BRAGG v. LINDEN RESEARCH, INC. et al

Filing 63

BRAGG v. LINDEN RESEARCH, INC. et al

Doc. 63

Case 2:06-cv-04925-ER

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Filed 06/28/2007

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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA _________________________________________ : MARC BRAGG, Esq., an individual, : : Plaintiff, : : v. : : LINDEN RESEARCH, INC., a corporation, : and PHILIP ROSEDALE, an individual, : : Defendants. : _________________________________________ : : LINDEN RESEARCH, INC., a corporation, : : Counterclaim Plaintiff, : : v. : : MARC BRAGG, an individual, : : Counterclaim Defendant. : _________________________________________ :

CIVIL ACTION Case No. 06-4925

DEFENDANTS LINDEN RESEARCH, INC. AND PHILIP ROSEDALE'S ANSWER TO COMPLAINT AND LINDEN RESEARCH, INC.'s COUNTERCLAIMS AGAINST PLAINTIFF MARC BRAGG FOR: 1) FEDERAL COMPUTER FRAUD, 18 U.S.C. § 1030 2) CALIFORNIA STATUTORY COMPUTER FRAUD, CAL. PENAL CODE § 502 3) BREACH OF CONTRACT 4) BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING 5) CALIFORNIA STATUTORY UNFAIR COMPETITION, CAL. BUS. & PROF. CODE § 17200 6) DECLARATORY JUDGMENT DEMAND FOR JURY TRIAL 1
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PRELIMINARY STATEMENT In his complaint, Bragg attempts to cast this as a case with broad implications about whether "virtual land" ­ actually, access to computing resources that enable a virtual representation of land in a three-dimensional online digital "world" ­ is subject to the laws governing real property. That is not what this case is about. It is a dispute about whether an online service may suspend a user from that service for engaging in a fraudulent scheme to obtain money, to the detriment of the service and its user community. ANSWER Defendants Linden Research, Inc. ("Linden") and Philip Rosedale ("Rosedale") (collectively, "Defendants") by and through their undersigned attorneys, hereby respond to the Complaint of Plaintiff Marc Bragg ("Bragg") in the above-captioned action as follows: THE PARTIES 1. Defendants lack information or belief sufficient to admit or deny the allegations in

Paragraph 1 of the Complaint, and on that basis deny them. 2. 3. Defendants admit the allegations in Paragraph 2 of the Complaint. Defendants admit that Rosedale is an adult individual and a resident of the State

of California. Rosedale's business address is 945 Battery Street, San Francisco, California 94111, and he can be contacted through counsel in connection with this matter. FACTS BACKGROUND 4. Defendants aver that Linden operates a three-dimensional online platform known

as "Second Life" and hosted at the URL http://secondlife.com. Defendants deny that Second Life is accurately characterized as a massively-multiplayer-online-role-playing game ("MMORPG"), although Second Life does share certain characteristics with such games (in that both are online environments rendered in three dimensions in which users are represented by avatars) and is sometimes compared with them in the media. 5.
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Defendants admit the allegations in Paragraph 5 of the Complaint. 2

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6. 7.

Defendants admit the allegations in Paragraph 6 of the Complaint. Defendants admit that the Second Life platform contains digital representations of

many real world items, such as cars and clothing, as well as embodiments of fantasy that do not exist in the real world (hereafter, virtual items created by Second Life users are referred to as "Objects"). Except as expressly admitted herein, Defendants deny the allegations in Paragraph 7 of the Complaint. 8. Defendants admit that Second Life contains an integrated economy that enables

users to purchase and sell rights in Objects or other user-created content for various forms of consideration. Defendants further admit that, subject to the Second Life Terms of Service and other applicable rules and policies, Second Life users may also purchase and sell representations of parcels of "land" in Second Life, hereinafter referred to as "virtual land." Defendants deny that Second Life allows for the actual "conveyance of title" in "virtual land," as "virtual land" is not property to which one may take "title," but instead a license of access to Linden's proprietary servers, storage space, bandwidth, memory allocation and computational resources of the server, which enables the experience of "land" and the things that one can do with "land" on the Second Life platform. Defendants further admit that the access rights represented by "virtual land" in Second Life can be purchased using Linden Dollars or U.S. Dollars. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 8 of the Complaint. 9. Defendants admit that the allegations in Paragraph 9 of the Complaint contain

generally accurate descriptions of some of the things users can do in Second Life. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 9 of the Complaint. 10. Defendants admit that Second Life has been referred to as a game, but aver that it

is more accurately characterized as a three dimensional development platform or a computing platform. Defendants further admit that Linden is a business that operates the Second Life development platform to generate revenue for the company. Defendants further admit that Rosedale has referred publicly to Second Life as a platform, rather than a game. Defendants deny that Second Life has generated a "substantial profit" for Linden, and further deny that 3
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Rosedale shares directly in profit generated from Second Life, apart from participation in a profit sharing program available to all Linden employees. Except as expressly admitted herein,

Defendants deny the allegations in Paragraph 10 of the Complaint. RESPONSES TO PLAINTIFF'S ALLEGATIONS REGARDING "VIRTUAL WORDS" 11. Defendants deny that Second Life is accurately characterized as an MMORPG,

although Defendants admit that Second Life does share certain characteristics with such games, in that both are online environments rendered in three dimensions in which users are represented by avatars. Defendants admit that Linden acknowledges users' intellectual property rights in Objects or other content of their original creation as set forth in and subject to the Second Life Terms of Service. Defendants admit that unlike users of MMORPGs, Second Life users can obtain rights analogous to ownership in "virtual land," as stated above in this Answer, and that Linden has made representations to this effect. Linden avers that the Second Life Terms of Service agreement speaks for itself. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 11 of the Complaint. 12. 13. Defendants admit the allegations in Paragraph 12 of the Complaint. Defendants admit on information and belief that many people use the Internet to

form friendships with others, create and acquire content, form contracts, and form business relationships and social organizations. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 13 of the Complaint. 14. Defendants lack information or belief sufficient to admit or deny the allegations in

Paragraph 14 of the Complaint, and on that basis deny them. 15. Defendants admit that Linden reserves the right to enforce its contractual rights

with users through real world laws. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 15 of the Complaint. 16. Defendants deny that Second Life is comparable or analogous to Disney World.

Defendants admit that Second Life users operate virtual shops selling Objects in Second Life. 4
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Except as expressly admitted herein, Defendants deny the allegations in Paragraph 16 of the Complaint. 17. Defendants admit that Linden sells to Second Life users rights to "virtual land" in

Second Life, namely, a license of access to Linden's proprietary servers, storage space, bandwidth, memory allocation and computational resources of the server, which enables the experience of "land" and the things that one can do with "virtual land" on the Second Life platform. Defendants deny that "Linden no longer owns the very world they [sic] created." Defendants admit that Rosedale has referred generally to Second Life as being like a new country. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 17 of the Complaint. 18. Defendants admit that in some respects the Second Life virtual platform, or

environment, is like the Internet, but in three dimensions. Defendants further admit that the viewer, or client side of Second Life is analogous to an Internet browser, in that it gives the user access to the Second Life environment. Defendants further admit that the places one can visit using this browser, i.e., the "virtual land" in the Second Life environment, are essentially three dimensional graphical websites on which users can create content. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 18 of the Complaint. 19. 20. Windows. Defendants admit the allegations in Paragraph 19 of the Complaint. Defendants deny that Second Life was designed to compete with Microsoft On information and belief, Defendants admit the remaining allegations in

Paragraph 20 of the Complaint. RESPONSES TO PLAINTIFF'S ALLEGATIONS REGARDING "VIRTUAL ITEM AND PROPERTY OWNERSHIP" 21. Defendants deny the allegations of Paragraph 21 to the extent they are based on

the incorrect premise that an online platform such as Second Life is comparable or analogous to MMORPGs or other services that may fall within Bragg's definition of "virtual worlds." Defendants admit, on information and belief, that operators of some MMORPGs claim exclusive 5
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ownership of the intellectual property rights in content that "exist[s] inside the game world." Defendants lack information and belief as to whether both "virtual items" and "virtual land" are "referred to generally by participants in such worlds as 'virtual property,'" and aver that in the case of Second Life there is a fundamental difference between user-created original Objects (as to which Linden recognizes users' intellectual property rights) and "virtual land" purchased from Linden or other users (as to which users do not have intellectual property rights). Except as expressly admitted herein, Defendants deny the allegations in Paragraph 21 of the Complaint. 22. Defendants deny the allegations of Paragraph 22 to the extent they are based on

the incorrect premise that "virtual items" in MMORPGs that are not created by users, but are the intellectual property of the operator of the MMORPG, are analogous to Objects or other original content created by users in Second Life. Defendants admit, on information and belief, that MMORPG operators have objected to users' alleged violations of the operators' intellectual property rights in game items. Except as expressly admitted herein, Defendants deny the

allegations in Paragraph 22 of the Complaint. 23. Defendants admit, on information and belief, that some MMORPGs derive

revenue from subscription fees. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 23 of the Complaint. 24. Defendants specifically deny that Second Life is part of the MMORPG

"industry." Defendants lack information and belief as to whether there is an "industry standard" as alleged in Paragraph 24 of the Complaint, because what that "industry" is is not stated, and on that basis Defendants deny the allegations that purport to define such an "industry standard." Defendants deny the remaining allegations in Paragraph 24 of the Complaint. 25. Defendants lack information or belief sufficient to admit or deny the allegations in

Paragraph 25 of the Complaint, and on that basis deny them. 26. On information and belief, Defendants are aware that a market exists for the

exchange of non user-created MMORPG game items outside of the MMORPG environments, and that operators of MMORPGs have objected to that practice. Except as expressly admitted 6
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herein, Defendants deny the allegations in Paragraph 26. 27. Defendants lack information or belief as to whether a "golden opportunity has

existed for some time for any virtual world game company to legitimize the buying and selling of" non-user created game items "by the payment and exchange of U.S. dollars," and on that basis Defendants deny the allegations in Paragraph 27 of the Complaint. RESPONSES TO PLAINTIFF'S ALLEGATIONS REGARDING "SECOND LIFE'S PLACE IN THE CROWDED MMORPG MARKET" 28. Defendants deny the allegations of Paragraph 28 of the Complaint to the extent it

is based on the false premise that there is a broadly-defined "industry for participants in virtual worlds" that includes both Second Life and MMORPGs as competitors. Defendants admit that commercial launch of Second Life occurred in 2003. Defendants lack information and belief as to whether "the competition in the [MMORPG] industry for participants in virtual worlds was fierce and the industry was dominated by well-known players" and on that basis deny same. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 28 of the Complaint. 29. 30. 31. Defendants deny the allegations in Paragraph 29 of the Complaint. Defendants deny the allegations in Paragraph 30 of the Complaint. Defendants aver that Linden has not created a significant portion of content in

Second Life ­ its intent was to create a flexible three dimensional development platform with building tools, allowing users to design their own virtual environment. Defendants deny that "Second Life generally languished and trailed its peers in terms of participants," as Second Life was unique, and not an MMORPG, and had no peers, and further deny that Second Life can be meaningfully compared to an MMORPG. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 31 of the Complaint. 32. Defendants admit that from its inception, Linden differentiated Second Life from

MMORPGs by providing users the opportunity to create a broad range of content of their own design, and that consistent with this principle, in or about November 2003, Linden announced a 7
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revision to the Second Life's Terms of Service to expressly recognize users' intellectual property rights in such creations. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 32 of the Complaint. 33. Defendants deny that Linden announced a "new business model," and aver that

Linden announced a change to the Second Life Terms of Service to provide express recognition of users' intellectual property rights in their original content at the "State of Play" conference in November, 2003, and that a press release followed shortly thereafter. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 33 of the Complaint. 34. 35. Defendants admit the allegations in Paragraph 34 of the Complaint. Defendants admit that Linden's November 14, 2003 press release stated, among

other things, that "the revised [Terms of Service] allows subscribers to retain full intellectual property protection for the digital content they create, including characters, clothing, scripts, textures, objects and designs." Except as expressly admitted herein, Defendants deny the

allegations in Paragraph 35 of the Complaint. 36. Defendants admit the allegations in Paragraph 36 of the Complaint, including that

Linden's November 14, 2003 press release stated, among other things, that "`Until now, any content created by users for persistent state worlds, such as EverQuest® or Star Wars GalaxiesTM, has essentially become the property of the company developing and housing the world,' said Rosedale. `We believe our new policy recognizes the fact that persistent world users are making significant contributions to building these worlds and should be able to both own the content they create and share in the value that is created. The preservation of users' property rights is a necessary step toward the emergence of genuinely real online worlds.'" Defendants further aver that the release continued: "Unlike traditional online game environments where anything created in-world is owned by the service provider, Second Life has responded to its residents' desire to own their work just as they would any other original creations. Under these terms they can create, and sell derivative works based on content they've made, or license the work to others." 8
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37.

Defendants aver that Lawrence Lessig, a Stanford University Professor of Law,

and Founder of the Stanford Center for Internet and Society, expressed support for Linden's recognition of the intellectual property rights of Second Life users. Defendants lack information or belief sufficient to admit or deny allegations regarding Professor Lessig's subjective beliefs, and on that basis deny the allegations in Paragraph 37 of the Complaint. 38. Defendants admit that Professor Lessig consented to being quoted in Linden's

November 14, 2003 press release, and that Paragraph 38 of the Complaint accurately reproduces that quote. Defendants lack information or belief sufficient to admit or deny allegations

regarding Professor Lessig's subjective beliefs, and on that basis deny the remaining allegations in Paragraph 38 of the Complaint. 39. Defendants admit that Lessig was quoted as stating that Linden was "poised for

significant growth." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 39 of the Complaint. 40. Defendants admit that between November 2003 and the present Second Life's

user base has grown. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 40 of the Complaint. 41. Defendants deny the allegations of Paragraph 41 of the Complaint, and aver that

in December 2003 Linden introduced version 1.2 of Second Life, which changed the model by which users could obtain rights to "virtual land." 42. Defendants admit that "ownership" of "virtual land" in Second Life is associated

with a charge known as a "tier" charge (also called a "land use fee"), corresponding to the amount of computing resources representing "virtual land" that a user is eligible to license. Defendants further admit that Rosedale stated to USA Today in or around June 2003 that under the new fee structure, revenue from tier charges exceeded revenue from subscription fees. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 42 of the Complaint. 43.
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Defendants admit that Paragraph 43 accurately reproduces excerpts from quotes 9

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attributed to Rosedale in an article in USAToday.com posted June 3, 2004. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 42 of the Complaint. 44. Defendants lack information or belief sufficient to admit or deny Bragg's

allegations that the alleged representations in fact caused users to purchase `virtual land" or to incur tier charges, and on that basis deny the allegations in Paragraph 44 of the Complaint. 45. Second Life. Defendants admit that Linden and Rosedale generally promoted features of Except as expressly admitted herein, Defendants deny the allegations in

Paragraph 45 of the Complaint. 46. Defendants admit the allegations in Paragraph 46 of the Complaint, and aver that

the quote "You create it, you own it ­ and it's yours to do with as you please" refers to users' ownership of intellectual property rights in Objects they create, and not to "virtual land." 47. Defendants admit that on or about June 14, 2005 Guardian Unlimited: Gamesblog

published an interview with Rosedale. Defendants further respond that the statements in that article speak for themselves. Except as expressly admitted herein, Defendants deny the

allegations in Paragraph 47 of the Complaint. 48. Defendants aver that in response to the question "Second Life famously offers its

players total ownership of their in-game creations. Why?" the June 14 Guardian Unlimited article quoted Rosedale as saying, in part, "We like to think of Second Life as ostensibly as real as a developing nation," and that, in the context of discussing the theories of Hernando DeSoto, author of "The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else," Rosedale was quoted as saying that DeSoto concludes that "[t]he fundamental basis of a successful developing nation is property ownership." Defendants admit that in response to the question "How does that Western capitalism translate into Second Life?" Rosedale was quoted as saying "We launched Second Life without out of world trade and after a few months we looked at it and thought, `We're not doing this right, we're doing this wrong.' We started selling land free and clear, and we sold the title, and we made it extremely clear that we were not the owner of the virtual property." Defendants aver that the references to "selling land free and 10
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clear" and selling "title" are metaphors or analogies to the concepts of ownership of real property, as what is "owned" with respect to "virtual land" in Second Life is in fact a license to computing resources. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 48 of the Complaint. 49. Defendants admit that the user base for Second Life has grown over time.

Defendants further admit that Linden earns revenue from Premium membership fees and from tier charges. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 49 of the Complaint. 50. Defendants admit that at the same time Linden released version 1.2 of Second

Life, Linden changed the fee structure to provide free access to Second Life. Defendants further admit that Paragraph 50 of the Complaint contains a portion of a quote attributed to Rosedale in an article posted at CNET news. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 50 of the Complaint. 51. Defendants admit that a Linden press release dated March 28, 2006 stated in part

that "Second Life has grown to over 165,000 residents with an economy worth over US$60mm per year." Defendants further admit that the press release also stated that "Second Life has enjoyed month over month record growth in subscriber acquisition, its economy and the number of subscribers that are generating profits in US currency." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 51 of the Complaint. 52. Defendants admit that the March 28, 2006 press release stated in part that Linden

had "completed a successful financing round of $11M led by Globespan Capital Partners and with participation by Jeff Bezos. Current investors Benchmark Capital, Catamount Ventures, software pioneer Mitch Kapor, and the Omidyar Network also participated in the round." Defendants specifically deny the implication that Defendants have made any misrepresentations to, or withheld any material information from, Lawrence Lessig or any Linden investors. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 52 of the Complaint. 53.
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Defendants admit that Defendants and Linden's investors have expressed interest 11

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in the "social good" of technology. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 53 of the Complaint. 54. Defendants admit that Paragraph 54 of the Complaint accurately quotes portions

of an interview of Rosedale discussing users' rights in Objects they create in Second Life, and discussing Hernando de Soto's "The Mystery of Capital" as it influenced Linden's policies on management and distribution of the "virtual land" in Second Life. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 54 of the Complaint. 55. Defendants admit that Rosedale has analogized Second Life to a developing

country. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 55 of the Complaint. 56. Defendants admit that on or about May 1, 2006, Linden put Bragg's account on

administrative hold pending investigation of irregular auction activity. Defendants further aver that as a result of Linden's investigation Linden determined that Bragg had fraudulently subverted the Second Life auction system, and thus Bragg's account status was updated to "fraud hold." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 56 of the Complaint. 57. Defendants admit that Paragraph 57 contains a portion of a statement attributed to

Rosedale from a podcast interview with AfterTV on or about July 20, 2006. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 57 of the Complaint. 58. Defendants admit that Paragraph 58 contains a portion of a statement attributed to

Rosedale from a podcast interview. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 58 of the Complaint. 59. Defendants admit that Paragraph 59 contains a portion of a statement attributed to

Rosedale from a podcast interview. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 59 of the Complaint. 60. Defendants admit that Paragraph 60 contains a portion of a statement attributed to

Rosedale from a podcast interview. Except as expressly admitted herein, Defendants deny the 12
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allegations in Paragraph 60 of the Complaint. 61. Defendants admit that in July 2006 the number of registered users in Second Life Except as expressly admitted herein, Defendants deny the

was approximately 300,000.

allegations in Paragraph 61 of the Complaint. 62. 63. Defendants deny the allegations in Paragraph 62 of the Complaint. Defendants admit, on information and belief, that generally press releases tend to

increase interest in the service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 63 of the Complaint. 64. Defendants deny the allegations in Paragraph 64 of the Complaint. RESPONSES TO PLAINTIFF'S ALLEGATIONS REGARDING "VIRTUAL PROPERTY IN SECOND LIFE" 65. Defendants admit that Linden represented that Second Life allowed users to have

rights analogous to ownership in "virtual land," although what is "owned" with respect to "virtual land" in Second Life is in fact a license to computing resources. Defendants further admit that Linden represented that it recognized the intellectual property rights of Second Life users in content of their original creation. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 65 of the Complaint. 66. 67. Defendants admit the allegations in Paragraph 66 of the Complaint. Defendants admit that Second Life users' Objects and "virtual land" are stored as

electromagnetic records on Linden's servers. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 67 of the Complaint. 68. Defendants admit that Second Life users with active accounts in good standing

may transfer the Objects they created or obtained as well as the "virtual land" they "own." Defendants deny that Objects may always be transferred "freely," as some users may put restrictions on copying or transfer of Objects they created. Defendants further admit that users may exchange Second Life Objects and "virtual land" for various forms of consideration. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 68 of the 13
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Complaint. 69. Defendants admit that the allegations in Paragraph 69 of the Complaint are

generally accurate descriptions of some features of Second Life Objects. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 69 of the Complaint. 70. Defendants admit that the transfer of Second Life Objects between and among

users can in some respects mimic real world exchanges. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 70 of the Complaint. 71. 72. Defendants deny the allegations in Paragraph 71 of the Complaint. Defendants admit that Linden recognizes users' intellectual property rights in Defendants aver that Linden owns the

content of their original creation in Second Life.

intellectual property in the code underlying the Second Life content. Defendants admit that some commentators have noted that Second Life is analogous to an operating system. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 72 of the Complaint. 73. Defendants admit that users who "own" "virtual land" in Second Life can invite

other users to that "virtual land," hold meetings on it, create or purchase Objects to put on it, or sell it to other users. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 73 of the Complaint. 74. 75. Defendants deny the allegations in Paragraph 74 of the Complaint. Defendants admit that the Second Life Objects and "virtual land" may have value

that can be measured in real U.S. dollars. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 75 of the Complaint. 76. Defendants admit that they have encouraged people to participate in Second Life,

and have promoted Linden's policies regarding intellectual property in user-created content and its policies regarding "virtual land." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 76 of the Complaint. 77. Defendants deny the allegations of Paragraph 77 of the Complaint to the extent

they are based on a false premise, namely, that Defendants transferred "title and ownership 14
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interests to Plaintiff in their virtual assets," when in fact Plaintiff was well aware that the "virtual land" he bought from Linden was a license to access Linden's proprietary server software, storage space, and computational power that enabled the experience of the "virtual land" in Second Life. On that basis, Defendants deny the allegations in Paragraph 77 of the Complaint. 78. Defendants deny the allegations in Paragraph 78 of the Complaint.

RESPONSES TO PLAINTIFF'S ALLEGATIONS REGARDING "VIRTUAL PROPERTY IN SECOND LIFE ­ PROPERTY OWNERSHIP" 79. Defendants admit that the allegations in Paragraph 79 of the Complaint are

generally accurate with respect to Premium membership in Second Life. Defendants aver that the Second Life tier fee is more accurately described as an access fee based on the amount of computer resources representing "virtual land" a user is entitled to license; from a technical standpoint, tier is a service fee for ongoing maintenance of the servers required to host the "virtual land," as well as provision of the computational processing power consumed. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 79 of the Complaint. 80. Defendants admit that Second Life users who purchase licenses to access the

computing resources that enable the experience of "virtual land" can do many things with the "virtual land," such as changing its appearance and reselling the rights to other users. Defendants deny that users hold or may convey "title" to "virtual land." Defendants deny the allegations of Paragraph 80 of the Complaint to the extent they are based on the false premise that Linden actually "create[s] `new' land" that "continues to exist," when in fact the "virtual land" is the output produced by Linden's computer software and hardware. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 80 of the Complaint. 81. Defendants admit the allegations in Paragraph 81 of the Complaint as they apply

to defendant Linden, except that the accounts are referred to as "Premium accounts," not "premier accounts." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 81 of the Complaint. 82.
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Defendants admit that Second Life users can access their personal account 15

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information, purchase Linden Dollars, buy and sell Linden Dollars for U.S. currency, pay for land, and monitor their accounts via the Internet. Defendants further admit that a currency exchange is maintained that sets the exchange rate between Linden Dollars and U.S. currency. Defendants further admit that there are third party currency exchanges that provide for the exchange of Linden Dollars to U.S. Dollars, and that Linden Dollars have been available for purchase on the eBay marketplace, located at the URL http://www.ebay.com. Except as

expressly admitted herein, Defendants deny the allegations in Paragraph 82 of the Complaint. 83. Defendants admit that the Second Life website states that users can cancel their

active accounts at any time. Defendants aver that the Second Life Terms of Service provided additional detail regarding the cancellation, suspension, and termination of accounts, as well as providing that cancelled accounts remain dormant for 60 days, and can be reactivated any time within that period. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 83 of the Complaint. RESPONSES TO PLAINTIFF'S ALLEGATIONS THAT "MARC BRAGG IS INDUCED INTO "PARTICIPATING" IN THE SECOND LIFE WORLD" 84. Defendants admit the allegations in Paragraph 84 of the Complaint on information

and belief as they apply to defendant Linden. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 84 of the Complaint. 85. Defendants lack sufficient information or belief to admit or deny the allegations in

Paragraph 85, and on that basis deny them. 86. 87. Defendants deny the allegations in Paragraph 86 of the Complaint. Defendants lack sufficient information or belief to admit or deny the allegations in

Paragraph 87 that pertain to Bragg's state of mind, and on that basis deny them. Defendants deny the remaining allegations in Paragraph 87 of the Complaint. 88. 89. Defendants deny the allegations in Paragraph 88 of the Complaint. Defendants admit that Bragg acquired some "virtual land" in Second Life, as well

as some virtual items. Defendants further admit that Exhibit 1 of the Complaint appears to be a 16
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list of "virtual land" in Bragg's account as of May 9, 2006, but Defendants lack information or belief as to the authenticity of that document. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 89 of the Complaint. 90. Defendants admit the allegations in Paragraph 90 of the Complaint. RESPONSES TO PLAINTIFF'S ALLEGATIONS REGARDING "SECOND LIFE'S AUCTION OF LAND" 91. Defendants admit that Linden generally sells "virtual land" via auctions hosted on Except as expressly admitted herein,

the Second Life website through Linden's servers.

Defendants deny the allegations in Paragraph 91 of the Complaint. 92. Defendants aver that the Second Life website states that to find "virtual land"

currently up for auction, users should review the list posted on the main auction page of the website. Defendants further aver that to view parcels of "virtual land" set aside to be auctioned, users can search an in-world map of the Second Life environment for the "virtual land" that has been published for auction, or users can take their avatars to a region and view land marked purple, which, as the website explains, indicates both (a) parcels currently up for auction and (b) parcels that users can preview, but which are not yet up for auction. Defendants further aver that to determine which of the purple parcels are currently up for auction, and which are not, users simply check the names of the parcels against the list published on the Second Life main auction page. Defendants further aver that only those parcels that are listed on the main auction page are up for auction. Except as expressly admitted herein, Defendants deny the allegations in

Paragraph 92 of the Complaint. 93. Defendants aver that Linden uses the same purple designation for "virtual land"

parcels planned for future auctions (so that users may preview parcels that will be available in the future) as well as parcels currently up for auction on the Second Life website. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 93 of the Complaint. 94. Defendants aver that Linden's auction FAQ for Second Life stated, in pertinent

part, "When you are in Second Life, you can click on the "Find" button, select "Land Sales," 17
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check the "Auction" box and select "Search." You can also see land for auction by clicking on the "Map" button and selecting "Land for Sale." The land set up for auction appears as light blue [sic]. The map includes land that is planned for auction as well as those parcels currently on the block." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 94 of the Complaint. 95. Defendants admit the allegations in Paragraph 95 of the Complaint, except that

the parcels are purple, not blue. 96. Defendants admit that the allegations in Paragraph 96 of the Complaint are

generally accurate as to defendant Linden and as to active auctions started and published by Linden, all of which appear in a list on the main auction page of the Second Life website. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 96 of the Complaint. 97. Defendants admit that users were allowed to go to the active auctions listed on the

Second Life website, and select an auction from that list, which directs the user to the auction detail for that parcel of "virtual land." Defendants deny that Linden published a list of URLs for users to access, although Defendants admit that once a user selected a parcel from the auction list, that user could see the URL for that parcel's auction detail page. Defendants further deny that users were authorized to access auction interfaces for parcels that had not been published on the main auction page of the website, or to "initiate" an auction for "virtual land" not listed on that page. Valid auctions are initiated only by being given an auction start date by a Linden employee. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 97 of the Complaint. 98. Defendants deny that there are auctions "where participants could initiate the

auction," because auctions are initiated based on start dates set by Linden. Defendants further deny that a search on Google.com would return a link to any auction detail pages for auctions yet to be initiated. Defendants lack information or belief sufficient to admit or deny the remaining allegations in Paragraph 98 of the Complaint, and on that basis deny them. Except as expressly 18
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admitted herein, Defendants deny the allegations in Paragraph 98 of the Complaint. 99. Defendants admit that auctions are set to automatically run for 48 hours from the

initial bid. Defendants aver that auctions published on the main auction page are open for bidding by any user with the requisite account criteria for bidding during the 48 hour auction period. Defendants specifically deny the allegations in Paragraph 99 with respect to Bragg's fraudulently-forced auctions, which never appeared on the main auction page and thus could only be accessed by those involved in the fraudulent scheme. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 99 of the Complaint. 100. Defendants admit that when auctions close 48 hours after the initial bid, the high

bidder at that time is automatically designated the winner by the auction program, and that the billing system charges the winner's Second Life account via an automatic process. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 100 of the Complaint. 101. 102. 103. 104. Defendants admit the allegations in Paragraph 101 of the Complaint. Defendants deny the allegations in Paragraph 102 of the Complaint. Defendants deny the allegations in Paragraph 103 of the Complaint. Defendants deny the allegations in Paragraph 104 of the Complaint, and aver that

at least one of Bragg's "virtual land" purchases was gained through computer fraud and was thus not a valid or enforceable contract. Defendants further aver that each and every "virtual land" auction transaction is governed by the Second Life Terms of Service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 104 of the Complaint. 105. Defendants admit that Bragg used U.S. funds in his account to purchase "virtual

land" from Linden. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 105 of the Complaint. 106. Defendants admit that Bragg upgraded to a Premium Second Life account.

Defendants further admit that Bragg made periodic tier payments to Linden, as are required on an ongoing basis to reserve the right to receive "virtual land" service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 106 of the Complaint. 19
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RESPONSES TO PLAINTIFF'S ALLEGATIONS THAT "LINDEN STEALS BRAGG'S PROPERTY" 107. Defendants lack information or belief sufficient to admit or deny allegations

relating to Bragg's state of mind, and on that basis deny the allegations in Paragraph 107 of the Complaint. Defendants specifically deny that Paragraph 107 accurately characterizes

Defendants' statements or actions. 108. Defendants admit that as of April 2006 Bragg "owned" "virtual land" and Objects

in Second Life, as such terms are defined in this Answer. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 108 of the Complaint. 109. Defendants aver that in April 2006 Bragg learned from another user of a

fraudulent way to subvert the auction system by accessing a page on the Second Life auction website that Bragg knew he was not authorized by Linden to access, and thereby purchasing land Linden had not yet released for auction at a price far below the US $1,000.00 minimum opening bid that Bragg knew would be set by Linden. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 109 of the Complaint. 110. Defendants lack information or belief sufficient to admit or deny the allegations in

Paragraph 110 of the Complaint, and on that basis deny such allegations. 111. Defendants aver that on or about April 30, 2006, Bragg knowingly and

intentionally subverted the auction system and placed bids in an unpublished auction, on a parcel of "virtual land" named "Taesot." As more fully alleged in Linden's counterclaims below, Bragg's bids on the Taesot property were part of a computer fraud scheme, whereby Bragg and his confederates knowingly and with intent to defraud, without Linden's permission, obtained, used and altered data and computer software in a deliberate exploit to gain unauthorized access to Linden's server software in order to manipulate and subvert Linden's auction system. Defendants further aver that, in furtherance of this scheme, Bragg's confederate triggered the 48 hour period for the "Taesot" auction, and Bragg was the winner of that auction at his high bid of $300.01 U.S. Defendants specifically deny that this transaction was a legally binding contract. 20
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Except as expressly admitted herein, Defendants deny the allegations in Paragraph 111 of the Complaint. 112. Defendants lack information or belief sufficient to admit or deny the allegations in

Paragraph 112 of the Complaint, and on that basis deny such allegations. 113. Defendants aver that on or about May 1, 2006, Linden put Bragg's account on

administrative hold pending investigation of irregular auction activity. Defendants further aver that as a result of Linden's investigation Linden determined that Bragg had fraudulently subverted the Second Life auction system, and thus Bragg's account status was updated to "fraud hold." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 113 of the Complaint. 114. Defendants aver that on or about May 1, 2006, Linden put Bragg's account on

administrative hold pending investigation of irregular auction activity. Defendants further aver that as a result of Linden's investigation Linden determined that Bragg had fraudulently subverted the Second Life auction system, and thus Bragg's account status was updated to "fraud hold." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 114 of the Complaint. 115. Defendants aver that, following suspension of his account, Bragg's access to

computing resources represented by parcels of "virtual land" was made available for purchase by, and sold to, other users pursuant to Second Life's Terms of Service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 115 of the Complaint. 116. Defendants deny that the excerpted quote attributed to Rosedale in the July 20,

2006 AfterTV podcast relates in any way to the disposition of "virtual land" and other items in Bragg's Second Life account after it was suspended, and aver that the excerpted quote was taken from this response to questions regarding crime between Second Life users: "We of course have not built crime into Second Life you know. It's not a game, so you can't for example just take someone else's property in Second Life." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 116 of the Complaint. 21
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117. "deleted."

Defendants admit that the "virtual land" previously in Bragg's account was not Except as expressly admitted herein, Defendants deny the allegations in

Paragraph 117 of the Complaint. 118. Defendants aver that on or about May 1, 2006, Linden put Bragg's account on

administrative hold pending investigation of irregular auction activity. Defendants further aver that as a result of Linden's investigation Linden determined that Bragg had fraudulently subverted the Second Life auction system, and thus Bragg's account status was updated to "fraud hold." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 118 of the Complaint. 119. 120. Defendants deny the allegations in Paragraph 119 of the Complaint. Defendants admit that on or about May 1, 2006, Bragg had approximately $2,000

in his Second Life account. Defendants aver that Linden suspended Bragg's account following discovery of his participation in the auction subversion scheme. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 120 of the Complaint. 121. Defendants aver that, following suspension of his account, Bragg's access to

computing resources represented by parcels of "virtual land" was made available for purchase by, and sold to, other users pursuant to Second Life's Terms of Service. Except as expressly admitted herein, users deny the allegations in Paragraph 121 of the Complaint. 122. Defendants aver that on or about May 1, 2006, Linden put Bragg's account on

administrative hold pending investigation of irregular auction activity. Defendants further aver that as a result of Linden's investigation Linden determined that Bragg had fraudulently subverted the Second Life auction system, and thus Bragg's account status was updated to "fraud hold." Defendants further aver that, following suspension of his account, Bragg's access to computing resources represented by parcels of "virtual land" was made available for purchase by, and sold to, other users pursuant to Second Life's Terms of Service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 122 of the Complaint. 123.
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administrative hold pending investigation of irregular auction activity. Defendants further aver that as a result of Linden's investigation Linden determined that Bragg had fraudulently subverted the Second Life auction system, and thus Bragg's account status was updated to "fraud hold." Defendants further aver that, following suspension of his account, Bragg's access to computing resources represented by parcels of "virtual land" was made available for purchase by, and sold to, other users pursuant to Second Life's Terms of Service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 123 of the Complaint. 124. 125. Defendants deny the allegations in Paragraph 124 of the Complaint. Defendants deny the allegations in Paragraph 125 of the Complaint.

RESPONSES TO PLAINTIFF'S ALLEGATIONS REGARDING "THE TERMS OF SERVICE AGREEMENT (`TOS')" 126. Defendants admit that Linden provides a Terms of Service agreement for the

Second Life service. Defendants aver that during the registration process, Bragg reached a screen containing the Terms of Service, which stated "Please read the following Terms of Service carefully. To continue logging in to Second Life, you must accept the agreement." Defendants further aver that Bragg selected "I Agree to the Terms of Service" before being allowed to enter Second Life. Defendants lack information or belief sufficient to admit or deny allegations regarding whether Bragg read the Terms of Service, and on that basis deny such allegations. Except as expressly admitted herein, Defendants deny the allegations in

Paragraph 126 of the Complaint. 127. 128. 129. 130. Defendants deny the allegations in Paragraph 127 of the Complaint. Defendants deny the allegations in Paragraph 128 of the Complaint. Defendants deny the allegations in Paragraph 129 of the Complaint. Defendants admit that the Terms of Service do not "suspend the application of the

laws of the United States." Indeed, Defendants aver that the Terms of Service require that users shall not violate any law. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 130 of the Complaint. 23
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131. 132. 133. 134. 135.

Defendants deny the allegations in Paragraph 131 of the Complaint. Defendants deny the allegations in Paragraph 132 of the Complaint. Defendants deny the allegations in Paragraph 133 of the Complaint. Defendants deny the allegations in Paragraph 134 of the Complaint. Defendants admit that Paragraph 135 of the Complaint (and subparagraphs

thereof) contains excerpts from the current Terms of Service. Defendants lack information or belief sufficient to admit or deny the allegations in Paragraph 135 of the Complaint that pertain to Bragg's state of mind, and on that basis deny all such allegations. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 135 of the Complaint. 136. 137. 138. Defendants deny the allegations in Paragraph 136 of the Complaint. Defendants deny the allegations in Paragraph 137 of the Complaint. Defendants deny the allegations in Paragraph 138 of the Complaint.

COUNT I: VIOLATION OF THE PENNSYLVANIA UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW (73 P.S. § 201-1, et seq. 139. Defendants incorporate by reference their responses to Paragraphs 1 through 138

as set forth above. 140. 141. 142. Defendants deny the allegations in Paragraph 140 of the Complaint. Defendants deny the allegations in Paragraph 141 of the Complaint. Defendants admit that Linden acknowledges Second Life users' intellectual

property rights in their original creations as set forth more fully in the Terms of Service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 142 of the Complaint. 143. Paragraph 143 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, and except as expressly admitted herein, Defendants deny the allegations in Paragraph 143 of the Complaint. 144. Defendants aver that on or about May 1, 2006, Linden put Bragg's account on

administrative hold pending investigation of irregular auction activity. Defendants further aver 24
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that as a result of Linden's investigation Linden determined that Bragg had fraudulently subverted the Second Life auction system, and thus Bragg's account status was updated to "fraud hold." Except as expressly admitted herein, Defendants deny the allegations in Paragraph 144 of the Complaint. 145. 146. Defendants deny the allegations in Paragraph 145 of the Complaint. Paragraph 146 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants deny the allegations in Paragraph 146 of the Complaint. 147. 148. 149. Defendants deny the allegations in Paragraph 147 of the Complaint. Defendants deny the allegations in Paragraph 148 of the Complaint. Defendants lack information or belief sufficient to admit or deny allegations as to

Bragg's state of mind, and on that basis deny all such allegations. Paragraph 149 of the Complaint consists of legal conclusions to which no answer is required, but to the extent an answer is required, Defendants deny the allegations in Paragraph 149 of the Complaint. 150. Defendants lack information or belief sufficient to admit or deny allegations as to Defendants deny the

Bragg's state of mind, and on that basis deny all such allegations. remaining allegations in Paragraph 150 of the Complaint. 151. 152. 153. 154.

Defendants deny the allegations in Paragraph 151 of the Complaint. Defendants deny the allegations in Paragraph 152 of the Complaint. Defendants deny the allegations in Paragraph 153 of the Complaint. Paragraph 154 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants deny the allegations in Paragraph 154 of the Complaint. 155. 156. 157. Defendants deny the allegations in Paragraph 155 of the Complaint. Defendants deny the allegations in Paragraph 156 of the Complaint. Defendants deny that they sell "title" to "virtual land." Defendants aver that,

following suspension of his account, Bragg's access to computing resources represented by 25
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parcels of "virtual land" was made available for purchase by, and sold to, other users pursuant to Second Life's Terms of Service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 157 of the Complaint. 158. Paragraph 158 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants deny the allegations in Paragraph 158 of the Complaint. 159. Paragraph 159 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants deny the allegations in Paragraph 159 of the Complaint. WHEREFORE, Defendants respectfully request that the Court enter judgment in their favor and against Plaintiff, dismissing Count I of the Complaint in its entirety and with prejudice, and award Defendants costs, attorneys' fees in accordance with applicable law, and further relief deemed appropriate by this Court. COUNT II: VIOLATION OF THE CALIFORNIA UNFAIR AND DECEPTIVE PRACTICES ACT (Cal. Bus. & Prof. Code § 17200) 160. Defendants incorporate by reference their responses to Paragraphs 1 through 159

as set forth above. 161. 162. 163. 164. Defendants deny the allegations in Paragraph 161 of the Complaint. Defendants deny the allegations in Paragraph 162 of the Complaint. Defendants deny the allegations in Paragraph 163 of the Complaint. Paragraph 164 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants deny the allegations in Paragraph 164 of the Complaint. 165. 166. 167. 168.
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Defendants deny the allegations in Paragraph 165 of the Complaint. Defendants deny the allegations in Paragraph 166 of the Complaint. Defendants deny the allegations in Paragraph 167 of the Complaint. Defendants deny the allegations in Paragraph 168 of the Complaint. 26

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169.

Paragraph 169 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants deny the allegations in Paragraph 169 of the Complaint. 170. Defendants deny the allegations in Paragraph 170 of the Complaint.

WHEREFORE, Defendants respectfully request that the Court enter judgment in their favor and against Plaintiff, dismissing Count II of the Complaint in its entirety and with prejudice, and award Defendants costs, attorneys' fees in accordance with applicable law, and further relief deemed appropriate by this Court. COUNT III: VIOLATION OF THE CALIFORNIA CONSUMER LEGAL REMEDIES ACT, Ca. Civ. Code § 1750, et seq. 171. Defendants incorporate by reference their responses to Paragraphs 1 through 170

as set forth above. 172. Paragraph 172 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants deny the allegations in Paragraph 172 of the Complaint. 173. 174. 175. Defendants deny the allegations in Paragraph 173 of the Complaint. Defendants deny the allegations in Paragraph 174 of the Complaint. Defendants specifically deny the implication that they violated the Consumer

Legal Remedies Act, and on that basis deny the allegations in Paragraph 175 of the Complaint. 176. 177. Defendants deny the allegations in Paragraph 176 of the Complaint. Defendants deny the allegations in Paragraph 177 of the Complaint.

WHEREFORE, Defendants respectfully request that the Court enter judgment in their favor and against Plaintiff, dismissing Count III of the Complaint in its entirety and with prejudice, and award Defendants costs, attorneys' fees in accordance with applicable law, and further relief deemed appropriate by this Court. COUNT IV: FRAUD AND/OR FRAUD IN THE INDUCEMENT 178.
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as set forth above. 179. 180. Defendants deny the allegations in Paragraph 179 of the Complaint. Defendants specifically deny that Defendants engaged in any fraudulent or

deceptive conduct. Defendants further deny that Bragg sustained any damages or was harmed. Defendants deny the allegations in Paragraph 180 of the Complaint. 181. Defendants deny the allegations in Paragraph 181 of the Complaint.

WHEREFORE, Defendants respectfully request that the Court enter judgment in their favor and against Plaintiff, dismissing Count IV of the Complaint in its entirety and with prejudice, and award Defendants costs, attorneys' fees in accordance with applicable law, and further relief deemed appropriate by this Court. COUNT V: VIOLATION OF CALIFORNIA CIVIL CODE § 1812.600, et seq. 182. Defendants incorporate by reference their responses to Paragraphs 1 through 181

as set forth above. 183. Paragraph 183 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants respond that California Civil Code §1812.600 et. seq. governs auctions as defined in that statute. Except as expressly

admitted herein, Defendants deny the allegations in Paragraph 183 of the Complaint. 184. 185. 186. 187. 188. Defendants deny the allegations in Paragraph 184 of the Complaint. Defendants deny the allegations in Paragraph 185 of the Complaint. Defendants deny the allegations in Paragraph 186 of the Complaint. Defendants deny the allegations in Paragraph 187 of the Complaint. Paragraph 188 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants respond that there is legal authority on the subject of waiver of this statute. Except as expressly admitted herein,

Defendants deny the allegations in Paragraph 188 of the Complaint. 189. Paragraph 189 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants deny the allegations in Paragraph 28
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189 of the Complaint. 190. 191. 192. 193. 194. Defendants deny the allegations in Paragraph 190 of the Complaint. Defendants deny the allegations in Paragraph 191 of the Complaint. Defendants deny the allegations in Paragraph 192 of the Complaint. Defendants deny the allegations in Paragraph 193 of the Complaint. Defendants deny the allegations in Paragraph 194 of the Complaint.

WHEREFORE, Defendants respectfully request that the Court enter judgment in their favor and against Plaintiff, dismissing Count V of the Complaint in its entirety and with prejudice, and award Defendants costs, attorneys' fees in accordance with applicable law, and further relief deemed appropriate by this Court. COUNT VI: CONVERSION 195. Defendants incorporate by reference their responses to Paragraphs 1 through 194

as set forth above. 196. 197. Defendants deny the allegations in Paragraph 196 of the Complaint. Paragraph 197 of the Complaint consists of legal conclusions to which no answer

is required, but to the extent an answer is required, Defendants admit that Bragg had U.S. currency on deposit with Linden. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 197 of the Complaint. 198. 199. 200. 201. Defendants deny the allegations in Paragraph 198 of the Complaint. Defendants deny the allegations in Paragraph 199 of the Complaint. Defendants deny the allegations in Paragraph 200 of the Complaint. Defendants aver that on or about May 1, 2006, Linden put Bragg's account on

administrative hold pending investigation of irregular auction activity. Defendants further aver that as a result of Linden's investigation Linden determined that Bragg had fraudulently subverted the Second Life auction system, and thus Bragg's account status was updated to "fraud hold." Defendants further aver that, following suspension of his account, Bragg's access to computing resources represented by parcels of "virtual land" was made available for purchase 29
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by, and sold to, other users pursuant to Second Life's Terms of Service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 201 of the Complaint. 202. Defendants deny the allegations in Paragraph 202 of the Complaint.

WHEREFORE, Defendants respectfully request that the Court enter judgment in their favor and against Plaintiff, dismissing Count VI of the Complaint in its entirety and with prejudice, and award Defendants costs, attorneys' fees in accordance with applicable law, and further relief deemed appropriate by this Court. COUNT VII: INTENTIONAL INTERFERENCE WITH A CONTRACTUAL RELATIONS / PROSPECTIVE ECONOMIC ADVANTAGE 203. Defendants incorporate by reference their responses to Paragraphs 1 through 202

as set forth above. 204. Defendants admit that Defendants do not claim intellectual property rights in any

Second Life content of Bragg's original creation, except as provided in the Second Life Terms of Service. Except as expressly admitted herein, Defendants deny the allegations in Paragraph 204 of the Complaint. 205. Defendants lack information or belief as to the scope and nature of rights Bragg

retained in Objects he may have received from third parties, and Defendants aver that Bragg's rights in Objects and "virtual land" are governed by the Second Life Terms of Service, and on those bases deny the allegations in Paragraph 205 of the Complaint. 206. Bragg. Defendants specifically deny