ToS changes legal panel transcript (3): looking at the law

Tim Faith Questions (1)

This is the first part of a transcript of the Q and A session of the Terms of Service legal panel discussion which took place on Saturday October 19th, to discuss changes made to the Linden Lab Terms of Service governing their products and services in August 2013.

If you have come to this page first, please read the introductory notes for details on the panel and its purpose. Links at the foot of this page provide access to the other sections of this transcript.

Tim Faith and Agenda Faromet
Tim Faith and Agenda Faromet

Agenda Faromet (AF):  I think it would be pretty good for us to discuss some of the potential problems with the specific terms of service. We’ve kind-of done a good overview, but there are some specific problems that people have pointed out. For instance, we were talking – I don’t know if you’ve been following the comments on my blog, I won’t plug my blog, but we’ve been talking about one of the issues [which] is where they’re calling for ” exploit in any manner whatsoever, all or any portion of your User Content (and derivative works thereof).”

00:49: AF: They’re not limiting that to derivative works that are created on Linden Lab’ services or that are uploaded to Linden Lab’s services. And the concern that some people have is that if you make machinima, or photographs or snapshots of Second Life content, that are not even uploaded to Second Life, but are just derivative works of content that you have created in Second Life, is Linden Lab trying to claim ownership or licence of those works.

01:34 AF; I would argue that no they’re not, but they certainly have constructed such that they could argue that they are. Tim, do you have any thoughts on whether or not the lack of limitation to derivative works is an issue?

Tim-201:55 Tim Faith (TF): One of the basic concepts in law is that you’re held to the words as they are written in a contract. So once you acknowledge that the terms of service govern your relationship with Linden Lab, the words themselves really do matter in terms of what you give and what you don’t give.

02:14 TF: Now I know that it’s common for people … if you didn’t write the contract, and in this case it’s obvious only one person can write the contract, which is Linden Lab, you could construe the contact against Linden Lab.

02:31 AF: Right, contracts are always construed against the drafter1.

02:35 TF: Well, not always, but I think contracts like this, which you have to agree [to] or you can’t use the system, I think there is a certain amount you could construe against Linden Lab. but I would hesitate to answer that I have a clear or simple answer to the derivative works question.

02:55 TF: I mean I read – and I haven’t re-read the terms of service to be definitive – but my sense of it was that they’re trying to have a much broader right and licensing in all works, so they don’t have to come back and ask you again if they have a different use for a work that’s been published in the world, in Second Life and they don’t necessarily know all the ways they want to use your work. In the real world, I’ll be honest with you, that’s very unusual. Any time that I’ve gone to use photographs of someone for a business purpose, for marketing or something, I go to a stock photographer place and I buy a licence. The licence is real clear on how I can use it, the duration of the use, cost, it’s real specific.

03:45 TF: This really the opposite, which is we’re as broad as we really think we can be. And so that kind-of opens the door to them doing stuff with works which I’m sure you would typically would agree to let them do; or at least not without compensation. It’s a curious thing, I think. I’ll stop talking, let me look again at the section you’re talking about, Agenda.

Agenda Faromet
Agenda Faromet

04:14 AF: One of the things I’d like to point out, and this is kind-of a big gotcha is that normally, especially in California, you have unconscionability2 to protect US consumers. Okay, let me back up a little bit. Unconscionability is something in contract law that protects consumers from manifestly unfair contracts, and unconscionability has two elements, procedural unconscionability and substantive unconscionability, and I’m throwing out legalese like crazy, but I promise I’ll explain.

05:20 AF: Procedural unconscionability is unfair in the way it is constructed, and substantive unconscionability is unfair in the substance of it, in the meat of it. So a terms of service agreement that you that you just have to click on and either say yes or no is called a contract of adhesion3. And Contracts of Adhesion are all by themselves procedurally unconscionability. That’s just the way they are. So you’ve already satisfied that; they are all by themselves unfair.

06:02 AF: So then you have to look at how they are written, and what the actual terms are, and if the actual terms of a terms of service are manifestly unfair to one side, then they are also substantively unconscionable, and then the whole thing can get thrown out.

06:20 AF: Well California is very friendly to consumers and very quick to call something substantively unconscionable, and to throw out an entire terms of service for being unfair. So normally you would be protected from an agreement, especially a terms of service agreement that is just flat-out unfair. The problem is, in the last four years the Supreme Court has been really, really friendly to arbitration agreements4. And California used to protect consumers from arbitration agreements, especially arbitration agreements that denied you the ability to form a class action. The supreme Court in 2009 threw out the California’s law that protected consumers from terms of service that barred class actions. So now everybody is putting class action levers and arbitration agreements in their terms of service, and Linden Lab has done that.

07:30 AF: So now there is the arbitration agreement in the terms of service and the class action waiver which means that you don’t have the ability to go to court over something like this, you don’t have the ability to form a class action over something like this. So even if this is manifestly unfair, you don’t have the ability to take it to a California court which is very freely to finding that things are unfair.

08:04 AF: So that was a very long digression to say that a lawsuit is probably unlikely.


  1. If the terms of a contract are ambiguous, then  the preferred meaning should be the one that works against the interests of the party who provided the wording – see contra proferentem
  2. A doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favour of the party who has the superior bargaining power, that they are contrary to good conscience.
  3. A contract (often a signed form) so imbalanced in favour of one party over the other that there is a strong implication it was not freely bargained.
  4. A written contract in which two or more parties agree to settle a dispute outside of court. The arbitration agreement is ordinarily a clause in a larger contract.

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All images courtesy of LaPiscean Liberty unless otherwise stated.

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