangeable for currency, and it's contrary to the rules, and they make it technically difficult to make the exchange, then I think we should treat the events in World of Warcraft as games. By contrast, Second Life actively markets itself as a venue for making real money.

The Associated Press reports that two Dutch teens have been convicted of stealing virtual game items from a third boy. All three played Runescape, a popular online RPG. At issue is ownership of two virtual items, an amulet and a mask.

While the ruling was the subject of some mirth in the U.S. gaming press, Antal Princen, a Dutch reader of GamePolitics, wrote in to say that there was much more to the story. The AP simply mentions that the victim was coerced, but Antal says there was some nasty real-world violence involved:

[The media reports] omitted a few important details: The duo not only stole the virtual goods, but actually beat the other kid up and threatened him with a knife. They extorted an amulet and mask. In Runescape they're worth a lot of money and in real life people buy them for real money, which is one of the reasons the judge said it was theft.

 

The boys were convicted for "violent theft". They lured the victim to their house, caught him in a chokehold and kicked and hit him. They used a kitchen knife to threaten the victim. Both thieves showed no regret and didn't acknowledge they did something wrong, which is never good if you find yourself in a Dutch court... The lawyers will appeal.

Indeed, Antal directed us to Dutch website Parool.nl, where we were able to translate the story sufficiently to confirm Antal's account. That being the case, the issue of whether one can steal virtual goods seems to take a back seat to the sheer thuggery of the would-be amulet robbers.

GP: Dank u wel to Antal Princen for the report!

I've been playing Warhammer Online since it launched about two weeks ago and I'm thoroughly enjoying life as a squig herder. Might jump over to The Order on another server though. That Dwarf engineer looks like fun, too.

Right now my greenskin is a bit short on in-game cash to buy gear, but it looks like I'll have to make do. That's because WO developer Mythic is aggressively targeting gold sellers. In fact, Mythic co-founder Mark Jacobs recently wrote, “I HATE GOLD SELLERS WITH EVERY FIBER OF MY BEING.”

Decaf, Mark...

Over at Gigaom, Wagner James Au argues that Mythic's approach doesn't make much sense:

When launching a big-budget online game, it doesn’t strike me as a very good idea to risk alienating nearly a quarter of your user base right out the gate. That, however, is likely to be the consequence of an extreme anti-gold selling policy at Mythic Entertainment...

 

In a study by Nick Yee, a PARC research scientist... 22 percent of players surveyed reported purchasing game gold, with those ages 35 and over most likely to do so... let’s face it: If you have kids and a mortgage, you only have so many hours a week left over to play games.

 

So if Mythic succeeds in driving away gold sellers, it seems inevitable that it will succeed in hurting Warhammer Online’s retention, too. For surely players who like to buy their way out of difficult quests but no longer can are likely to get frustrated and leave for another game.

GP: I've fessed up in the past to buying WoW gold, which led to the most hate mail I've ever gotten. In my case, though, it's pretty much what Nick Yee found in his research. Kids + mortgage + job = less time to play.