Bragg v. Linden Research, Inc.

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Bragg v. Linden Research, Inc.
Pennsylvania-eastern.gif
Court United States District Court for the Eastern District of Pennsylvania
DecidedMay 30, 2007
Citation(s)487 F. Supp. 2d 593
Holding
An Internet company's mandatory arbitration clause is unconscionable under contract law; a plaintiff's participation in an online virtual world serves as minimum contact for jurisdiction by a local court.
Court membership
Judge(s) sitting Eduardo C. Robreno
Keywords
United States contract law, Arbitration clause, Personal jurisdiction

Bragg v. Linden Research, Inc., 487 F. Supp. 2d 593 (E.D. Pa. 2007), was a ruling at the United States District Court for the Eastern District of Pennsylvania. The case resulted in an important early ruling on the enforceability of an online End User License Agreement (EULA) under American contract law, though it did not ultimately gain influence as a precedent. The ruling also clarified the matter of personal jurisdiction for a dispute involving a user of a website that originates in a different region. [1]

Contents

Background

Linden Lab (owned by the corporate entity Linden Research, Inc.), an online virtual world service provider known for the popular Second Life , terminated the account of user Marc Bragg when it discovered that Bragg had found a way to acquire land in the virtual world at a lower-than-market price by manipulating in-game auctions. [2] This was deemed an act of hacking that violated the Second Life End User License Agreement. Linden Lab conducted an investigation and then closed Bragg's account completely. In the process, Bragg's virtual assets within the game were dissolved; Bragg claimed that those assets were worth between US $4,000 and $6,000. [2]

Bragg filed suit, originally at the West Chester District Court in Pennsylvania in 2006. [3] [4] Linden Lab argued that the case should be removed to federal court due to the facts of the case, [5] and claimed that courts in Pennsylvania lacked personal jurisdiction because Linden Lab was headquartered in California. [6] Linden Lab also claimed that the dispute should not be heard in court at all but should go to arbitration, due to the arbitration clause found in the Second Life EULA. [7] Bragg's efforts to resist the move to federal court were unsuccessful. [8] [9]

District court proceedings

In May 2007, Judge Eduardo C. Robreno of the United States District Court for the Eastern District of Pennsylvania rejected Linden Lab's argument that his court and others in Pennsylvania lacked personal jurisdiction in the dispute, because the company had engaged in nationwide marketing efforts to publicize Second Life and the virtual world was available to customers in Pennsylvania. This satisfied the minimum contacts that are necessary for personal jurisdiction. [1]

Having thus determined that his court had jurisdiction, Robreno then denied Linden Lab's attempt to force the dispute into arbitration, finding that the EULA containing this requirement had been constructed as a contract of adhesion for which users like Bragg were given no opportunity to negotiate. [10] Bragg had argued that the arbitration clause in the EULA was "both procedurally and substantively unconscionable and is itself evidence of defendants' scheme to deprive Plaintiff (and others) of both their money and their day in court." [1]

Robreno agreed, noting that the terms of service were presented by Linden Lab on a "take-it-or-leave-it-basis." [1] However, he limited this holding by noting that a claim of unconscionability for a contract will only succeed if there are no "reasonably available market alternatives" available to the weaker party. This worked in Bragg's favor in the present case. Although there were numerous other online virtual worlds available to Bragg at the time, Judge Robreno noted that Second Life was unique in that it allowed participants to retain property rights in virtual land. [1] Thus, the Second Life EULA was found to be unenforceble under contract law due to its unconscionable provisions.

Impact and subsequent developments

Bragg and Linden Lab later reached an out of court settlement in which Bragg's full "privileges and responsibilities to the Second Life community" were restored. [11] At the time of the district court ruling, some commentators believed that it could become an important precedent on arbitration clauses and other unconscionable provisions that are forced upon Internet users by the operators of online games and platforms. [12] However, the ruling turned out to be an outlier because later court disputes over objectionable EULAs were almost uniformly ruled in favor of Internet firms as long as users had a chance to read the terms of service with an obvious opportunity to accept or reject the terms before continuing to use the site or software. [13] On the other hand, this ruling is often cited in later cases involving specific disputes within virtual world platforms in which property can be bought and sold. [14] [15]

Related Research Articles

Arbitration, in the context of the law of the United States, is a form of alternative dispute resolution. Specifically, arbitration is an alternative to litigation through which the parties to a dispute agree to submit their respective evidence and legal arguments to a neutral third party for resolution. In practice arbitration is generally used as a substitute for litigation, particularly when the judicial process is perceived as too slow, expensive or biased. In some contexts, an arbitrator may be described as an umpire.

An end-user license agreement is a legal contract to end its license between a “First Party, Second Party & Third Party” in a terms. For example software developer or vendor and the user of the software, often where the software has been purchased by the user from an intermediary such as a retailer. A EULA specifies in detail the rights and restrictions which apply to the use of the software.

<i>Second Life</i> Online virtual world

Second Life is an online multimedia platform that allows people to create an avatar for themselves and then interact with other users and user created content within a multi player online virtual world. Developed and owned by the San Francisco-based firm Linden Lab and launched on June 23, 2003, it saw rapid growth for some years and in 2013 it had approximately one million regular users. Growth eventually stabilized, and by the end of 2017 the active user count had declined to "between 800,000 and 900,000". In many ways, Second Life is similar to massively multiplayer online role-playing games; nevertheless, Linden Lab is emphatic that their creation is not a game: "There is no manufactured conflict, no set objective".

A clickwrap or clickthrough agreement is a prompt that offers individuals the opportunity to accept or decline a digitally-mediated policy. Privacy policies, terms of service and other user policies, as well as copyright policies commonly employ the clickwrap prompt. Clickwraps are common in signup processes for social media services like Facebook, Twitter or Tumblr, connections to wireless networks operated in corporate spaces, as part of the installation processes of many software packages, and in other circumstances where agreement is sought using digital media. The name "clickwrap" is derived from the use of "shrink wrap contracts" commonly used in boxed software purchases, which "contain a notice that by tearing open the shrinkwrap, the user assents to the software terms enclosed within".

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The virtual world Second Life has its own economy and a virtual token referred to as Linden Dollars (L$). In the SL economy, users buy from and sell to one another directly, using the Linden, which is a closed-loop virtual token for use only within the Second Life platform. Linden Dollars have no monetary value and are not redeemable for monetary value from Linden Lab. A resident with a surplus of Linden Dollars earned via a Second Life business or experiential play can offer to exchange with other users via the LindeX exchange provided by Linden Lab. This economy is independent of the price of the game, which users pay to Linden Lab, not to each other. Linden Lab reports that the Second Life economy generated US$3,596,674 in economic activity during the month of September 2005, and in September 2006 Second Life was reported to have a GDP of US$64,000,000.

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References

  1. 1 2 3 4 5 Bragg v. Linden Research, Inc., 487 F. Supp. 2d 593 (E.D.Penn. 2007).
  2. 1 2 Tateru Nino, Bragg vs Linden Lab - The Story So Far , Second Life Insider (Jan. 27, 2007).
  3. Bragg v. Linden Research, Inc. Complaint (Oct. 4, 2006).
  4. Law Offices of Marc S. Bragg, Virtual Land Dispute Spills Over Into Real World , PR Newswire (May 8, 2006).
  5. Bragg v. Linden Research, Inc. Notice of Removal (Nov. 7, 2006).
  6. Bragg v. Linden Research, Inc. Rosedale's Motion to Dismiss for Lack of Jurisdiction (Nov. 14, 2006).
  7. Bragg v. Linden Research, Inc. Linden's Motion to Compel Arbitration (Nov. 14, 2006).
  8. Bragg v. Linden Research, Inc. Bragg's Motion to Remand (Nov. 20, 2006).
  9. Bragg v. Linden Research, Inc. Linden's Opposition to Bragg's Motion to Remand (Dec. 7, 2006).
  10. Benjamin Duranske, Bragg v. Linden Update: Defendants' Motions to Dismiss and Compel Arbitration Denied , Virtually Blind (Jun. 1, 2007).
  11. Marty Linden, Resolution of Lawsuit , Second Life Blogs (Oct. 4, 2007).
  12. Benjamin Duranske, Bragg v. Linden Update: Defendants' Motions to Dismiss and Compel Arbitration Denied , Virtually Blind (Jun. 1, 2007) ("Bottom line is that this is a pretty extraordinary decision which, assuming it survives an almost certain appeal, will likely be cited as the seminal decision in virtual law for the foreseeable future.").
  13. Winter, Cory S. (2008). "The Rap on Clickwrap: How Procedural Unconscionability is Threatening the E-Commerce Marketplace". Widener Law Journal. 18 (1): 249–292 via HeinOnline.
  14. Quinn, Peter J. (2010). "A Click Too Far: The Difficulty in Using Adhesive American Law License Agreements to Govern Virtual Worlds". Wisconsin International Law Journal. 27 (4): 757–789 via HeinOnline.
  15. Horowitz, Steven J. (2008). "Bragg v. Linden's Second Life: A Primer in Virtual World Justice". Ohio Northern University Law Review. 34 (1): 223–242 via HeinOnline.