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Class action lawsuit targets Second Life

Changes to the virtual world's terms of service shut out paying members from ownership of in-world property, the suit on behalf of four "residents" alleges.

A number of paying users (or "residents") of virtual world Second Life have filed a class-action lawsuit against the company and its founder, Philip Rosedale. Their complaint: The terms of virtual property ownership have changed, and residents were forced to agree to a new terms of service that eroded their ownership rights to virtual property and goods. In fact, the suit filed on April 15 claims, the promises of "ownership" were empty in the first place.

Through extensive marketing, Second Life parent company Linden Lab, with Rosedale as its spokesman, "lured consumers across the United States to invest real money into (Second Life) by promising those users that they would own the virtual land and property they purchased as well as the content they created," the terms of the suit allege.

"Then unilaterally, without the consumer owner's consent, knowledge, or permission, changed the terms of the service agreement to state that these land and property owners did not own what they had created, bought and paid for, and that these consumers had no choice but to click on a new terms of service agreement or they could not have access to their property," the terms of the suit continue.

The plaintiffs also bring up a 2007 lawsuit that was originally filed in a Pennsylvania small claims court on behalf of Marc Bragg, a Second Life resident who requested the return of the dollar value ($8,000) that he'd invested in virtual goods and property after his account was frozen. Bragg's suit settled and his account was reinstated; the April class action suit is highlighting this as a precedent for the legal nature of ownership in Second Life.

Second Life representatives were not immediately available for comment.

Rosedale stepped down from his post as CEO of Linden Lab two years ago, but remains chairman of the board. The current CEO is Mark Kingdon, who previously helmed digital agency Organic.

A few years ago, Second Life's 3D virtual environment was hyped as the next phase of the Internet and the next big craze in brand marketing, and the media rushed in to establish a presence. But though Second Life failed to break into the mainstream and is now remembered by many as one of Web 2.0's great tales of overhype, the company has actually maintained a steady niche user base and is profitable.

The company recently announced that the first quarter of 2010 was the best in the history of the Second Life "economy," with $160 million in user-to-user transactions and over 500,000 users actively involved in the virtual market.

But there have been some significant stumbles in Second Life's attempts to develop a thriving online economy. A rash of banking scandals early in 2008, for example, caused Second Life to bar residents from creating in-world financial institutions.