By Glenn Block

We came across an interesting column in the Los Angeles Times today regarding what appears to be the first case of eminent domain – sort of – in cyberspace.  How is that possible?  A San Francisco company called Linden Lab has created a virtual world known as Second Life.  Their website purports, “a free 3D virtual world where users can socialize, connect and create using free voice and text chat.”

The “world” may be free; however, property (including islands, or other virtual real property) is purchased by users using real-world dollars.  A user then becomes the property owner and may develop it as he or she wishes.  That is, until Linden Lab changed their terms.

Originally, per the Los Angeles Times column, “A real-world battle over virtual-property rights,” citing a lawsuit filed in Pittsburgh, PA this month, Linden Lab, “repeatedly emphasiz[ed] that users would have indefinite ownership of any property purchased online.”  Users paid hundreds of real-world dollars, or more, to own property in this virtual world, with the promise it would be theirs and theirs alone for life.  This was what Linden Lab had claimed until the company, “quietly changed its contract terms to remove the concept of ownership and has confiscated the property of some users without compensation.”

Is this the taking of private property without payment of just compensation?  In situations involving real property (pun intended), the Fifth Amendment of the United States Constitution protects private property rights.  The government can only take private property for a “public use” and only upon payment of “just compensation.”  But does the Fifth Amendment extend to the virtual world?

In the virtual world of Second Life, if Linden Lab is the “government” do they need a “public use” to take virtual property?  Not likely.  Even though Linden Lab may be the “government” of its virtual world, it is not the government in reality and therefore not bound by the federal or state Constitutions.  As we point out in our “California Eminent Domain Handbook,” traditional examples of “public uses” for which the government might exercise its power of eminent domain include such things as schools, roads, libraries, police stations, fire stations, etc.  How about payment of “just compensation”? Again, they are not bound by the constitutional requirement of “just compensation.”  They may however, have a contractual obligation to pay compensation or damages.

According to the Los Angeles Times, “[t]he lawsuit seeks more than $5 million in damages for what it says was fraud and violations of California consumer protection laws,” as well as, “a judge’s determination that Second Life users do indeed own the property they purchase online, and as such they enjoy the same right as real-world property owners.”

Second Life property owners may want to consider hiring virtual eminent domain attorneys.