Where the proprietor of a virtual community generally fails to enforce the rules, could it be estopped from doing so in any particular instance?

Despite a clear contractual right to terminate, a provider may be estopped from terminating in circumstances where it would be unconscionable to do so.¹⁾ In order to prevent the provider from terminating, a participant would have to show that the provider had represented that it would not terminate, that the participant relied on that representation to his or her detriment, and that it would be unjust or inequitable for the provider to terminate in those circumstances.

The representation that the provider would not rely on the right to terminate does not need to be explicit, but it must be unequivocal.²⁾ The representation does not need to be made to a particular person, but can be made to a class of people.³⁾ Where breaches of a particular rule are widespread, a long-standing failure to enforce the rule could conceivably be construed as a representation that the provider will not enforce the rule in future. However, such non-enforcement could also be construed as not making any representation as to the future.⁴⁾ The requirement that the representation be unambiguous does not mean that “it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed.”⁵⁾ Whether a representation has been made is a question of fact, and its existence “must be decided on ordinary common law principles of construction and of what is reasonable, without fine distinctions or technicalities.”⁶⁾ In practice, while possible, it may be quite difficult for a participant to establish that the provider represented that it would not enforce a rule in future or against any particular person.

If a representation can be shown, the participant must also be able to show that he or she reasonably relied on that representation. While showing reliance may be straightforward – in that the participant would not have engaged in conduct that technically broke the rules if he or she did not believe that the rule would not be enforced – showing that the reliance was reasonable may be more difficult. In Galaxidis v Galaxidis, Tobias JA (with whom the other members of the NSW Court of Appeal agreed) held that

the representation is sufficiently clear and unambiguous if it is reasonable for the representee to have interpreted the representation in a particular way being a meaning which it is clearly capable of bearing and upon which it is reasonable for the representee to rely.⁷⁾

Brennan J, in Walton Stores v Maher, held that it was “essential to the existence of an equity created by estoppel that the party who induces the adoption of the assumption or expectation knows or intends that the party who adopts it will act or abstain from acting in reliance on the assumption or expectation”.⁸⁾ Again, whether it is reasonable for a participant to rely on a representation that the provider will not enforce a strict contractual right will depend on the circumstances.

It may be difficult to establish in many cases, but it would certainly be open for a judge to find that a platform owner is estopped from terminating a particular participant's access to the virtual community where it takes no action against others who have habitually broken the same rule. If an estoppel can be established, it is important to consider that estoppel does require that that the representation or promise be fulfilled, but instead only provides a remedy for the detriment suffered as a result of reliance upon the representation.⁹⁾ For this reason, an estoppel, unlike an election, is not permanent – if the detriment to the relying party can be cured, the provider will once again be entitled to exercise its rights. For practical purposes, this means that given sufficient warning, a provider may be able to begin to enforce rules which it had largely ignored in the past.

There is a lot of flexibility in the doctrine of estoppel, and a significant normative question arises as to whether it ought to apply in any given case.¹⁰⁾ In the most extreme cases, it will almost certainly be effective as a brake on the ability of platform owners to rely on strict contractual rights which it has encouraged participants to believe would not be enforced. Its application in other circumstances, however, will depend in a large part on the discretion of the court as to how the alleged representation is interpreted and how reasonable the court believes the reliance on that representation to be. Like the other ways in which strict contractual rights can be read down, I believe that these considerations will depend particularly on the importance which the court attaches to the interests of the participant at issue.

It is common practice for the EULAs and ToSs written by providers of virtual worlds to prohibit a broad range of conduct, but to only rarely enforce those prohibitions as written. Could it be possible that by failing to enforce, the provider could be prevented from exercising the right to terminate for breach? For example, if the ToS prohibits RMT, but the provider knows that everyone engages in RMT and generally turns a blind eye, could it be prevented from enforcing the ToS against one particular participant?

In prohibiting certain conduct, a contract will usually provide a right of termination to the platform owner. In certain circumstances, where the right of termination has not been consistently exercised, the platform owner may be treated as having affirmed the breach and elected to continue the contract. Election, in this sense, refers to a choice between inconsistent rights – the right to receive performance of the contract and the right to terminate.¹⁾ If faced with a threatened or purported termination, the onus of proving that the platform owner has elected to affirm is on the participant.²⁾ The participant must be able to show that the platform owner knew of the breach, and unequivocally, by words or conduct, indicated a choice not to terminate.

The requisite knowledge is at least knowledge of the breach, and may extend to knowledge of the existence of the right to terminate.³⁾ In most cases where the platform owner is alleged to have affirmed the contract, given the fact that the platform owner is used to dealing with such cases and is usually legally advised, it would generally be possible to presume that it knew of its right to terminate if it knew of the circumstances of the breach.⁴⁾ The more important question will be whether knowledge can be implied from the fact that many different people are acting in breach of their respective agreements, or whether actual knowledge of the specific breach is required before an election can be effective.⁵⁾ As a question of fact, this will always depend on the circumstances, but it is possible that in many cases, knowledge only of general non-compliance with a EULA will not be sufficient to give rise to an election in a particular instance.

If knowledge can be imputed, the participant must still be able to show an unequivocal choice. Subjective intent is not required; instead, the provider must be shown to have objectively conducted itself in a manner “which would be justifiable only if an election had been made one way or the other”.⁶⁾ Because express communication of a choice is unlikely in the circumstances we are concerned with, the participant will be required to show conduct which is inconsistent with the exercise of the right to terminate. Mere failure to immediately terminate is not sufficient, as long as the provider does nothing to affirm the contract and so long as the participant is not prejudiced by the delay.⁷⁾ However, voluntary receipt of the participant's performance (for example, receipt of the monthly subscription fee) could be treated as unequivocal conduct.⁸⁾

The doctrine of election potentially provides an interesting limit on the ability of providers to terminate a subscription for breach where they are aware of the breach and continue to receive subscription fees. It will almost certainly be effective where the provider has actual knowledge of the breach and neglects to terminate before the next subscription fee is collected.⁹⁾ It is less likely to be effective where there is only actual knowledge of general non-compliance and constructive knowledge of a particular participant's breach, but it is not unimaginable that a court could find that an election had been carried out in these circumstances. In most cases, however, unless actual knowledge can be shown, a participant may have a better chance at imposing a limit on termination by estoppel rather than election. More on that later.

Please stop attacking my site.

195.5.117.252 - - [18/Apr/2008:09:01:01 -0500] “GET /gallery/update.php HTTP/1.1” 200 31008 ”-” “User-Agent: Opera/9.27 (Windows NT 5.2; U; ru)”

For everyone else, my server was compromised this morning using an exploit for an old version of the coppermine photo gallery software.

I have removed the gallery from this site (and others I run), and I've now restored everything from a clean backup.

Moral of the story: Don't, ever, under any circumstances, run old code and forget about updating it to patch against new exploits.

In Australia, blind people are able to access texts in braille and books on tape, but the demand for these media is decreasing. Blind people today are increasingly reliant on texts in electronic form, and these are much less readily available in Australia. Electronic texts are more portable and less cumbersome than large braille volumes, and are much faster to navigate than audio recordings. However, in Australia it is difficult for blind people to get access to a wide range of electronic texts and there exists no scheme enabling such access. At the same time sighted people are using electronic text and other digital media at an ever-increasing rate. In order to approximate the same level of access as sighted people, blind people require access to accessible electronic versions of all published material. The authors suggest that given the legal imperatives of Australia’s domestic legislation, treaty obligations and social values, that there exists a moral imperative to create a scheme providing blind people with access to digital print media.

Thanks to the MALR and LexisNexis, it's available here under a CC BY-NC-SA 2.5 (AU) licence. Attribution must be to the authors and the publisher (first published by LexisNexis and MALR).

Published as Nicolas Suzor, Paul Harpur and Dilan Thampapillai, 'Digital copyright and disability discrimination: From braille books to bookshare' (2008) 13(1) MALR 1.

I recently had the good fortune to review a paper by Judge Ung-gi Yoon on RMT.

You can find the paper at SSRN: Real Money Trading in MMORPG items from a Legal and Policy Perspective.

I really enjoyed this paper, and recommend that you take a look if you're interested in the topic. The analogy to goodwill is really interesting, and there are some great critical insights about the choices that game developers make, which inevitably encourage RMT, and the benefits they receive from RMT. These recognitions set the stage for an interesting debate about the extent to which developers and publishers can then purport to rely on contractual terms which prohibit RMT.

In this article, Judge Ung-gi Yoon considers the legal status of Real Money Trading (RMT) in Massively Multiplayer Online Role-Playing Games (MMORPGs). Judge Yoon notes that in-game items are virtually treated as personal property, but are only legally recognised as information goods. The right of ownership of these goods belongs to the developers, and players have a right to use, as conferred by the terms of service. In contrast, players own the rights in content they create themselves within the game. Transfers of in-game items, as a manifestation of real human will, can accordingly be seen to be transfers intended to have real legal effect in the form of a transfer of a portion of the right to use over the game service held by a user in the real world.

Judge Yoon argues that declarations of intent by players within a game environment cannot be unilaterally ignored by the legal system, and must instead be individually judged to determine whether they were intended to be legally binding. In this conception, internal rules which are consistent with game play should be given precedence over external real-world rules. However, real-world rules should be applied in cases where the intent is unrelated to the game's proper context, for example in cases of in-game defamation.

Through this framework, Judge Yoon considers RMT, noting that most discussions of RMT in South Korea and elsewhere characterise the objects of real-world transactions as the in-game items. This characterisation, however, is flawed because in-game items are not capable of being treated as personal property. An alternate suggestion is that the transaction is characterised as a sale of a right to use, but this characterisation fails to adequately explain the disparity in values of right to use versus the fees charged by the MMORPG operators, and presents a large liability problem for the operators with regards to the valuable rights to use of their users.

Judge Yoon argues that neither of these models are satisfactory – the object of RMT is neither the item itself nor the right to use the item, but rather something entirely distinct. Instead, the objects of RMT are better recognised as 'play values', and the monetary compensation is a 'gwonri-geum' (lease goodwill) payment. This analysis makes an analogy between the transfer of goodwill and RMT, where the transfer is not a purchase of an item or the right to use, but rather a payment for the effort the other party has invested in obtaining the item. On this analysis, RMT does not concern the operator any more than sales of goodwill concern the lessor of a business property.

It follows that if RMT is not the transfer of an item or the right to use an item, but rather a transfer of goodwill, then it must fall within the domain of private autonomy of players, and developers and publishers have no legal standing to interfere with the transfer. However, because the value in RMT transactions is the goodwill associated with the item and not the item itself, RMT does not impose liability on the publishers for protection of the items. A publisher's liability will be limited to the original value of the item (related to the subscription fee), and not for the amounts in which associated goodwill is traded.

Judge Yoon argues that developers and publishers need to face the reality that market pressures have transformed play into real economic activity, a transformation which resulted from the game design choices made by the developers.

The fact that goodwill transfers are outside the scope of regulation by the publisher does not mean that the publisher has no right to regulate related activities. For example, prohibiting in-game advertising of RMT may be prohibited because it interferes with gameplay. Judge Yoon suggests that publishers ought to disclaim any involvement and liability with regard to monetary transactions between players, but reserve the right to regulate the in-game behaviour of players. Judge Yoon argues further that there is no real legal basis for justifying the imposition of restrictions on RMT transactions, and such bans are unfair insofar as they heavily infringe upon players’ rights to the intangible value they have created.

Judge Yoon points out that many publishers and operators do not care to correct structural issues in their games which lead to RMT, as RMT indirectly increases their revenue. However, by including an unenforceable ban on RMT in their terms of service which is of questionable validity, publishers are hypocritically covering themselves in cases where the negative social effects of RMT, particularly on the welfare of youth, are brought into question. Judge Yoon concludes that doing away with bans on RMT can alleviate some of the problems which have been recognised in South Korea, by respecting the personal autonomy of players, allowing trade to occur in a more stable environment and making it easier to deal with fraudulent traders.