[Rutgers University law professor Greg Lastowka looks at whether players can and should be granted legal ownership of virtual items, whether or not there's any existing legal precedent and how the virtual item landscape may change in the near future.]

In the spring of 2011, an English newspaper reported that over 300 prisoners at the Jixi labor camp in northeastern China were being forced to work 12-hbaour shifts at night playing video games. These night shifts followed long days of forced manual labor. The prisoners were playing games in order to gather virtual gold. They were beaten if they failed to meet their production quotas. Incidents of prison brutality in China may not be surprising, but prisoners being forced to play online games was certainly something new.

Why would prison guards force inmates to play online games? The answer, as anyone familiar with MMORPGs should know, is that the objects and currency they obtained could be sold for real money. The prison guards sold the fruits of the inmate labor to line their own pockets.

In the United States, I have met many people who have sold some form of virtual property from an online game. Most have made a few thousand (real) dollars -- some substantially more -- selling off the assets they acquired in MMORPGs.

Most game companies are not happy about this, and for good reason. Game companies would rather avoid the task of mediating player disputes.

To illustrate: say that Player A claims he paid Player B real money for a virtual sword, but Player B didn't deliver that sword. Or say Player B claims he delivered a virtual sword to Player A, but claims Player A didn't pay for it. Chances are that this dispute will be brought first to the game company. From the standpoint of the game company, meting out virtual justice between A and B is simply a needless customer service cost.

But this isn't the only problem. As Richard Bartle has explained, games that allow real money markets for virtual property risk a host of pitfalls. Trading real money for virtual loot destroys immersion, ruins game balance, raises legal issues with regard to taxation and intellectual property rights, and to some MMORPG players, seems a lot like cheating. Perhaps a company can build a game that profitably incorporates real money trading in player-owned virtual property, but it is a very tricky business to get right.

So most game companies, wisely, advise their players that they have no rights in the virtual items they acquire. Despite this, as the example of Jixi labor camp shows, sales of virtual property persist. In fact, some have estimated that these trades form a multi-billion dollar market. And so the property puzzles persist as well.

The most tragic story of virtual property is another tale from China.

In 2004, a Chinese gamer from Shanghai, Qiu Chengwei, found a Dragon Saber in the Korean MMORPG Legend of Mir. The Dragon Saber was so powerful that it was worth almost a thousand dollars. A friend of Qiu, Zhu Caoyuan, asked him if he could borrow the sword. When Qiu transferred the sword, Zhu sold it to another player and pocketed the money. Qiu had not just lost his virtual sword; he had lost a substantial sum of money.

I do not know if Qiu went to the game company, but he did complain to the Chinese police. The police, however, turned him away, explaining that according to the law, the Dragon Saber wasn't his legal property.

So, after brooding over the loss for several days, Qiu confronted Zhu in person. There was a fight, Qiu pulled out a (real) knife, and stabbed Zhu, killing him. He then turned himself in to the police. The last news report I read about Qiu Chengwei stated that he was serving a life sentence in a Chinese prison. Presumably, given the location of Shanghai, he is not among the gold farmers at the Jixi labor camp.

Ever since I read the first news story about Qiu Chengwei, I have been wondering: were the Chinese police right to turn him away? Or should they have accepted his claim that virtual items can constitute legal property?

In the United States, the law would seem to be on his side, since we already recognize many forms of intangible property. Mickey Mouse is a form of legal property. Game software is a form of legal property. Electricity can be legal property. Some courts have found that internet domain names are property as well. The money in your bank account is property, even though it is nothing more than bits of data stored on a computer. So why should a valuable virtual sword be invisible to the law?

However, even if virtual property is theoretically capable of legal recognition, that doesn't mean that recognizing it is good policy. If you own your virtual Dragon Saber, for instance, that seems to imply that you should be compensated for its loss if the game company decides to shut down its servers.

Worse yet, you might even make a legal claim about a nerfing patch. What game company would want to create an MMORPG if the legal environment constrained their freedom to devalue the virtual property of players?

An additional argument is that game owners, not players, should be understood as the true owners of virtual property. The game company pays for the physical servers on which the virtual property resides. It creates and sustains the software.

It owns the copyright and other intellectual property rights embodied in the game code. It creates the rules of the game and embodies them in the software. And most game companies even put their position in writing: they explain to players, in their terms of service document, that the players have no property interests in the virtual items they acquire.

Finally, there is common sense: do we really want judges and lawyers sorting out disputes over Dragon Sabers? Not everyone loves our legal system. Many people would prefer to keep games as lawyer-free as possible. Aren't games just games?

These are good arguments. There are good policy reasons for not recognizing virtual property rights. Yet the law on the books in the United States doesn't make that outcome certain. Many legal statutes today define property as "anything of value."

So if a person has the practical ability to sell something for a thousand dollars, and someone else fraudulently deprives them of that thing and sells it for a thousand dollars, the law should, in theory, come to the victim's rescue. Should the law really draw a line between the wrongful theft of a rare baseball card and the wrongful theft of a Dragon Saber? Do we really want virtual criminals to be outside the law?

To be clear: I'm not advocating that those who play MMORPGs should have a full right to own in-game items. As other commentators (such as my friend Unggi Yoon) have pointed out, a full-fledged property right in virtual items is not really necessary or feasible.

But I think we should at least consider recognizing some lesser form of virtual property right -- something like the legal rights of "easements" and "bailments." These are lesser property rights that protect one person's interest in using and possessing, respectively, another person's property. My concern here isn't about our current virtual landscape, but about the future.

Before we deny legal rights to those who are defrauded of virtual property, we should consider where our technologies are headed. In the last decade, we've seen a boom in social gaming platforms, virtual item sales, and virtual currencies. A small but growing number of lawyers are specializing in the murky law of virtual currencies and virtual economies. Over two hundred law review articles have been published about virtual property and virtual economies. Slowly, governments are taking notice.

In the past couple of years, I've talked with both legislators and law enforcement agents about the questions raised by virtual property and virtual crime. Yet much of this is so new that the law is unsettled. Only a handful of virtual property disputes have made their way into courtrooms. Several involve Second Life, a few involve World of Warcraft, and many involve courts and laws outside the United States, like the arrest in Japan after a MapleStory "murder" and a pair of cases from the Netherlands involving virtual crimes by minors.

The status quo is probably reassuring to game companies. Player claims to virtual property have not yet been recognized by any court in this country to date. Yet should we be happy with our system of virtual feudalism?

Before you answer that, consider how we increasingly invest our time, creativity, money, and social lives in various "cloud" castles: the servers of Facebook, Google, Apple, and Amazon. Our presence in these online places gives us very little in the way of property rights, but we return to these services because they are enjoyable.

Our efforts are monetized by our virtual hosts. The feudal analogy is especially fitting for the millions of microserfs who voluntarily till the fields of FarmVille, paying real money for the privilege of owning virtual tractors and seeds -- yet legally owning nothing.

Some gamification proponents are seeking to expand these virtual economies. They want to bring virtual currencies into our work lives and social networks, persuading us to convert more of our cash and effort into points, tokens, badges, and virtual coinage. We will be asked to perform microlabors to earn new virtual variants of the old company scrip. The gamification dream seems to be that our lives will be spent playing (but actually working) in a mobile always-on massively-multiplayer alternate-reality game. We'll be in the Jixi labor camp, more or less, but laboring happily, without the beatings. Who knows if that dream will come true... but do we want laws that enable it?

Last year I published a book about these issues with Yale University Press. The title is Virtual Justice: The New Laws of Online Worlds. In the book, I go into more detail about the law of virtual property, and also explore questions about the law of copyright, computer hacking, jurisdictions, and games. If you're curious, my publisher gave me permission to share the electronic version, so you can download a full (and free) PDF version of the book here.

I admit that worries about the legal status of virtual swords may seem a little strange and silly today, but we are still in the early days of online law. The puzzles of virtual gold may be the canary in the coal mine of our future law. If the legal system says you don't own your virtual sword, how likely is it that you'll own your virtual life?