May 4th, 2007 by Benjamin Duranske, by way of VirtualLaw

The dirty little legal secret of Second Life isn’t the virtual escorts, illegal gambling, ponzi schemes, or even money laundering, but trade mark infringement.
Here are a handful of numbers gathered May 4, 2007, that begin to illuminate the scope of the problem:
* There are at least 16 shops in Second Life advertising that they sell “Ferrari” cars. One model sells for L$1995 (approximately US $7.75). Ferrari does not have an official presence in Second Life.
* At least 40 stores in Second Life advertise virtual “Rolex” and “Chanel” watches, averaging around L$350 (US $1.61). Neither Rolex nor Chanel runs any of these stores.
* Ferarri Rolex Chanel Gucci Rayban Oakley Prada and Nike Knock-Offs in Second LifeThere are more than 50 stores in Second Life carrying virtual sunglasses branded “Gucci,” “Prada,” “Rayban,” and “Oakley.” Each pair is priced around L$125 (US $0.75). None of these stores appears to be owned, sponsored, endorsed, or licensed by any of these companies.
* Even geek-darling Apple isn’t immune. A half-dozen stores in Second Life sell virtual “iPods” for avatars. Some add copyright infringement, preloading the unlicensed “iPods” with songs from artists ranging from Michael Jackson to Gwen Stefani. Apple is not behind these stores.

and so on… The economics of this are big, even with conservative estimates.

This past March, about 11,500,000 transactions took place within Second Life. There’s no way to know exactly how many involved knock-off goods, but a quick overview of in-world shopping areas reveals that well over 1% (probably closer to 3-5%) of the goods for sale in-world carry unlicensed trademarks. For the sake of argument, let’s be conservative and say that about 1% of the transactions in-world involve unlicensed trademarks. That’s about 115,000 instances of profitable, in-world trademark infringement in March, 2007, alone. Projected out, around 1.4 million transactions a year.Using an average transaction value of $1.50 (less than the current, saturated-market price of a knock-off Rolex) we’re in the range of US $2m in transactions involving counterfeit goods in Second Life every year.

This only supports my previous argument that popular trademarks shoudl be made the property of UNESCO. Aparently they have become so natural to mankind that not even a new, ‘virtual’ world can do without them….