The End of the (Virtual) World

At the Digital Entrepreneurship conference, I remarked on the rising number of bankruptcies of virtual worlds or companies that develop them (most cleverly illustrated by Woody Hearns' bugzapper at gucomics, here, here, and here).  I'm interested in what we can learn about the bankruptcies of virtual worlds. 

What I wanted to ask the Terra Nova community is this: Is there anything special that we should think about or plan for when a virtual world goes under?

Questions include:

• Can virtual property be used as collateral for loans, such that secured lenders get first priority in bankruptcy? 
• If courts treat users as having merely non-exclusive licenses for software, can users enforce those licenses over the world creator's objection under Bankruptcy Code 365(n)?
• Can virtual worlds use 365(n) to retain rights under licenses governing user-generated content?
• Is there less, or more, of a problem valuing virtual assets than valuing intellectual property in bankruptcy more generally -- on the one hand, we have grey-market economies to provide a value baseline.  On the other hand, the world only has value on its own terms: if the world is gone, its assets aren't worth much.
• Is there any reason to treat intangible assets like virtual property differently than, say, a bank account (given that both are more or less contract rights in an entry in an electronic database)?

I value your questions and ideas more than those I've posted above! What catches your fancy about the end of worlds?

Comments

[Tom Boellstorff]

1.

In terms of the cultural issues around the end of virtual worlds, check out Celia Pearce's work on the Uru diaspora.

[epredator]

2.

In virtual worlds where people provides services to others there will some contractual problems if you can no longer provide the service due to the loss of the platform. It is not as simple as switching to another supplier as each world has its own specifics of either culture or function.

[free virtual worlds]

3.

i think bankruptcy in virtual worlds apply to those who were still trying to carve a niche or make a name. I think the more popular ones are safe - a case of the rich getting richer.

[ecastronova]

4.

I wonder about this: If the owners of a world leave it fallow and its users are interested in maintaining its existence, how does transfer of ownership to the community happen? I would be interested in broader juristic concepts, such as eminent domain, that would permit takeover of operations by the community in cases of bankruptcy. The community as such would have to become defined which, I assume, could only happen through the EULA.

Perhaps instead of community and eminent domain, the precedent would be public utilities. If the VW is a public utility, it cannot go under. Rather it becomes a publicly regulated company. Again, it has to be determined what or who "the public" is.

No matter how you look at it, the issue of bankruptcy raises the prior issue of community. The users are a collective, a class, whose interest in the existence of the world can't be questioned. How does that class get its interests represented?

I assume that Joshua's examination of bankruptcy law points to some judgments there. I wonder whether the bankruptcy court would reach for other concepts: eminent domain, class action, public goods, etc.

[Joshua Fairfield]

5.

Ted's analysis is spot-on. Bankruptcy courts look to state law to determine what constitutes property of the bankrupt's estate. So state law conceptions of property will have serious analytic value.

Precedents are, frankly, limited. We have a ton of cases dealing with IP following the dot-com bust earlier this decade. But treating virtual worlds as IP doesn't really capture what they're about. It's about the thing, not the intellectual property.

In keeping with your eminent domain thoughts (a private version of which is called adverse possession) I do wonder if a court would let a community "adversely possess" a world under the doctrines of laches, delay, or waiver -- that is, if the IP holder wants to stop the community, they'd better do it promptly, rather than let the community rebuild before attempting to expropriate the value that the community has generated.

I'm thinking here of the Earth & Beyond emulator, for example. Take a look: http://www.enb-emulator.com/

[Jan]

6.

I think not all business virtually is experiencing bankruptcies. Some are growing and I think it is depends on the products or services they are offering. It is risky in doing the business virtually because sometimes the bank or agencies are not recognizing it.

[SusanC]

7.

I think The Palace is still in operation, even though Electric Communities, its former owner, went under years ago.

Palace History

Second Life is an interesting case, because the users own most of the IPR, but everything is stored on LL's servers. How could users continue to access their own content if LL went under? If there was a period of notice, a migration involving an improved copybot and OpenSim might be possible. But: if user A creates a build using their own content plus content created by user B, it is not clear that user A has the right to migrate all of it to a non-LL server.