Where Real Money Meets Virtual Reality, The Jury Is Still Out

Veronica Brown is able to make a living selling her digital fashions in the online world Second Life.
Veronica Brown is able to make a living selling her digital fashions in the online world Second Life. (Linden Lab)
By Alan Sipress
Washington Post Staff Writer
Tuesday, December 26, 2006

Veronica Brown is a hot fashion designer, making a living off the virtual lingerie and formalwear she sells inside the online fantasy world Second Life. She expects to have earned about $60,000 this year from people who buy her digital garments to outfit their animated self-images in this fast-growing virtual community.

But Brown got an unnerving reminder last month of how tenuous her livelihood is when a rogue software program that copies animated objects appeared in Second Life. Scared that their handiwork could be cloned and sold by others, Brown and her fellow shopkeepers launched a general strike and briefly closed the electronic storefronts where they peddle digital furniture, automobiles, hairdos and other virtual wares.

"It was fear, fear of your effort being stolen,'' said Brown, 44, whose online alter ego, Simone Stern, trades under the name Simone! Design.

Brown has reopened her boutique but remains uncomfortably aware that the issue of whether she owns what she makes -- a fundamental right underpinning nearly all businesses -- is unresolved.

As virtual worlds proliferate across the Web, software designers and lawyers are straining to define property rights in this emerging digital realm. The debate over these rights extends far beyond the early computer games that pioneered virtual reality into the new frontiers of commerce.

"Courts are trying to figure out how to apply laws from real life, which we've grown accustomed to, to the new world," said Greg Lastowka, a professor at Rutgers School of Law at Camden in New Jersey. "The law is struggling to keep up."

U.S. courts have heard several cases involving virtual-world property rights but have yet to set a clear precedent clarifying whether people own the electronic goods they make, buy or accumulate in Second Life and other online landscapes. Also unclear is whether people have any claim when their real-life property is depicted online, for instance in Microsoft's new three-dimensional renderings of actual real estate.

The debate is assuming greater urgency as commerce gains pace in virtual reality. In Second Life, where nearly 2 million people have signed up to create their own characters and socialize with other digital beings, the virtual economy is booming, with total transactions in November reaching the equivalent of $20 million. Second Life's creator, Linden Lab, allows members to exchange the electronic currency they accumulate online with real U.S. dollars. Last month, people converted about $3 million at the Lindex currency market.

Second Life's economy has been surging since Linden Lab made the unusual decision three years ago to grant users intellectual property rights for what they create with the Web site's free software tools. Thousands of people have created homes and businesses on virtual land leased from the site and are peddling virtual items as varied as yachts and ice cream.

Congress has taken note and is completing a study of whether income in the virtual economy, such as from the sale of gowns that Brown makes, should be taxed by the Internal Revenue Service. The Joint Economic Committee of Congress is expected to issue its findings early next year.

"There seems to be a lack of ground rules in an area that would have explosive growth in the next decade or two," said Christopher Frenze, the committee's executive director.

Though she grew up watching her mother at the sewing machine, learning the craft with each loving stitch of the family's clothes, Brown never considered making it a career until two years ago, when she entered Second Life. Within days, she studied up on the basic software skills and began designing virtual women's apparel from her home in Indiana. "When I design," she said, "I think about how the cloth falls and the sheen silk has compared to satin." She said she now spends 70 hours a week on her trade. Starting with four original outfits, she now offers 1,200 designs and has also moved into men's fashion.

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