Virtual Goods Retailers Sue for Trademark Infringement in Second Life

SAN FRANCISCO —Eros, a merchant of adult products, and Shannon Grei, who sells clothes for avatars in the virtual world, have filed a class-action compliant against Second Life owner Linden Lab for violation the intellectual property rights.

The complaint, filed yesterday at the U.S. District Court in San Francisco, alleges that Linden Lab violates the rights of proprietors of virtual content within Second Life directly and secondarily by providing the tools for infringing, being negligent about its policies and profiting from piracy.

Eros is a seller of erotic items on Second Life, including its SexGen line of products, with a store within Second Life — which Linden Labs charges rent to maintain.

The company Shannon Grei operates, known in Second Life as Munchflower Zaius, sells online “skins” or clothing for avatars in Second Life.

Second Life also profits from the uploading of content — including pirated material — and online marketplace for Second Life good, XstreetSL, according to the suit.

Linden Lab operates LindeX, which allows the online currency within Second Life known as Linden Dollars to be exchanged for U.S. dollars for a fee of 3.5 percent per transaction.

The exchange of real-world money allows for true commercial activities to flourish within Second Life, the complaint states, including that of Eros, which counts more than 100,000 customers in the virtual world.

While the Second Life Grid is employed as a digital rights management program, the complaint alleges that “Linden Labs conducts little supervision or enforcement to insure that such content copying is eliminated, minimized, or detected,” as it does not ban users for uploading or selling copied content.

The Digital Millennium Copyright Act is described as ineffective and sometimes counter-productive because takedown notices sent to Second Life pirates can cancel their accounts and create a new one to re-upload the content.

In addition, the suit claims some infringers will counter-file, thus leading to the release of personal information. Other infringers will threaten rights-holding merchants with the release of the stolen content if file a DMCA claim.

If a pirated is successfully taken down, the suit alleges Linden Labs will restore access to the content with public outcry.

When Second Life users search for a product, they see trademarked stores and products, as well as products that counterfeited. The suit compares “the manner in which this has occurred is akin to the knockoff handbags and purses sold near Canal Street in New York City.

Eros claims the cheap knockoff of products bearing the SexGen brand causes harm by creating confusion among consumers and is destroying the reputation of the company.

This is the second lawsuit from Eros founder and CEO Kevin Alderman involving Second Life. In March 2008, Alderman filed a complaint against Robert Leatherwood, known online as Volkov Catteneo, that allegedly used Second Life to sell unauthorized copies of a software program developed by Alderman.

The suit was settled with Leatherwood agreeing not to sell or copy any products owned by Eros. He agreed also to not help anyone copy and Eros products, and to turn over the email addresses of anyone that had access to the Catteneo avatar.