"In contrast to previous economic eras,
intellectual property will be the primary source
of new wealth in the 21st century."
- Gregory A Piccionelli, 1989
 
AREAS OF PRACTICE
• Internet Matters
• Music & Other Entertainment Matters
• Intellectual Property Rights Enforcement
• Crowdfunding Matters
• Freedom of Expression Matters

Game Changer: The Virtual World Web

NOVEMBER 2009

For the last five years a revolution in communication technology that might well rival the arrival of the World Wide Web in transformative social and economic importance has been quietly picking up steam. It is a revolution that has now advanced to the point that it is poised to burst on the scene in a manner not unlike the commercial Web in the mid-90s. It is a revolution that utilizes, combines and synergizes the availability of increased bandwidth, the powerful processing ability of personal computers, the phenomenon of social networks, the engaging entertainment power of computer games, and the vitality of user generated content. For adult entertainment entrepreneurs, it provides an unparalled opportunity to be “on the ground floor” of what I’ve been calling the adult Internet’s “Second Cumming”. Further, it is a revolution that is not threatened by free tube sites or bit torrents, and its principal content component virtually sidesteps the applicability of the 2257 regulations.

 

 

 

What is this revolution, this miracle technology? In two words and three letters, it’s “Virtual Worlds” and the “VWW” (The “Virtual World Web”).

 

What is a Virtual World?

 

A virtual world is a computer-based simulated environment through which users, as computer generated “avatars”, interact with each other, or the environment, via the Internet or another wide area computer network. Avatars are generally 3D representations of the virtual world’s real world users. Use of an avatar interface empowers a world’s users to interface with the virtual world environment and its “inhabitants” much as a person interacts with the real world and with real people. This results in an inherently intuitive user interface with virtually limitless online applications.

 

While the quality of today’s virtual world avatars is typically analogous to characters in high-end computer games, technology now exists to create photorealistic avatars that can even track and reproduce the user’s facial expressions in real time. This has been accomplished through adaptive use of biometric security software and the user’s computer camera. Thus, in the near future, highly emotive communication between avatar users in virtual worlds will likely become commonplace and augment the social networking appeal of virtual worlds.

 

Some virtual worlds, such as Utherverse’s “Red Light Center” (www.redlightcenter.com) and Linden Lab’s “Second Life” (www.secondlife.com), provide an “immersive” experience for their users allowing real time interactions by and between avatars. To do this they have developed and incorporated sophisticated online gaming platform technologies into their users’ experience that have enabled thousands of participants to operate in their virtual worlds simultaneously (although not necessarily in the same scene until very recently). This type of virtual world is often referred to as a Massively Multi-Player Online Game or “MMOG”.

 

Participants in the Red Light Center and Second Life MMOGs engage in a virtual world version of a broad spectrum of endeavors that occur in the real world. This includes the buying, selling and renting of virtual real estate as well as the establishment and management of in-world clubs, theaters, and a myriad of other storefront businesses. Popular and lucrative business models in MMOGs like Red Light Center and Second Life often involve the creation and sale of “virtual goods” such as clothing and accessories for avatars and props for private environments. In Red Light Center, participants can also engage a “working girl” for avatar sex that often includes a live audio and/or video chat upsell component.

 

Additionally, some MMOGs like Red Light Center and Second Life operate using virtual currencies that have value in the real world and are regularly exchanged for real dollars and other currencies. Red Light Center also provides its merchants with the ability to accept micropayments. These new payment forms also open up intriguing opportunities that could have a profound impact on Internet commerce at large.

 

Some virtual worlds are created to “mirror” real world counterparts. For example Utherverse’s “Virtual Vancouver” (www.virtual-vancouver.com) allows users to shop, attend concerts and otherwise participate in a virtual world modeled on the city of Vancouver, Canada. It is likely that we will soon see many real world locations reproduced in virtual worlds, including tourist destinations, trade shows, colleges and gambling casinos.

 

Virtual world or so-called “3D web” technology will also allow companies with 2D websites to enhance their website visitors’ experiences. For example, one such enhancement is the providing of site visitors with the ability to virtually pick up, rotate and manipulate products vended on the site rather than just showing them or describing the product to them in 2D.

 

Nothing Virtual About Virtual World Growth.

 

Recent virtual world use growth curve statistics are beginning to look a lot like the early Internet participation data of the mid-1990s. This demonstrates, I believe, that we are already in the process of leaving the era of the 2D Web, and that the era of the 3D Web has begun. If so, it is not unrealistic to expect that this change will likely soon bring an explosion of online growth and opportunities analogous to the beginning of the World Wide Web.

 

Many other media industry experts also believe that today’s virtual worlds point the way to how we will soon be using the Internet to shop, learn, communicate, interact and be entertained. It’s a view that has attracted substantial investment into virtual worlds and virtual worlds technologies. According to Virtual World’s News, nearly $2 billion was invested in virtual worlds from 2007 to end of the first quarter of 2009.

 

Thus, while many early virtual worlds have focused on games and social network interaction, virtual worlds are now increasingly becoming a powerful commercial medium with almost unlimited opportunities for exploitation, particularly in the areas restricted to adult use.

 

Announcing “VWW” Brought To You By One Of The Online Adult Industry’s Founding Fathers

 

In late September, I was invited by my friend Brian Shuster of Utherverse, an uber-MMOG creator and owner of Red Light Center, to attend the Engage! Expo in San Jose. The Engage! Expo is the virtual world industry’s première trade show. I have known Brian since the earliest days of the adult Internet in the mid-1990s, when he was CEO of the hugely successful early Internet phenomenon, XPics, which my law firm represented. An inventor of many of the Internet’s early patented commercial technologies, such as the pop-up ad, Brian Shuster, has always been known to those “in the know” as one of e-commerce’s true geniuses. It would be difficult to overstate the huge role he has played in the evolution of the adult online entertainment business.

 

But despite my knowledge of Brian’s past accomplishments, and my having become somewhat used to expecting the unexpected from him, I was nevertheless amazed by what Brian told me his company, Utherverse, would, and did, unveil at the Engage! Expo. At the show Utherverse announced that it would offer to provide software to any party that wants to create their own virtual world, and do so free of charge! Basically, Utherverse announced that it will now provide, for free, basic virtual world properties and tools that had cost Utherverse millions of dollars and several years to develop. Several basic “regions” such as a club, a park, a store, an office or a theater would be made available with thousands of pre-existing props. As a result of this move, technology that had cost tens of thousands of dollars for a virtual world startup to acquire just a week previously was being made available by Utherverse free of charge with upgrades on an escalating fee schedule that would be available for more elaborate worlds of almost any scale and dimension.

 

The announcement was coupled with Utherverse’s official launch of the “Virtual World Web” or “VWW” in which virtual world users could, for the first time, literally web surf from one virtual world to another without the need to download and install software for each world.

 

The results of Utherverse’s unprecedented actions at the Engage! Expo were swift. According to an Utherverse representative I spoke to, more than 2,000 applications for Utherverse virtual worlds were received within two days of the company’s announcement.

 

But There’s More . . . Super-massive Multiuser Platforms

 

The offer of free virtual world software, as bold and unprecedented in its own right as it was, was nevertheless accompanied by news of a technological innovation by Utherverse of perhaps even greater importance to the virtual worlds community and to the evolution of Internet commerce in general. Utherverse also disclosed that it had effectively addressed a technological problem that had previously vexed the virtual worlds industry, specifically, the problem of scaling up the population of participants in a virtual world “scene”.

 

Basically the virtual world population problem involves the fact that a truely immersive MMOG requires that each user computer must be provided with updated information in real time regarding actions taken by each avatar in a region, such as a club or a park, etc. Because of this, as new avatars enter a region the amount of aggregated data that must be transmitted to all the avatars populating the region increases exponentially. This has heretofore created severe interactive population limitations in virtual worlds rendering massive multiuser virtual world platforms, well, not really so massive after all.

 

But according to Utherverse, its patent pending technology now effectively addresses previous scaling limitations allowing, for example, thousands or even conceivably millions of users to attend and interact with one another in a giant virtual nightclub or concert venue.

 

Taken together, the availability of free virtual world creation, the solution of the virtual world population scaling problem, and the initiation of the VWW comprise a set of milestone events in the development of the 3D Internet. One likely result is that there may soon be a significant increase in the number of virtual worlds and 3D web sites. Because of that, as the number of 3D destinations for consumers proliferate we may also see an acceleration of the trend toward virtual world usage much the same as initial Internet usage expanded exponentially after the creation of user-friendly web browsers and a “critical mass” number of attractive web sites.

 

Regardless of how it specifically happens, however, I feel fairly certain that the time is rapidly approaching when 3D web sites will be as ubiquitous as 2d web sites are today. From here to there, we are likely to see proliferation of opportunities for virtual world entrepreneurs, particularly those exploiting the adult MMOG space.

 

Some Legal Issues Involved In Virtual Worlds and MMOGs

 

As we move into the 3D era of the web and the corresponding creation of the Virtual World Web, it is important to note that many legal issues will arise in association with the development, operation and evolution of virtual worlds. For example:

 

Intellectual Property Issues.

 

  • Copyrights. Virtual worlds will inevitably introduce a whole new set of copyright issues associated with the unique features of virtual worlds. Some of these have already surfaced. For example, avatars and virtual goods are generally protectable by copyright laws. That means that their unauthorized modification and duplication can result in copyright infringement. Sure enough, a number of disputes regarding ownership and infringement of copyrights in and to avatars and virtual goods are currently ongoing.

 

  • Trademarks. Trademark disputes pertaining to the use registered marks on virtual goods in virtual worlds are now occurring and are likely to occur in the future with greater frequency.

 

  • Patents. As the functional features of virtual worlds comprise potentially patentable subject matter, the number of patent applications and patents issued pertaining to MMOGs and virtual worlds in general will continue to grow. It will predictably only be a matter of time until patent litigation regarding virtual world technologies becomes as common as Internet patent litigation is today.

 

  • Celebrity Likeness Rights. As avatars become more and more photorealistic, it is also only a matter of time before we start to see celebrities suing virtual world operators and/or participants for the unauthorized use of their likeness incorporated into avatars for the purpose of promoting products and services.

 

Adult Entertainment Law Issues. While the 2257 regulations are not likely to apply to depictions of avatars engaging in explicit sexual conduct because there is not a real person in the depiction, the 2257 regulations still apply to traditional 2D content, such as videos, depicting real performers that is displayed or performed inside a virtual world (like in a virtual theater, for example). Also the obscenity laws apply with full force and vigor to all sexual materials depicted in, or in association with, a virtual world, including avatars.

 

Terms of Use Agreements and Other Contracts. Properly drafted licenses for the use of, and participation in, a virtual world are a critical component of any virtual world business. Like dating sites, MMOGs and other virtual worlds with social networking components are well-advised to devote whatever time and legal resources it takes to complete the task of drafting and incorporating appropriate terms of use of the world’s social resources and user generated content options.

 

Use by Minors. Special legal considerations arise in association with the potential or actual use of a virtual world by minors or the obtaining of personal information from minors.

 

Other Legal Areas. Because of their almost limitless possibilities for commerce, virtual worlds also generate their own special kinds of issues regarding tax issues, product liability issues, labor matters and matters under the jurisdiction of the Federal Trade Commission.

 

Further Questions Regarding Virtual Worlds.

 

As the creation and participation in virtual worlds accelerates, I expect that there will be an increasing amount of interest in this fascinating Internet market segment. If you are interested in starting a business in or expanding a business into a virtual world and wish to discuss the legal issues involved or would like to be referred to parties providing virtual world technologies and support services, I invite you to contact me at the number below.

 

This article is not intended to be, nor should be considered to be, legal advice. I strongly urge you to seek the counsel of a qualified and experienced adult entertainment attorney familiar with the types of matters discussed in this article.

 

1Gregory A. Piccionelli is an intellectual property and adult entertainment attorney experienced in adult entertainment, Internet, intellectual property, and Federal Trade Commission matters. He can be reached at Piccionelli & Sarno at (805) 497-5886 or greg@piccionellisarno.com.

 

 

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