In April 2009, the world’s largest manufacturer of stun guns (“Company 1”) sued the owner of one of the most popular websites in the “Virtual World” (“Company 2”). Company 2’s website allows players, called Residents, to interact with each other through avatars. Residents can explore, meet other residents, socialize, participate in individual and group activities, and create and exchange virtual properties and services with each other, or travel around the world, which residents refer to as the network. In its lawsuit, Company 1 claimed that Company 2 and other defendants damaged Company 1’s reputation and hurt its sales by allowing virtual weapons to be sold online under their brand name. Not only Company 1’s alleged complaint that Company 2 was infringing on its trademarks, but also that it was damaging its reputation by selling the virtual weaponry in the same online stores that included pornographic content.

The case was dismissed in May 2009, presumably because the parties resolved their dispute. However, the lawsuit should raise concerns about the surveillance of trademarks in the digital world. The law places a duty on trademark owners to monitor their trademarks. If your trademark is infringed and you allow the infringement to continue without taking action, you may face an argument that you have abandoned your trademark. Traditionally, policing your trademarks meant monitoring online and offline posts and other places where your trademark may be infringed. Now that real commerce is happening in virtual communities like Virtual World, the scope of surveillance has broadened. The supposed population of this particular virtual world is over 2 million, though opinions differ. However, there are many people “playing” and several companies, from Reuters to IBM, have installed virtual world windows. It’s unclear what Virtual World’s annual GDP is (estimates range from $ 64 million to $ 200 million), but whatever it is, it’s not small.

With the commercialization of the Virtual World by real companies, concern about the protection of intellectual property rights has grown. Copyright owners can protect their rights through the Digital Millennium Copyright Act (DMCA) procedures, which Virtual World claims it will enforce. The DMCA requires service providers, upon notification of copyright owners, to remove and ban repeat infringers. It is in Virtual World’s best interest to comply with the DMCA or else it may also be subject to liability for the infringing activities of its users.

Unfortunately, there are no such protections for trademarks. The DMCA does not apply in this area, only the provisions of the Lanham Act, which prohibits trademark infringement. Although Virtual World may enforce trademark rights by enforcing its Terms of Service, it specifically states that users are responsible for complying with copyright law, but has no provision, like Facebook’s, to report violations. Apparently, however, there are many infractions. One commenter observed:

“By last, [Company 2] the creator of [Virtual World], relies on the vigilance of SL community residents to monitor trademark and copyright abuses. However, one boutique still sells a virtual reproduction of the entire Ikea catalog. Virtual computers with the Apple logo have been sold without permission from Apple. Residents walk the streets of [Virtual World] They wear imitation clothing and are sought after by black market vendors who sell entire lines of counterfeit goods. [Company 2] You may not be actively looking for offensive material, but many of the infringing acts are so rampant and flagrant that ignoring these abuses practically amounts to deliberate ignorance. “Chilling Effects.Org

It sounds like the wild west, so stay tuned.