Tag: Terms of Service

ToS changes, FinCEN and speculation

Posted on by Inara Pey

secondlife

Update, May 10th: Alex Kadochnikov has posted a further piece on the recent FInCEN interpretive guidelines on virtual currencies.

The recent change in the ToS affecting the use of third-party exchanges for L$ transactions was apparently accompanied by an e-mail from the Lab to such exchanges asking them to cease trading / cease trading in Linden Dollars.

So far, and as reported on Hypergrid Business, around eight exchanges have suspended trading in Linden Dollars while seeking clarification from the Lab as to whether / how they can continue to provide a service to users. Whether the suspension turn into an outright cessation of trading / operation obviously depends on the response obtained from the Lab.

Additionally, Oz Linden contacted TPV developers via the Opensource Development mailing list, stating:

Linden Lab has made a change to the Terms of Service – see the blog post at

http://community.secondlife.com/t5/Featured-News/Updated-Second-Life-Terms-of-Service/ba-p/1996185

If you are a viewer developer, and your viewer includes use of a third-party exchange for functions like ‘buy L$,’ it will need to be changed to use the LindeX instead. 

Some are speculating that the move is as a result of the FinCEN issuing a set of interpretive guidelines on virtual currency (which I commented about in April), possibly related to limiting the Lab’s exposure where other exchanges are concerned. As I’ve stated in comments following-up on the news piece on the change – and while, inevitably, IANAL), I’m not altogether convinced by those arguments per se, because there is nothing in the FinCEN guidelines which appears to fundamentally impact LL’s exposure in this regard – rather, they and third-party exchanges appear to be in the same boat where FinCEN’s guidelines are concerned.

US Treasury's FinCEN: examining virtual currencies
US Treasury’s FinCEN: examining virtual currencies

However, this is not to say that I think LL’s move is entirely unrelated to the FinCEN guidelines being published in March. Again, as I’ve commented both in this blog and elsewhere:

I would add that where there is a potential overlap between the two (the FinCEN guidelines and the SL ToS change), inasmuch as by attempting to limit any exposure of L$ to third-party exchanges and confine trading to LL’s own mechanism (the LindeX), the Lab might be trying to strengthen their position that the L$ is a “gaming token” rather than a “virtual currency” – which cuts to the heart of the core difference in their interpretation of the Linden Dollar’s status, and how FinCEN might regard it.

Of course, even in doing this, the Lab doesn’t escape FinCEN’s view that they are effectively a Money Service Business (MSB) and as such, are required to register as such with the US Treasury and meet regulatory requirements and adhere to anti-money laundering and other periodic reports. Some have suggested that the Lab may as a result face escalating costs in attempting to meet these requirements which may render the Linden Dollar, as we know it today, unviable to the company. However, as I stated back in April:

… there would appear to be questions as to how justified concerns over compliance (and the cost thereto faced by the Lab) actually are.

When it comes to money laundering in particular, Linden Lab already has a number of safeguards in place. Whether these are compliant with any requirements specified by the US Treasury is open to debate … However, it would seem unlikely that such safeguards would be without reference to any legal / regulatory compliance, even  if they only meet the bare minimum required.

Thus, how much additional work and expense would be required on LL’s part should they have to become a registered MSB isn’t that easy to ascertain; so dismissing them as being unable to comply, or that cost of compliance would be something the company would be unable to bear would appear to be perhaps premature.

However, it is reasonable to suggest that if this move is related to FinCEN, then quite possibly it is just an initial step, one which may well be followed-up in the coming months by further changes as the Linden Dollar’s overall status is further clarified as a result of dialogue between LL and FinCEN. Whether such additional result in the Linden Dollar becoming a closed currency without “real” value is entirely open to debate and beyond the considerations of this piece.

There is another question to be asked here as well. Which is this: while it might be unwise to totally dismiss FinCEN as having nothing to do with LL’s change in policy, are there other reasons why LL would make this move?

Well, yes there are. Here’s a couple:

  • It could actually have arisen as a result of the discovery of a fraudulent activity or situation which simply could not be ignored, and the Lab had to take drastic steps in order to ensure the door was firmly slammed shut on the matter
  • It might simply be an attempt to ring-fence the buying and selling of L$ for direct revenue gain. As WolfBaginski Bearsfoot points out, LL are potentially missing out on around $500,000 in transaction commissions going through VirWoX alone. While this may sound trivial, it could go some way to offsetting declining revenue from tier (which in 2012 amounted to approximately $762,000).

Then there is the way in which the change has been announced. If the reason behind it is purely a response to FinCEN setting out its stall in relation to virtual currencies, why couldn’t the Lab have indicated this to be the case? At the very least, and with more considered up-front communication blog-wise, it would have avoided the current levels of confusion, angst and speculation. And why the need to act in such an abrupt manner? It seems odd that if this course of action has arisen from the moves by FinCEN, the Lab explain the situation to users and third-party exchanges alike and give both X number of days to prepare for the changes to come into effect. Were they perhaps afraid that doing so would lead to a run on demand for L$ through third-party exchanges?

It is possible that whatever prompted the change to the ToS may never be known – particularly if it was, as mentioned above, related to a specific fraud-related situation or activity which the Lab could not afford to ignore.As such, this one change –  allowing for the current confusion and speculation it has created – is liable to be the end of things,

However, if it is as a result of the rumblings coming out of FinCEN as they cast their eyes across virtual currencies, then this might just be a foretaste of further changes to come.

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Lab updates SL’s Terms of Service

Posted on by Inara Pey

secondlifeThose logging-in the Second Life on Tuesday May 7th, 2013 were confronted with the need to accept the platform’s terms Terms of Service (ToS) once more. An official blog post on the matter states:

When you log in to the Second Life Viewer today, you’ll be asked to accept an updated Terms of Service. As with any legal document, it’s important to read in its entirety before accepting, but we wanted to highlight one of the changes we’ve made in this update: to better protect Second Life users against fraud, the updated Terms of Service make it clear that trading of Linden dollars (L$) on exchanges other than the LindeX, Second Life’s official L$ exchange, is not authorized or allowed.

 As the official exchange owned and operated by Linden Lab, the LindeX is the best place to buy and sell L$ for use in Second Life. It consistently offers the best rates for both buyers and sellers, and by limiting L$ trading to the exchange we operate, we are better able to protect users against fraudulent activity.

 The majority of Second Life users who purchase L$ do so through the Second Life Viewer by clicking on the “Buy L$” button. There will be no change to that function, as these orders are placed directly through the LindeX. Similarly, shopping on Marketplace will not be impacted.

The post also includes a link to the Knowledge Base article on the LindeX and the Quick Tips video on getting and spending Linden Dollars.

The core change to the ToS is section 5.3, which has been revised to read:

Third party exchanges are not authorized by Linden Lab and Buying or Selling Linden dollars on third-party exchanges are not authorized transactions. Third party exchanges are wholly distinct from both the LindeX exchange and Linden Lab and they have no affiliation with Linden Lab. We do not endorse or otherwise guarantee the legitimacy of the Linden dollar transfers offered on them, and we are not liable for purchases of such Linden dollars. Buying or Selling Linden dollars anywhere other than the LindeX is done so solely at your own risk. If you Buy Linden dollars that are traced to unauthorized credit card activity or other fraudulent activity, we will recoup these Linden dollars from your Account. The only authorized exchange is the LindeX.

All reference to any third-party exchanges using the Lab’s “Risk API” tool has been removed from the ToS, and the Risk API wiki page has been removed from the SL wiki, although the deletion log is retained for reference purposes.

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TOSing out the changes

Posted on by Inara Pey

“Ringing in the changes” is a term that goes back centuries. Originally used in terms of campanology – where it is indeed still used – it entered English slang in the mid-1800s to mean “changing bad money for good; in respectable society the phrase is sometimes employed to denote that the aggressor has been paid back in his own coin, as in practical joking, when the laugh is turned against the jester.” Nowadays we take it to simply mean “employing alternative methods”.

One of the common uses of the term in western society is around the New Year period where we face the opening of another year and are acknowledging we’re going to perhaps do things a little differently (a-la New Year resolutions). So, given we’re fast approaching that time of year, and accepting that broad changes are afoot, it’s no surprise that Linden Lab have thrown out a revised Terms of Service – and once again left it to residents to work out what, precisely, has changed rather than simply highlighting the changed section up front, or even producing a blog posting to explain the new ToS.

So what has changed?

Well, the core of the changes are around the upcoming merger (aka “absorption”) of TSL into the Main Grid and the throwing open of the doors to anyone aged thirteen or older. Here’s what has changed:

Section 2.1 Age Requirements now reads:

By accepting this Agreement in connection with an Account, you represent that you are at least 13 years of age and you have the legal authority to enter into this Agreement.

Clarification is then given that those below 18 years of age must have a) received parental / guardian approval for them to have joined the service, and b) their parent / guardian has read the ToS.

Section 2.2 Age Requirements for Use of Areas of Service (formerly Age Requirements for Teen Second Life)

Sets out the requirements / limitations of under-18s using Second Life, which fall into line with what has already been released by Linden Lab, namely:

  • 13-15 year-olds will be restricted to estates (called “Teen Estates”) operated by Sponsoring Organisations (which are in turn defined in Section 2.4 of the ToS) and which must comply with Linden Lab’s General Maturity Rating in terms of both content and activities
  • 16-17-year-olds will be restricted to Mainland and private estate sims operating under the General Maturity Rating and, at the discretion of the Sponsoring organisation, may continue to access any “Teen Estate” they have been affiliated with prior to turning 16.

Section 2.4 Requirements for Corporate Users now has “and Sponsoring Organisations” tacked on to the end and has the following statement glued on to the end of the original Section 2.4:

If you are a Sponsoring Organization, you agree that (i) you will maintain your Teen Estate in compliance with the General Maturity Rating; (ii) you will comply with the the API Terms of Use; (iii) you will limit the access of Affiliated Accounts of users between 13 and 16 to your Teen Estate; (iv) you are solely responsible for all Content and activities that take place on your Teen Estate, and (iv) you will comply with such guidelines as Linden Lab may issue from time to time with respect to Teen Estates.

This comes across as a lot of waffle that doesn’t actually say much – other than attempting to absolve Linden Lab of any blame should anything go “wrong” on such sponsored estates. Who or what actually qualifies as a “sponsoring organisation”? According to the revised Section 2.2, the new Section 2.4 is supposed to provide such a definition – but it doesn’t.

Elsewhere in the ToS Section 8, Conduct of Users of Second Life has seen some toughening-up   of the wording in respect of minors accessing the Main Grid, namely:

  • Section 8.2 (ii) now requires that adults will not impersonate a minor for the purpose of interacting with a minor using the Service
  • A new Section 8.2 (iii) has been added, stating users of Second Life will not Stalk, harass, or engage in any sexual, suggestive, lewd, lascivious, or otherwise inappropriate conduct with minors on the Service
  • Section 8.2 (iv) (formerly 8.2 (iii)) clarifies and improves the wording of how matters relating to age play will be handled.

Similarly Section 11.4, dealing with the suspension / termination of accounts has been updated to read:

We may suspend or terminate your Account(s) if we learn, or in good faith believe, that you are a Registered Sex Offender, that accessing Second Life may violate a condition of parole or probation, that you have engaged in, or attempted to engage in conduct with minors on the Service that violates this agreement. [my emphasis for clarity].

Outside of the age changes to the ToS, there is one incongruous change to the ToS that has been thrown in, relating to the taking of snapshots / making of Machinema in “publicly accessible areas” (section 7.4). The inclusion of the phrasing in the ToS when it first appeared back in April of this year caused much gnashing of teeth. It’ll be interesting to see if its removal will be noted in any way…

Overall, these are not in and of themselves major changes. The main area of concern is that, in typical fashion for these kinds of documents, the ToS is more about protecting Linden Lab against any perceived wrongdoing with the upcoming changes that it is about anything else. As such, people (assuming they read the new ToS prior to agreeing to it) will continue to rend cloth and scatter ashes ahead of the upcoming changes. And while is it true that a part of me is concerned at the one-way flow of things here (it would be nice to have some kind of visual indicator, for example that the individual you’ve bumped into in a store is actually a minor rather than, say, an adult operating a below “average height” avatar that looks like a minor), I’m still not convinced that the arrival of Teens onto the Main Grid will be the God-awful disaster many seem to believe. And in truth, outside of the sheer woollyness of Section 2.4, it’s hard to see how else things could have been worded.

Conversational consent and the CS

Posted on by Inara Pey

There has been an increasing trend within SL for people to post comments in their Profile and / or Picks along the lines of:

“TOS Disclaimer: My IM’s are logged and might be distributed if i wish…”

Or

“Since Linden Lab demands this notification you are by this informed that all my IMs as well as Local Chat are logged to harddisc and that I will use the logs in any way I feel suitable. If you are uncomfortable with this you are free to avoid interacting with me.”

So how much weight do such comments actually carry? Do they actually conform to the Community Standards (and not the ToS, as many with such comments in their Profiles wrongly refer to)?

These questions can be answered simply and in the order given:

1. None whatsoever.

2. No.

Let’s see what the Community standards actually states (Section 4, Disclosure):

Residents are entitled to a reasonable level of privacy with regard to their Second Life experience. Sharing personal information about a fellow Resident –including gender, religion, age, marital status, race, sexual preference, and real-world location beyond what is provided by the Resident in the First Life page of their Resident profile is a violation of that Resident’s privacy. Remotely monitoring conversations, posting conversation logs, or sharing conversation logs without consent are all prohibited in Second Life and on the Second Life Forums. [emphasis mine]

The very clear implication here is that informed consent is required before such conversations are distributed. Informed consent is a two-way agreement. As such, posting a unilateral declaration of intent within one’s Profile does not absolve oneself of adherence to the Community Standards.

Note also, that at no point in the section is any caveat given that allows people to bypass it. There is no “unless otherwise indicated in an individual’s Profile” or “except where the individual monitoring and distributing conversations states XYZ in their Profile”.

Rather, all these comments actually achieve in the first instance, is to demonstrate the poster’s own woefully inadequate understanding of the Community Standards for the reasons stated.

Of course, there are exceptions to Section 4: as stated elsewhere in the CS, open chat is not regarded as a private conversational area. Similarly, where outright abuse is concerned, Section 4 does not mean a person cannot use a transcript of an IM conversation when filing an Abuse Report.

But really, that’s not what these disclaimers are about; rather they lean towards the individual posting them as being at the least insecure – if not potentially malicious in their intent – by posting such comments. Certainly for me, encountering someone for the first time who has such a statement in their profile leaves me feeling they are somewhat less than trustworthy and thus I pass on communicating with them.

I have to admit as well that the sheer hubris of people putting such comments in their Profiles – particularly those who have been in SL long enough to know better – does, to use the vernacular,  get right up my nose.

I’m not alone in this feeling, as friends have pointed out. To this end, a number of us have started posting the following (sometimes amended to suit our personal style) in our picks (with thanks to Yasmin Heartsdale for the original wording). If you feel the same way, I invite you to add it to your own Picks.

To those with comments about their “right” to distribute conversations logs, etc:

Linden Lab’s Community Standards state (Section 4: Disclosure): “Remotely monitoring conversations, posting conversation logs, or sharing conversation logs WITHOUT consent are all prohibited in Second Life and on the Second Life Forums.”  (Emphasis mine)

The key here is MY *informed* verbal / written consent, *not* your own misguided attempt to waive consent on my part.

Therefore, in the correct spirit of the CS, you are hereby informed that *UNDER NO CIRCUMSTANCES* do I give you consent to monitor, post, or share any private conversation involving me, *regardless* of any misguided language to the contrary contained in your Profile. ARs can and may follow should you choose to deem yourself above the CS.

Consider yourself forewarned and informed.

http://secondlife.com/corporate/cs.php

Restructures, ToS and licences

Posted on by Inara Pey

Gwyn Llewelyn replied to my post on the restructuring at LL, and while we differed in some views, she nevertheless raised a point that has taken a while to percolate through the grey fluff between my ears and mingle with something I posted regarding the sudden launch of the heavily revised ToS.

At the time the new Terms of Service came out, I asked if LL might not be putting the paperwork in order, suggesting that they might be moving towards a hiving-off and licencing of the server-side software.

Despite all the soft assurances from Mark Kingdon about the health and vitality of Linden Lab, as circulated in his recent e-mail, could it be that the announcement of the restructuring be a further step in that direction?

If I’m honest, Prokofy Neva spotted the parallel before me; although she takes a slightly different angle.

In the ToS, LL have pretty much redefined SL as software as a service (SAAS). This helps make the platform itself suitable for licencing – letting other companies come in a take on the task of hosting the platform, as I’ve previously mentioned. This benefits LL from the need to invest massively in additional hosting efforts elsewhere (such as in Europe) with the aim of reducing latency. It also relieves them of the burden of supplying customer support services, since this would fall under the remit of the licensees. At the ame time, LL generate income through a licence structure (based on the server count? the number of actual sims?) that also enables them to retain the IP on the software and thus control its development.

Certainly it is doubtful a purely “land sales” model is sufficient to keep LL afloat, and licensing deals have traditionally been far more lucrative to software companies, so I’d be very surprised if a shift towards such a model hasn’t been considered by some at the top of the LL tree.

They could even hive-off the operations they currently have into a holding company, as Prok suggests, which in turn could operate a number of sub-leasing deals.

Again, moving towards browser-based accessibility for the platform (or possibly offering as an option alongside the Viewer) fits this scenario, again for reasons I’ve stated: it encourages those who would otherwise fight shy of “trying” SL to do so, simply because it no longer necessarily requires them to download and maintain software.

The browser approach also increases the potential attraction business and education may have towards SL as a platform. A shiny new toy delivered direct to the desktop within an browser’s existing functionality is far more attractive than buying a “virtual world modelling tool” which requires you to install and maintain a clunky client front-end on every single desktop PC in your office / classroom environment.

Licencing the platform also offers potential benefits for LL’s business hopes: a couple of strategic “partnerships” with suitably focused hosting services could see the development of Justin Bovington’s longed-for “business oriented Mainland”: a secure environment to which companies using Second Life on the business front can meet and intermingle via “shop fronts”, as an example. Again, LL win in that they lose the overhead of running the service, but gain on the licensing of the platform and in the potential consultancy spin-offs.

Turning as well, for a moment, to Mark Kingdon’s e-mail to residents on the structuring, and risking going off-topic from the above speculation.

I’ve previously-suggested that the structuring PR may have been poorly-worded, giving people the impression that LL were going to overthrow the Viewer in favour of a purely browser-based method of access SL when in fact they may have meant the browser option might be in addition to the Viewer.

Mark Kingdon’s letter to users suggests this may well be the case, as he states: By bringing new people to Second Life, and by increasing the ways in which people can interact with the world and with the people, places, and things within it. Note the emphasis. Not “changing the way in which people can interact”, but “increasing the ways” – this really does suggest to me that the browser approach is intended to be in addition to the Viewer.

New ToS released

Posted on by Inara Pey

M Linden has announced the release of a new SL Terms of Service (ToS), that will come into effect from the 30th April 2010.

The timing is interesting, as it coincides with the Third Party Viewer (TPV) Policy going into effect, and it is interesting to note that M’s post also refers to all the policies relating to the ToS as being “new” (i.e. updated).

As to the ToS itself, the language has evidently been cleaned up with a view to making it somewhat more comprehensible – even if the document is much longer than the older ToS.

However, longer does not automatically mean better.

Overall, the ToS appears to encompass something of a paradigm shift that has been hinted at in various blog postings from LL for a while now: that they no long consider themselves a platform provider, but rather a service provider, licensing aspects of their service for use, ostensibly as the user requires them.

Some elements of this move appear to be “good” – on the land front, for example, we finally move away from the absurd and highly misleading notion that “land” in Second Life is “owned”. In the past, this has given rise to all sorts of misconceptions and ranting within the official flogs.  The new ToS makes it clear that the acquisition of “virtual land” and the fees relating to the same are now effectively a licence to use LL’s server space and fees relating to the use of that space.

That said…this blatant move it liable to cause massive upsets: Linden Lab have long promoted the concept of “ownership” within Second Life – while the ToS has tended to make it clear users don’t actually “own” anything beyond IP rights to their own creations. As such, the ToS was found to be coercive during one famous case. While times have changed, one can well see the move to “licensing” land to be a causing of much potential upset in some quarters.

Similarly, the new approach is liable to cause much gnashing of teeth where Linden dollars are concerned, inasmuch as any fiscal value associated with them has now been almost completely stripped away up until they are actual converted to “real” currency and withdrawn. One cannot help this a) has been done to reduce the prospect of litigation following future account terminations; and b) will vastly reduce the funds people are willing to hold in their accounts.

These implications are potentially bad enough; then things get worse. Section 7, dealing with content, is perhaps the most confusing aspect of the new ToS, in that it appears to have been written around the God-awful “Second Life as the web” paradigm many at LL seem so in love with (and which is in keeping with their shift in now regarding themselves as a service provider along the lines of an ISP). As such, licences, rights, etc., are all talked about in terms of “uploading”, “publishing”, “submitting” and so forth, vis: You retain any and all Intellectual Property Rights you already hold under   applicable law in Content you upload, publish, and submit to or through the Servers, Websites, and other areas of the Service, subject to the rights,   licenses, and other terms of this Agreement, including any underlying rights   of other users or Linden Lab in Content that you may use or modify [my emphasis].

But what of content created in-world? The ToS implies that content created in-world (prim linksets, LSL scripts written in-world, etc.), fall outside of this section and thus are by default the property of Linden Lab. Even Section 7.6, relating to IP rights limit’s the user’s ownership of such rights to content you upload, publish or submit to the Service.

If this is the case, then it is worrying on several levels – both for users and potentially for Linden Lab.

Elsewhere, the new ToS introduces the TPV Policy in what is again bound to cause outrage. As I’ve mentioned previously (and more than once), the TPV is flawed in that the TPV confuses the use of third-party Viewers with the development of said Viewers. This has already given rise (rightly or wrongly) to outpourings of scorn and hurt from third-party Viewer developers  – and it now looks set to do the same with users of such Viewers. One can – to a point – see why the two have been mixed: TPV code is open-source and thus moddable – not only by the original developers, but by users why are so inclined.

Even so, it would have been far better had LL restricted the TPV policy itself to developers and the development of TPVs, and included a short, unambiguous section on users’ responsibilities in the use of TPVs within the body of the ToS. This would have scored two quick wins: i) it would have enabled LL to simply specify what users cannot do to existing TPVs without getting confusingly embroiled in deeper development issues; ii) it would enable developers to more clearly state their own EULA to ensure they both remain within the confines of the TPV Policy and limit their liabilities in the face of those determined to hack their code for malicious ends.

It’s also hard to fathom the policy around snapshots and machinima. Promoted by LL as an “aid” to such work, the entire policy looks set to achieve exactly the reverse. People are already trigger-happy with the AR option when it comes to “copybotting”; one dreads to thing what will happen when folks start innocently taking snapshots of one another as they hope around places that interest them and others start getting objectionable…..

The biggest problem with the new ToS is that while it is cohesive pretty much of itself, some contradictions are apparent – most notably between the ToS and the supporting policies. The ToS also absolves Linden Lab of virtually any and all liabilities – even in the case of them either turning off SL with no warning, or simply being so grossly negligent that they completely break the platform; at the same time, it enforces liabilities upon user even after they cease using the service. Hard to see either of these surviving a court case intact.

One can no longer doubt that the times are a-changin’ – but the question really remains as to how much this new ToS will really affect the overall use of SL. On the one hand, I can see elements giving problems, as mentioned above vis photos / machinima and possibly the use of third-party Viewers (possibly because the majority of “new” users will be driven down the Viewer 2.0 route), but I honestly suspect that – as with past upheavals in SL, life will go on more-or-less with an air of “business as usual” as the dust surrounding the new ToS settles. At least until the first lawsuit pops up.

Unless, of course, LL themselves see fit to rock the boat to the point of capsizing it themselves.