[iDC] Trademark Infringment in Second Life

[Julian Kücklich]

Rampant Trademark Infringment in Second Life Costs Millions Yearly, 
Undermines Future Enforcement

(http://virtuallyblind.com/2007/05/04/trademark-infringement-virtual-worlds/)

May 4th, 2007 by Benjamin Duranske

The dirty little legal secret of Second Life isn’t the virtual escorts, 
illegal gambling, ponzi schemes, or even money laundering — that all 
gets splashed across the front page whenever the mainstream media needs 
a scary headline. No, the secret is this: misappropriation of major 
corporations’ trademarks in-world is now so ubiquitous, so safe, and so 
immensely profitable, that it has become a wholly transparent part of 
the Second Life commercial landscape.

Here are a handful of numbers gathered May 4, 2007, that begin to 
illuminate the scope of the problem:

     * There are at least 16 shops in Second Life advertising that they 
sell “Ferrari” cars. One model sells for L$1995 (approximately US 
$7.75). Ferrari does not have an official presence in Second Life.

     * At least 40 stores in Second Life advertise virtual “Rolex” and 
“Chanel” watches, averaging around L$350 (US $1.61). Neither Rolex nor 
Chanel runs any of these stores.

     * Ferarri Rolex Chanel Gucci Rayban Oakley Prada and Nike 
Knock-Offs in Second LifeThere are more than 50 stores in Second Life 
carrying virtual sunglasses branded “Gucci,” “Prada,” “Rayban,” and 
“Oakley.” Each pair is priced around L$125 (US $0.75). None of these 
stores appears to be owned, sponsored, endorsed, or licensed by any of 
these companies.

     * The term “Gucci” alone generates 106 hits in Second Life 
classifieds, referring shoppers to stores selling virtual versions of 
nearly every hot product the company makes, including shoes, handbags, 
and clothing. “Vuitton” generates 39 hits. “Abercrombie” gets 30. 
“Timberland” gets 26. None of these stores appear to be affiliated with 
the company behind the name.

     * “Nike” holds the record, generating 186 hits, many of which link 
to stores where shoppers can find avatar shoes bearing the company’s 
distinctive swoosh. Nike itself does not sell any of these shoes.

     * Even geek-darling Apple isn’t immune. A half-dozen stores in 
Second Life sell virtual “iPods” for avatars. Some add copyright 
infringement, preloading the unlicensed “iPods” with songs from artists 
ranging from Michael Jackson to Gwen Stefani. Apple is not behind these 
stores.

     * Of ten randomly selected “shopping malls” found in Second Life’s 
classifieds, seven had stores selling goods that exhibited obvious 
trademark infringement. Some stores VB visited for this piece appeared 
to sell nothing but unlicensed brand-name goods.

This past March, about 11,500,000 transactions took place within Second 
Life. There’s no way to know exactly how many involved knock-off goods, 
but a quick overview of in-world shopping areas reveals that well over 
1% (probably closer to 3-5%) of the goods for sale in-world carry 
unlicensed trademarks. For the sake of argument, let’s be conservative 
and say that about 1% of the transactions in-world involve unlicensed 
trademarks. That’s about 115,000 instances of profitable, in-world 
trademark infringement in March, 2007, alone. Projected out, around 1.4 
million transactions a year.

Using an average transaction value of $1.50 (less than the current, 
saturated-market price of a knock-off Rolex) we’re in the range of US 
$2m in transactions involving counterfeit goods in Second Life every 
year. That’s quite a bit of money, but it isn’t that much that any 
individual business is leaving on the table. At least not yet. So why 
should a company care, right now?

Two reasons — one is legal, and the other is practical.

The first is a legal concern: trademark law requires that companies 
holding trademarks actively enforce those trademarks in the event of 
infringement; failure to do so can ultimately result in loss of 
registration for the marks. Moreover, the more trademark dilution is 
tolerated by a company, the harder it is to later argue that any 
particular infringer should be enjoined.

Trademark attorney Gregory Guillot explains: “When marks are 
appropriated unlawfully by unlicensed third parties, Apple Timberland 
and Gucci Knock-Offs in Second Lifeconsumers are likely to become 
confused regarding the source or origin of goods or services. Trademark 
owners should take steps to discover, and prosecute, adverse users. A 
trademark owner’s failure to prosecute known infringers of a mark, may 
result in a finding of abandonment of trademark rights.”

The second concern is more practical. Even though a company may not want 
to enter a virtual world right now, it is only prudent to protect the 
option.

Some people (including this author) believe that having a virtual world 
presence will soon be as normal as having a web address. That opinion is 
no longer just out on the fringes, either. This week’s biggest virtual 
world news story was Gartner’s prediction that 80% of internet users 
will have some sort of virtual world presence by the year 2011.

Sure, even if the metaverse evangelists are right, that doesn’t mean a 
company has to move into this space today. On the other hand, smart 
companies will at least pay attention to what’s going on here, and 
should move to keep others out of their future virtual space. It will be 
much harder for a business to distinguish itself when it does decide to 
move into a virtual world if it is competing against hundreds of 
established knock-off vendors.

Second Life designer Linden Lab’s official policy on trademark 
infringement addresses this question as follows:

     Linden staff generally removes content that uses trademarks without 
apparent authorization, with or without giving notice to the object 
owner. This generally includes all RL corporate logos and brand names.

     It is often difficult to tell what may or may not be trademarked. 
However, use of designer logos and brand names without permission, such 
as Gucci, Nike, Louis Vuiton, etc., are usually not acceptable.

Linden Lab has a well-deserved reputation for respecting intellectual 
property. Obviously, it doesn’t support trademark infringement. But it 
is equally as obvious that the explosive growth of Second Life has 
overwhelmed Linden Lab’s ability to devote sufficient resources — likely 
any resources — to this issue. Consider that the list of examples of 
marks that are “usually not acceptable” matches the biggest subjects of 
infringement almost perfectly. This isn’t really a criticism of Linden 
Lab; in the real world, the government doesn’t police trademark usage on 
companies’ behalf either.

As in the case of real world trademark infringement, it is up to the 
officers of concerned companies themselves to take steps to protect 
their companies’ intellectual property in virtual worlds. And it is this 
author’s opinion that businesses will need to begin paying close 
attention to the problem of trademark infringement in virtual spaces 
much sooner than they think, if they wish to avoid legal and practical 
difficulties later.

-- 
julian raul kücklich, ma

http://www.playability.de