Yes, if You Hired Someone to Design it for You.

Remember when Second Life was all the rage? I’ll admit that my memory is a little hazy, but I swear it was a huge deal a few years ago. Anyway, it’s still around, with a new slogan: YOUR IMAGINATION, YOUR WORLD.* If you’re not familiar, Second Life is an interactive virtual world that emphasizes the creation of virtual lands, complete with topography, buildings, etc. Subscribers operate avatars that may move through and interact with these worlds.

* Judging from this promotional video: ALSO BOOBS. Seriously.

Subscribers can also purchase virtual land and “terraform” it—i.e., give it mountains, forests, buildings, beaches, caves—to their liking. These lands can be private—i.e., cut off except for those specifically invited—in which case they’re called “islands.”

In this post, I’ll be discussing a recent decision in a lawsuit about whether terraformed virtual “islands” are copyrightable. More practically, the lawsuit is an object-lesson how badly things can go when copyright is involved in what appears to be “just a business transaction.”

Prelude to an Accidental Copyright Dispute

A teacher (we’ll call her the Teacher) working for a particular school district (we’ll call it the District) got the idea that these islands would make ideal “virtual classrooms.” She convinced the District to buy three “islands” on Second Life.

Apparently, she wasn’t alone in having this kind of idea, because she later attended a conference all about education and virtual worlds. Not only that, but she met a guy who consulted about how to set up virtual worlds for educative purposes. The guy was the sole owner and operator of a consultancy called SabreFire (we’ll call the guy the Consultant, but we’ll also treat him as basically interchangeable with SabreFire).

The consultant proceeded to terraform the islands. I’m not really sure why, which is part of the crux of the case. Was he just doing a bit of free work to demonstrate his skill, so the District would hire him? Was he expecting to be paid for this work?* Apparently, the Teacher and the Consultant never discussed any terms. More important, neither of them even brought up the issue of who would own what. Indeed, one strongly suspects that neither the Teacher nor the Consultant had any idea that copyright issues abounded (though the Consultant eventually wised up).

* Speaking of things that are unclear: how were these islands supposed to function as virtual classrooms? And how were they supposed to be educational? If the students were scattered about geographically (but still had access to high-speed internet), I could understand that, but I don’t get that sense about the District’s students. Completely irrelevant to the legal analysis, but still.

The next school year, the District cut SabreFire a check for $5000 for services to be rendered that year. The Consultant thought he was going to be paid $10,000. He actually got his act together enough to send the Teacher a draft contract, but we don’t know what terms it contained, or whether the contract would have solved any of the sticky problems the parties were about to get into. Anyway, no contract is ever executed. The parties trudged through the school year, with the Consultant terraforming an additional three islands, but the Consultant was clearly feeling a little bitter about the whole thing.

The Consultant Strikes!

The following school year, the Consultant decided he’d had enough. Or, maybe he’d already had enough but spoke to a copyright lawyer? Maybe that conversation went like this:

  • Consultant: Wait, I own the islands?
  • Lawyer: Well, you said nothing was ever signed, right?
  • Consultant: Yeah?
  • Lawyer: So the copyright in the islands stays with the creator. That’s you.
  • Consultant: But I’m just a consultant… They hired me to make this. Doesn’t make it theirs?
  • Lawyer: Well, you said nothing was ever signed, right?
  • Consultant: Yeah?
  • Lawyer: So you’re the creator. You own the copyright.*
  • Consultant: I’m a creator? … Yeah! I’m a creator! OK, so now what? Can I take them back or something?
  • Lawyer: Well, you said nothing was ever signed, right?
  • Consultant: Yeah?
  • Lawyer: So, yeah, you probably can. The legal term, however, is “yank their license.”

The concept here is “work made for hire.” Works that are “made for hire” belong to the hiring party; in fact, the hiring party is considered to be the author or creator! The term, however, is misleading when applied to independent contractors, like the Consultant, because it makes it sounds like you’re just hiring a cab or something. In the context of an independent contractor, works are only legally “made for hire” if (1) the work falls within one of nine pretty specific categories, most notably contributions to collective works, part of a motion picture and translations; and (2) the “made for hire” arrangement is explicitly spelled out in a signed writing.

Anyway, the consultant sent the Teacher a notice yanking the District’s license to use the terraformed islands. He also got some of the content removed by sending Linden DMCA takedown notices.*

* DMCA takedown notices aren’t just for music and videos! Anyway, the District apparently copied some of the data to a different virtual-world system, but the court found a dispute as to whether the District took so much as to constitute copying of the terraformed islands themselves.

During the lawsuit, both parties moved for summary judgment. The Consultant’s argument went like this:

  1. I own the copyright in the terraformed islands.
  2. The defendants had a license to use the terraformed islands, but I yanked it.
  3. The defendants continued to use the terraformed islands after I yanked the license.
  4. Therefore, the defendants are infringers.

In response, the defendants argued: (1) there isn’t any copyright in the terraformed islands because they aren’t “fixed”; and (more plausibly) (2) the Consultant didn’t have any right to yank the license.

I’m Gonna Fix You But Good!

The defendants’ first argument goes to an unloved part of perhaps the most fundamental concept in copyright law: copyright arises in an original work of authorship when it is fixed in a tangible medium. Copyright thus has two basic requirements: originality and fixation. Originality gets most of the action in law school classes*, but fixation is a requirement, too!

* To be fair, originality is a constitutional requirement, while fixation isn’t, so originality is more fundamental than fixation since Congress couldn’t get rid of it if it wanted.

Ages ago, courts decided that computer games were “fixed” even though the displays were not “fixed” by the author. When you play Pac Man, you might go left or right, then down or up, and so forth, so that every time you played, the “movie” that was played on the screen was different every time. More important, you were the one who was most responsible for determining how the “movie” went, not the programmers of the game.

It was thus argued that computer games couldn’t be copyrighted because they weren’t “fixed”. Early on, courts rejected this argument. Computer games are fixed, just not where you can see them. They are fixed in the code that makes the game possible.* Thus, when the defendants brought up this argument, the court spent little time rejecting it.

* In a sense, a computer game has two copyrights: one in the sound, images, etc., and another in the code. In this case, we’re concerned with the sound and images, not the code. If you duplicated Pac Man but using entirely new code, you’d still be infringing a copyright in Pac Man. Conversely, if you took protected code from a computer game to make game with very different images and sounds, you’d be infringing another copyright in the game.

When Is a Work of Art Truly Finished, Grasshopper?

The defendants’ next argument was that the terraformed islands weren’t “fixed” because they weren’t sufficiently permanent or completed. Anyone could come along and alter them. The court rejected this argument, correctly analogizing the islands to a sculpture made of modeling clay. Sure, someone could come along and alter the sculpture, even squash it flat, or make subtle but valuable improvements. But you’d still have a copyright in the sculpture you made.

This is actually something of a zen concept in copyright law. Copyright law isn’t concerned about permanence or completeness, just originality. If what you’ve fixed in a tangible medium—modeling clay, ink on paper, or data on a hard drive—is original to you, you have a copyright in it. If you make revisions to it, then you have a copyright to that, and so forth.* Thus, if you die while in the middle of your novel, your heirs could still enforce the copyright in that. If someone stole an early draft of your novel, one you thoroughly rejected, and copied it, you could still enforce the copyright in that rejected draft.

* Where this gets tricky is deciding when the changes are significant enough to warrant a new copyright registration.

But How Permissive Is Your Permission?

The bottom line is that the defendants are infringers*… Does that seem fair to you? After all, the Consultant designed the islands for the District knowing he didn’t have a contract. And the District paid the Consultant $5000 for something. If the Consultant had been selling a car, we’d all be wondering why he kept the $5000 if that wasn’t the price the parties agreed on.

* Again, to the extent the District was using the Second Life terraformed islands after the license was yanked, but not to the extent of the data that was copied over to the new system. On that issue, the court held there was a factual dispute for the jury about whether those new islands were similar enough to the islands the Consultant designed.

The answer is that the District had some permission to use the islands, but it is radically unclear how much. The legal problem is that the transaction is less like purchasing a car than leasing one. One doesn’t own the islands themselves, any more than one can own fairy gold, but one owns the copyright in the islands—or permission from the copyright owner to use the islands. When you think you’re buying something virtual—and this principle extends to software applications, music files, eBooks, video files, and so forth—you aren’t really buying but doing something much more like leasing.

Imagine you were leasing your car to an acquaintance to use while you were on vacation. You’ll agree on a price, of course, but you’ll also agree on a time period. Obviously, that can’t be longer than your vacation—you’ll want your car back—but what if the acquaintance only wants it for a few days, or doesn’t know how long he’ll want it for? More important, what happens if the acquaintance doesn’t return the car before you get back from vacation? Can you just re-possess the car? Do you need to give the acquaintance some advanced notice?

This hypothetical transaction is simple compared to what the Consultant and the District had gotten themselves into. From the opinion, they discussed nothing about permission. In fact, one gets the strong sense that they weren’t even aware, at first, that permission was something they should be thinking about because they weren’t aware the copyright was in any way involved. Here are the two most important facts from the opinion:

  • “No written contract was executed between the parties regarding the 2006–2007 school year …, and the parties never discussed the issue of who owned the intellectual property rights to any aspect of the … project.”
  • “During the course of the negotiations, Plaintiff transmitted to Defendants several written proposals for services to be provided during the 2007–2008 school year …, but again no formal contract between the parties was ever executed.”

So, yeah. The Consultant is building all this stuff, and the District is using all this stuff, and they haven’t gotten to square one on negotiating. I’m betting those written proposals were silent about copyright, because everyone was thinking this was a matter of providing services, not a matter of copyright.

Were we Implying Something?

Welcome to the wonderful world of implied permission (normally called “implied license”). While it’s better for permission to be in writing, it doesn’t normally have to be. One can be implied by the parties’ conduct. For example, here, the District clearly had a license to use the terraformed islands because the Consultant had built the islands for the District’s use and he knew and expected the District to use the islands. The question is whether the Consultant could yank that implied license.

If the implied permission was granted gratuitously, the Consultant could yank the license whenever he felt like. If, however, the Consultant received something in exchange for the permission, even if it’s just a promise to receive something, then he probably can’t. The case would then become one for breach of contract—how much should the District have paid the Consultant for the permission?—rather than copyright infringement. However, if you can’t even tell what price the parties agreed on for the permission, then there was no exchange, the grant was gratuitous, the Consultant can yank the permission, and the District is in trouble.

The District’s best case is that the $5000 it paid wasn’t just for “services” but also for permission. But it doesn’t sound as though permission ever entered into anyone’s head until the Consultant starting thinking about suing. If that’s the case, then it’ll be impossible for the District to prove that it promised the Consultant anything in exchange for the permission (as opposed to his services).

What’s more, the District can’t prevent others from using “its” islands. We know this for certain because we know nothing was ever signed. You can’t assign a copyright, or even grant an exclusive license, unless the assignment or grant is in writing. Also, the right to sub-license must be explicit*. Maybe the terraformed islands were too idiosyncratic to have a market beyond the District. But if the District was expecting to, say, sell its virtual classrooms to other school districts, or at least be the only school district with these particular virtual classrooms, it will be disappointed. The virtual classrooms remain in the Consultant’s control.

* Or else every licensee would become a competitor to the licensor.

In Copyright Law, the Designer Always Has the Advantage.

Does that seem fair? From a business standpoint, the Consultant appears to have made the big blunder. He was the one who was giving his work away without a contract. But despite this mistake, he’s in a better position legally. His upside is significantly better than the District’s: damages plus a superior bargaining position by depriving the District of the islands. His worst case scenario is he gave away some work for free.

What seems particularly unfair is that it was the District, not the Consultant, that had to be aware of the copyright problems, even though the Consultant was the one in the “copyright business.” The District is just a consumer, and it would have been far from clear to a teacher or other school official that copyrights were even involved. But the onus was on the District to protect itself. This isn’t just a “trap for the unwary.” It’s a trap that’ll catch the wary, too.

Let’s conclude by wishing the jury* good luck unraveling this mess.

* Assuming the case doesn’t settle.

Thanks for reading!

Rick Sanders

Rick is an intellectual-property litigator. He handles lawsuits, arbitrations, emergency injunctions and temporary restraining orders, opposition and cancellation proceedings, uniform dispute resolution proceedings (UDRPs), pre-litigation counseling, litigation avoidance, and other disputes, relating to copyrights, trademarks, trade secrets, domain names, technology and intellectual-property licenses, and various privacy rights. He has taught Copyright Law at Vanderbilt University Law School. He co-founded Aaron | Sanders with Tara Aaron-Stelluto in 2011.