By: Jeff Pietsch

What happens when someone takes your virtual goods?  You know, the virtual goods that you earn or buy by playing games such as Farmville or Second Life.  Usually, these goods are in the form of virtual objects such as weapons or special character features.  Virtual goods can also be in the form of virtual currency which can be used to purchase virtual objects.

Virtual goods and currencies were recently valued at more than $3 billion dollars globally.  Despite the large virtual economy, the law is relatively unclear when it comes to how virtual goods are treated.  Should virtual goods be treated similar to property laws or are virtual goods merely an aspect of a game that can be changed or eliminated at the whim of the game creator?  A recent class action lawsuit against Google may help clarify these issues for gamers and game developers alike.

The plaintiffs in this case are players of an online video game known as SuperPoke! Pets (“SPP”) who purchased virtual gold or other virtual items within SPP.  SPP allows its users to adopt, name and care for a virtual pet.  Users can interact with their virtual pet, dress it, customize its environment and also interact with other user’s virtual pets.  From its creation in 2008, SPP’s popularity increased and it was eventually acquired by Google in 2010.

SPP did not charge its users a monthly fee to access to the SPP game.  However, the game highly encouraged that users purchase virtual items with real currency.  The game was constructed so that certain highly sought after “golden” items could only be purchased by spending “gold” which had to be purchased with real cash.  There was no cap on how much “gold” a user could own.  SPP’s main revenue stream was from the purchase of these virtual goods.

Due to the popularity of the game, SPP could directly influence the value of new items by releasing virtual items in limited quantities.  For example, if a virtual item quickly sold out, SPP often restocked that item but now with a much higher price.  SPP also helped to develop a secondary market where users could buy and sell their “used” virtual items.  SPP allowed users to advertise their goods for sale as well as rate users based on their transaction experience.  SPP strongly encouraged such trading as it encouraged users to purchase SPP’s virtual goods to capitalize on any price movement.

Despite SPP’s willingness to encourage users to purchase and re-sell their virtual goods, SPP’s Terms of Use (“TOU”) specifically stated that the users have no right or title in any virtual goods or virtual currencies appearing in the game.  The TOU also stated that SPP can control and eliminate the virtual goods in its sole discretion with no liability to its users.  So even though SPP encourages its users to spend money on these virtual goods, SPP could delete or modify these goods at any time and for any reason under its TOU.

In July 2011, after several changes to the game structure, SPP eliminated all gold balances remaining in users’ accounts.  SPP did not refund the cash value of “gold” that was not used by its users.  One month later, SPP announced that the game would be terminated by March 2012 leaving all virtual pet owners with virtually nothing.  At this time, a class action was filed against Google to recover the users’ value of the property.

It is unclear how the court will treat this matter.  The law with respect to virtual goods is minimal to say the least.  The question centers on whether the virtual goods should be treated as a property right or as a service that is provided by the game provider.  If it is the latter, the terms of use or end user license agreement will control the users’ rights.  If it is the former, then developers will need to overhaul their current game configurations.  It also begs the question on how this virtual property will be treated for other purposes, such as sale and income tax laws.  The court may, however, view the TOU as an illusory contract because SPP encouraged its users to purchase virtual goods while having the sole ability to cancel or terminate the contract.  If the court made this finding, they may require SPP to reimburse its users for the purchases they made.  Either way, this case should shed some much needed light on the rights that virtual owners have with respect to their virtual goods.