ToS changes legal panel transcript (5): Q and A session (2)

Questions (1) Questions (3)

This is the second 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.

Moderator Maxwell Graf
Moderator Maxwell Graf

What if the “sell, resell” thingie was put there intentionally…betraying Linden Labs actual plans…….to sell SL as it is?

00:19 Agenda Faromet (AF): I  think that’s probably a little far-fetched. Again, sell and re-sell refers to patent content, it doesn’t refer to copyright content. Sell and resell, it’s like modify and adapt refer to copyrighted content; Sell, resell refers to patented content. Whether they put it in there just because they were grabbing at verbs that said, “We can sell your stuff,” is a different issue, and if that’s what they did it just means that they didn’t really know what they were doing when they were drafting.

01:00 AF: People keep talking about Renderosity. That’s just such a totally different issue. If you have a question about Renderosity, please ask Max and get in the queue and I would love to talk about it. But the sell and resell thing is, they’re either talking about a section of intellectual property rights that would be rare for content on Second Life or they’re just putting in verbs that don’t mean what they think they mean.

01:32 Tim Faith TF: I guess the other side of it, let’s just say that Linden Lab wanted to sell to some third-party. They own their own intellectual property, which is how Second Life exists. So there’s nothing we could do to prevent them selling to another business or forming a new business entity and transferring their intellectual property rights. Where would that leave your rights? I guess it would be whatever licence it is that transferrable by Linden Lab to any third-party without your consent. Does the successor company own your stuff? Well, no. You could probably close your account; but whatever licence it is that Linden [Lab] has that it can assign to anyone else, that other third-party would then have the same licence, in theory, to your stuff. I don’t know that they had to change the terms of service to accomplish that. I’m pretty sure the old terms of service permitted Linden Lab to assign itself to other people and I don’t think we had any limitations that we could enforce on their intellectual property. But I don’t know; I clearly don’t have all the answers to that part.

02:43 AF: That’s absolutely true. You think about Instagram recently got bought by Facebook. And it didn’t cause the world to end and it didn’t cause anybody’s content in Instagram to suddenly disappear and Instagram did not have to, before the sale, change their terms of service to allow the sale to go through. companies always have in their terms of service the ability to transfer their content, the content that is stored on the service, because that is the value of the company. So that’s not an issue.

Juris Amat (profile picture)
Juris Amat (profile picture)

03:22 Juris Amat (JA): The terms of the license granted under the ToS is really suspicious in that it is stated that no bargained for exchange or value is given to the creator in exchange for the grant of the right. I don’t know if such a lack of bargained for exchange would be upheld under contract laws. Perhaps that would depend on state laws more so than federal law, particularly considering the reliance of creators on the previous terms of service.

03:49 AF: I totally see what she’s saying, but courts have upheld that as long as you affirmatively regain consent, and that’s why you have to click on the Accept again.

04:18 TF: Well, one thing I will say, unlike other systems, I think Facebook is a good analogy, the old Facebook terms of service were probably more limited and they’ve broadened what their rights are under the licensing in their terms of service. And you might say, “Well I detrimentally relied on Facebook’s old terms when I was uploading all of my controversial pictures of my friends on Facebook.” But I think that’s categorically different from a business  that might detrimentally rely on Linden Lab providing a certain kind of availability. I think one of you mentioned it’s really hard for you to take stuff you’ve made in-world and transfer it to another world. I don’t know if there’s a universal world where goods in Second Life could be transferred to. They’re really are only good here, so there are some elements of we’re here because we can operate a business in Second Life that can generate transferrable in real world wealth, and you have substantially limited that ability to do that to our injury.

05:26 TF: Would you win in court on that? I mean, detrimental reliance in light of the fact that there’s an existing contract that you’ve agreed to, is a hard case; but it’s not that that’s impossible, you just have to rely on a court to agree with you. It might vary, depending on what court you go to. I don’t know under California law as I don’t practice there, but in Maryland there’s a lot of different rules, and that’s a hard way to go about it, but it’s not an invalid way. I do think that there’s a point there. This is a different place, in Second Life, in terms of what we’re doing here, and we relied on old terms of service to do it. So when you change that out of the blue, I think that’s fundamentally different from other systems.

06:13 AF: That’s a really good point.

Tim Faith and Agenda Faromet
Tim Faith and Agenda Faromet

06:19:  How likely is this ToS to hold up under actual litigation based on precedence, etc?

06:24 TF: That’s a hard question to answer. I really don’t know. I guess I would have to defer to people who have litigated these sorts of things previously. I have not, so I don’t know.

06:26 AF: I’m not a litigator, but I can tell you that your big problem is always going to be the arbitration clause. so actual litigation is going to go to arbitration, and there’s your problem. As for how it’s likely to hold up, personally I think it wouldn’t; but I think arbitration is always a crap shoot, so I think you’re better-off … I don’t know…

07:11 JA: It doesn’t cost much to file claims before the courts per se. VIPO  has assisted right holders by reviewing their complaints to ensure that those filings complied with legal requirements etc of course within ethical rules governing the profession of attorneys. I do not believe it would hold if the correct cause of action was pleaded.

07:36 AF: I agree with Juris; I don’t think it would hold up. I definitely don’t think it would hold up in court. I think your problem is getting to court. As for whether it would hold up in arbitration, it’s a crap shoot.

07:48 JA: The arbitration clause was challenged in Bragg v. Linden and it didn’t hold.

Agenda Faromet
Agenda Faromet

07:53 AF: That was Bragg versus Linden, but that was before the Supreme Court threw out California’s law against unfair arbitration clauses, and that was before the Supreme Court completely re-did our entire thinking on arbitration. The Supreme Court has every year, since 2009, upheld the FAA [Federal Arbitration Act] and ever since 2009, companies have been strengthening their arbitration clauses in their terms of service and every year the Supreme Court has been upholding them, and every year state courts have been upholding them. So arbitration clauses and courts in arbitration have just been getting stronger.

08:42:  With content creators having no choice but to accept the new ToS in order to log into Second Life. Are there still grounds for legal action if our content is used without the creator’s permission?

08:55 TF: You can bring any case you want. There’s no limitation in that sense. I think the question would be whether you  were less likely to win because of affirmative consent to the Terms of Service, and I think, frankly, it’s kind-of a crap shoot. Agenda was talking earlier about unconscionability1, and contracts of adherence2, and that’s a state law, a state-by-state thing; California’s is different from Maryland’s – I think we’re actually less likely to side with consumers on that particular issue than California is.  So it’s kind-of the same with this, You could probably argue, and I think Bragg v. Linden partially argued that there was a contract of adherence in that circuit, and they also at that time beat the arbitration requirement. But I don’t know; I guess I’d defer.

09:49 JA: Exactly. I believe that a strong case could be made on that basis.

09:56 AF: I totally agree. And I totally agree that there is absolutely grounds if your content was used without your permission and I think there’s absolutely grounds for unconscionability; and yes, Bragg v Linden did use unconscionably and used it very well. It kills me that Bragg v Linden went to settlement and we don’t have a great precedent on the actual case at hand, because that was a beautiful case.

10:23 TF: I wonder if you sent Linden Lab a DMCA take-down notice because they had something they were using without a permission, I wonder what they would do? Because the other side of it is they run the risk of a very large copyright judgement against them.

10:40 AF: They run the risk of losing Section 230 Safe Harbor.

1:44 TF: Yeah, because they’re the ones doing it, they’re not just facilitating it. So that’s an interesting question whether that would be enough of a leverage to really hammer them;  I don’t know. Maybe they would relent then. Interesting. I don’t know all the details about DMCA, but I assume you’d be able to file it through their website first, to make the complaint. If they are actually using your content for themselves in a way that you didn’t authorise; see what happens, but interesting point.

11:13 JA:  I think it’s a good sign that all of the challenges made by users against Linden have settled including Minsky.

11:21 AF: It’s a good sign, but it’s a sad sign because it means we don’t have any great precedents.

11:26 TF: Well I think it reflects the muddle which is really that there’s no right or wrong answer because there’s so little known. It’s what I said earlier, I think this is really a brand new world. It’s like when photography was invented; back then we weren’t even sure, in the 1830’s, whether copyright even applied to it, and I think a lot of people thought it didn’t. And so this, unfortunately for everyone here, this is also a brand new world, so you don’t really know, and Linden, having a lot of money, their corporate attorneys are more likely to want to settle to avoid a bad precedent. The other side of it, I guess you’ll ever know is if you pursue it and see what you get.

12:12: How is it they can apply this retroactively to content already created and uploaded prior to the new ToS?

12:20 AF: Didn’t we already discuss that? … You are presented with the contract, you get the chance to read the contract, you agree to the contract…

Tim Faith
Tim Faith

12:39 TF: I guess the short answer is that it’s not illegal for them to propose a contract like that, I’m not sure it’s against public policy either; It might it. It’s a contract of adherence; it might be against public policy, but it’s not flat-out illegal. So if you read it, you can be held to it. You can fight ’em, but there’s nothing, I think that would stop them from saying, “All your content is all your content.” I mean, I looked at 1.1 just now in the Terms of Service, where it defines content, I don’t think it doesn’t exclude stuff  it says it means, “any works”, it doesn’t say, “any works that are after the date of this Terms of Service”.  I think that’s what they’re trying to claim; I’m not saying that that’s favourable to you, but literally, “any work”, I think that means “any work”.

13:38: Big issue I see is twofold: buying and selling work into and out of Second Life. I realize LL actually re-selling material is unlikely, but as with CGTech and Renderosity, most texture/etc providers do NOT allow Reselling. And many or most media publishers insist on buying some form of limited exclusive Rights to buy it at all, Which is no longer possible (?) under the changed ToS. One of the main strengths of SL was how well it facilitated Internet-wide business to business sake… how can the ToS changes be amended to protect this ability to build Internet-wide creative?

14:15 JA (Going back to a previous question): It’s not true that simply because you agree to the ToS that you cannot sue. There’s nothing that can stop you from suing, in particular to clarify ambiguous provisions under the terms.

14:37 AF (responding to the question about CG Textures and Renderosity): There is nothing that has changed in the Terms of Service that drastically affects CG Tech’s and Renderosity’s terms to the point that they should have reacted the way that they did. If they don’t allow reselling, then they should never have allowed uploading to Second Life in the first place. And that they have gone off the rails and said, “OK, you can never allow use of our stuff in Second Life now” is, I think, an over-reaction; I think its them jumping on a bandwagon and taking the opportunity to get some press and bash Second Life. I think it’s silly, and I’m irritated and disappointed in both of them for rabble-rousing and poking at what is already a very sensitive hornet’s nest. It’s embarrassing.

15:49 AF: You have always been able to sell stuff in Second Life; they should never have allowed upload to Second Life if they had a problem with reselling textures. Businesses can always be sold. If they had a problem with the idea that you could upload stuff to a business that might someday be sold, it’s just silly. There. I’m done.

16:16 TF: I guess this limited exclusive right, I don’t know that you ever didn’t give Linden Lab some kind of non-exclusive right to things that you uploaded here. Agenda or Juris, correct me if I’m wrong, but I thought that that was the only way that this could work, is if you uploaded stuff here, that Linden [Lab] had to have some kind of a licence to it, and that it was a non-exclusive licence to begin with. I don’t know that that has really changed with the current Terms of Service, because I presume you had to give them some kind of a licence before that was non-exclusive.

16:52 TF: If you had something that you wanted to licence exclusively, I’m not sure this was the place to do it. Again, I could be wrong, but I’m not sure that’s anything new.

17:03 AF: You have to give Linden Lab a licence to make a copy, because they have to have a copy of it on their servers; you have to give them a licence to modify it, because they have to put it in a different format to store it; you have to give them a licence to publicly display, to publicly perform; you have to give them a licence to distribute. You have to give them these licenses or otherwise they cannot function. And that’s why I showed you all of the other terms of services out there. You have to give people these licenses, otherwise the Internet does not function.

17:48 AF; If you’re looking to give your creative content somewhere where you’re going to have to create an exclusive licence, don’t create it on Second Life, don’t create it on Facebook, don’t create it on Flickr, don’t create it on the Internet where you’re going to have to establish these kinds of licence agreements.

18:10 JA: My position is that’s their right as creators of digital art as it’s their right to control modification or display of any kind of their work. Well the right to control the publication of their works OUTSIDE of the environment is very much an exclusive right of creators, and it is not a right granted under the terms. It is a question whether their “distribution” is in fact distribution if it is shared in world only, it is in my opinion a right to display.

18:41 AF: Well, yes, but it has to be a right of distribution to distribute it over the Internet. That’s been established; distribution of the Internet is distribution. Well, there’s different cases about it. Some courts have called it “distribution” if you just make it available, and some courts have called it distribution if there is actually transmission involved, so different courts have ruled differently. But you do have to have the right of distribution in order to transmit something across the Internet.

19:19 AF; I completely agree with Juris that it is the right of creators to control modification or display of their work. You do have to give an on-line service provider some of these rights, but this comes back to what we’re saying all along, that your licence, your permission you give, should be limited, and you should be able to control what permission you give. And the problem here is in this Terms of Service, Linden Lab is asking for such an unlimited and such a broad right.

  1. 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.
  2. 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.

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All images courtesy of LaPiscean Liberty unless otherwise stated.

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