Second Life Arbitration Clause Unenforceable

NewYorkCountryLawyer writes "In a decision that could have far-reaching implications, a federal court in Pennsylvania has held that the California arbitration clause in the 'take it or leave it' clickwrap agreement on the Second Life website is unconscionable, and therefore unenforceable. In its decision (pdf) in Bragg v. Linden Research, Inc., No. 06-4925 (E.D. Pa. May 30, 2007), the Court concluded that the Second Life 'terms of service' seek to impose a one-sided dispute resolution scheme that tilts unfairly, 'in almost all situations,' in Second Life's favor. As a result, the case will stay in Pennsylvania federal court, instead of being transferred to an arbitration forum in California."

Comments

Re:Will this carry over to other online services?

[Zironic]

The problem would be that for most other services there are "reasonable available market alternatives". The thing I wonder though is that if all the companies have the same crappy TOS does that then mean that there isn't any reasonable option and all the TOS's get invalidated?

The end of Microsoft's EULA?

[Randym]

(a) Procedural Unconscionability: A contract or clause is procedurally unconscionable if it is a contract of adhesion. Comb, 218 F. Supp. 2d at 1172; Flores v. Transamerica HomeFirst, Inc., 113 Cal. Rptr. 2d 376, 381-82 (Ct. App. 2001). A contract of adhesion, in turn, is a "standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it."

The interesting thing about this is that is being adjudicated under *Federal* law, rather than state law, because it involves interstate commerce. Any EULA -- not just Microsoft's -- is now in jeopardy, because, according to this ruling, an EULA is -- by definition -- a "contract of adhesion".

The next thing that they should go after is the concept that you don't actually *own* software that you purchase, you only "license" it. That could certainly be seen as a "contract of adhesion" ('procedurally unconscionable') imposed in a one-sided way and thus unlawful as well.

Re:Not a good decision, really

[hibiki_r]

That's backwards: If it can be converted into money, it has real value. You can exchange US dollars for linden dollars and vice versa, by going through the developer itself!

Besides, what does taxing have to do with anything? If I don't pay taxes on something that the tax code claims should be taxed you are not dealing with something with no value: what you have is tax evasion. Don't put the cart before the horse

Re:An eye on WoW

[sampson7]

One key element of the Judge's (very well written) opinion is that Second Life holds itself out as granting something akin to a traditional property right in the virtual world that it has created. Blizzard's policy, in contrast, has always been that it owns the virtual "property" and grants you a license to play with it.

In other words, Second Life offers to let you buy a portion of its sandbox, while Blizzard merely lets you play in it. In one case, you can take your toys and go home since you own the toys, in the other, you cannot.