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China's State Administration of Taxation recently imposed a 20 percent income tax rate on profits made from virtual currency and virtual items, sparking price increases for virtual goods. While this tax rate (if actually enforced) clearly impacts the virtual space, it also affects transactions happening outside of MMO servers and virtual world grids. The taxation policy could ultimately extend to the virtual currencies linked to the largest IM providers in China such as Tencent, drastically increasing the percentage of the population affected by the new laws. Despite this, the positive benefits of eliminating gray and black markets for virtual items and currency may outweigh the drawbacks for gamers and users of the various digital services in China.

Questions remain about what will and will not be taxed in the virtual space, but it's clear that individuals who gain virtual income are expected to declare their profits and pay taxes on this, and do so within seven days of having earned the profit, according to Shanghai Daily.Taxpayers who can provide proof of the value of this property or the value of the transaction are taxed at 20 percent on their profits, while those who cannot provide sufficient verification are taxed at three percent of the total transaction value. But how many people are affected by this new system?

Addiction as it applies to MMOs and internet activity in general is a contentious issue. Many of the more unusual or extreme stories regarding the actions that result from digital addiction tend to come to us from Asia, especially China. The pace and fervor with which China's internet savvy population has seized the web and all that it offers -- both good and bad -- is staggering. The web has become integral to entertainment in China, particularly for the younger generation, but it's brought with it a host of societal problems and crime.

Only days ago, the Chinese government classified Internet addiction as a mental disease, a fact which may well stay the execution of Hu Ange, a 22-year-old man who poisoned his own parents... apparently so they would not interfere with his addiction to the online game Legend. Hu was sentenced to death, but the case is now being appealed on the grounds that he is mentally ill.

Blizzard recently announced that they'd be switching over to a new centralized account system, tying together the company's online games through Battle.net. Existing World of Warcraft accounts are essentially replaced by Battle.net accounts, and will allow for the tracking of achievements across the Blizzard titles. But some players, roughly 350,000 of them, found another unexpected feature arrived with the Battle.net account integration: bans.

Gamesindustry.biz reports: "Blizzard has revealed that is has closed over 350,000 StarCraft and Diablo II accounts which were found to be using third-party hacks. The company further revealed that the Diablo II CD keys associated with the closed accounts are now barred from playing on Battle.net for 30 days and warned that repeat offenders face a permanent ban." Check out the full report over at Gamesindustry.biz, along with a statement from Blizzard about the bans.

If you've been keeping up, you already know of the court battle between Blizzard and MDY over the Glider automation software used with World of Warcraft. Another amicus brief has been filed in the case, and this one is a real attention-getter.

An amicus brief (often formally named amicus curiae -- friend of the court) is usually (but not always) where a concerned party submits additional information to the court, often to inform it of a wider impact or implication of certain outcomes beyond the fundamental interests of the direct parties to the case, or to provide other information which the court may be lacking. This isn't uncommon in particularly controversial, far-reaching or complex legal cases. That can go a little further, however, to what is called Intervention, where a third-party seeks to become a party to the case already in progress.

The filer of the Intervention is Jonathan Lee Riches, who is incontestably our favorite US Federal Prison inmate. Riches has previously sued "Adolf Hitler's National Socialist Party", "13 tribes of Israel", Plato, Nostradamus, Che Guevarra, Jimmy Hoffa, the Lincoln Memorial, the Eiffel Tower, the Garden of Eden, the Roman Empire, the Appalachian Trail, Three Mile Island (the island, not just the power-plant), Rockstar Games, George W Bush, Steve Jobs, Perez Hilton, Britney Spears, and hundreds more.

Now he's suing Blizzard because of World of Warcraft, and ... well, let's take a look at why ...

While much of the world's gold farming activity is based in mainland China, the black market industry operates in violation of the law. Despite this, a large part of the problem in curbing illegal activities in China is that there's a substantial divide between what the law states is illegal and the actual enforcement of those laws. This may well be the case with the law passed last week by China's State Administration of Taxation, which will impose a personal income tax rate of 20% on profits made from virtual currency.

Juliet Ye at The Wall Street Journal's "China Journal" blog reports: "The policy would cover China's legions of online gamers, who can use online virtual currency to buy better equipment and new powers for their online warriors. But it also affects millions of others who use virtual currencies on instant-messaging services and Web portals." The widespread use of virtual currencies in China spurred last year's restrictions on exchanging virtual currency into RMB. If the new law becomes a reality rather than a technicality in the lives of China's internet users, it will be a substantial change in virtual economics in the country.

In-game economies can make MMOs more vibrant places to play, lending depth to these games that generally isn't found in regular PC or console titles. Then again, the perceived value attributed to virtual currency and items can lead to a slew of problems, not limited to acts of real world violence, the plague of gold spamming, and the slippery slope of ownership in the virtual space.

At least one company out there is working with MMO publishers to create a regulated secondary market, the hope being that it's possible to reclaim the black and grey market commerce so often attached to massively multiplayer titles. Do you think this approach is a viable solution to some of the problems associated with MMO economies? What are your ideas on how these issues intertwined with virtual currency and items should be resolved? Is there even a solution at all?

The AP reports that a Japanese woman who had an online-only marriage with a Japanese man has been arrested for taking unlawful action against his avatar. We were talking about this sort of thing only this-morning, actually. You might want to refer back to that.

When her online hubbie broke off the relationship, she retaliated by using her ex's password to get into his Maplestory account and deleted his avatar/character there. AP doesn't say what the charges are likely to be, but we can take a good guess. It passes the dishonesty and deprivation tests (Dishonest appropriation of property with the intention of permanently depriving the other of it), so that's criminal theft right there. Likely "destruction of property" will also be added as a rider. At the very least, we imagine that unlawful accessing of a computer and illegal data manipulation will wind up on the list.

The 43 year-old woman has been remanded into custody in Sappporo, the jurisdiction where the 33 year-old man lives. AP says that she may face a prison term of up to five years, or a fine of up to US$5,000, though without any formal charges being laid, that seems a touch premature. Though the AP also bandies about the terms 'divorce' and 'murder', both of which are clearly inapplicable to the current case.

Can something intangible that only exists as a pattern of bits somewhere on some computer hardware that you've never seen be stolen? Can it be considered actual theft? Can the Law -- as it is actually written and applied -- competently deal with those situations without substantive modification?

Actually the answer to all of these questions is yes. So long as you know what you're actually talking about.

In the words of a certain, famous, fictional Spaniard, 'You keep using that word. I do not think it means what you think it means.'

Indeed the whole meaning of theft, particularly when applied to digital and other intangible forms of content has become seriously blurred in popular culture. In the Law, however, it has retained its meaning consistently for most of a century -- and surprisingly, that meaning still allows the Law and courts to apply traditional law to these twenty-first century assets.

Should the theft of virtual items be punishable by law? This varies from country to country, but today's ruling in a Dutch court emphasizes that virtual crime is actual crime under their country's laws, regardless of whether the individuals involved are minors. Associated Press reports: "These virtual goods are goods (under Dutch law) so this is theft," the court said Tuesday in a summary of its ruling.

The court did not reveal the identities of the minors, but they are 15-years-old and 14-years-old, respectively. They apparently coerced a younger boy into giving them a 'virtual amulet and virtual mask' in RuneScape. The offenders have both been sentenced to community service -- 200 hours for the 15-year-old, and 160 hours for the 14-year-old.

Do you feel this is too steep a penalty for virtual extortion, or not steep enough? Should it matter if the items or currency involved are real or virtual?

Update: It's been communicated to us by our readers in Holland that the crime in question was not, in fact, a virtual one, but involved actual violence. The victim in question, according to this source, "was kicked and threatened with a knife." The original Associated Press source omitted this detail, which obviously changes the tone of the discussion below. To clarify, this was real world violence inflicted over virtual items, hence the community service sentences for both of the offending minors.

Well, not 'banning', per se -- the term isn't exactly a meaningful one in a Second Life context -- Linden Lab is asking for the court to approve its termination of Minsky's account as a part of a general package of relief.

As you may recall, Linden Lab and Minsky have been duking it out over trademarks: Minsky with his registered SLART trademark, and Linden Lab with its unregistered SL trademark. Now, Linden Lab doesn't normally bother with getting court-approval for terminating an account, yet they have asked for it in this instance.

Likely they're worried that if they followed their normal procedure, certain parts of the Second Life Terms of Service would fall back under court scrutiny again -- and it did not fare at all well the last time that happened.

Virtually Blind's Benjamin Duranske was, just as we were, taken somewhat aback by a recent article that reported that Professor George Stein, the Director of the Cyberspace and Information Operations Study Center at the Air Force's Air War College ("The Intellectual and Leadership Center of the Air Force") told people attending a seminar on security issues and emerging technology that it was okay to spy on avatars because "the Supreme Court has ruled that avatars are not real people" and that avatars are, thus, "not governed by laws." -- thus concluding that there are no significant legal barriers to spying and surveillance on them.

Ouch, huh? We here at Massively have to call bullshit on that. No actual case-law was cited by name, so there's no evidence at this stage that such a ruling exists. Duranske is digging deep to find out if there might be such a ruling and is looking for help in running down any possible references. Up for grabs for one contributor is a signed copy of his book, Virtual Law. Neither we nor Duranske think anything will turn up to substantiate the claim, but who knows? Maybe there is some obscure US Supreme Court ruling out there that we've all missed.

Are you aware of your property rights as they pertain to the virtual goods in your favorite MMO? Are you aware of the laws in your country as they pertain to virtual goods? Heck, do you even read the EULA?

It seems like these lawyer-speak agreements are becoming more prevalent lately, as we impatiently click the 'agree' button in anticipation of playing the latest MMO. In fact, even older games are reinstating their EULA on the loading screens, forcing players to click through before entering their world. The reason for this basically boils down to inevitable litigation as gaming grows in popularity.

The Escapist is carrying a deliciously cogent piece from multimedia writer Wendy Despain, tantalizingly entitled Legislating the Virtual World. In it, she introduces The Virtual Policy Network, founded by Ren Reynolds to help governments, universities and businesses mediate their interests in online worlds. The Virtual Policy Network includes such names as Richard Bartle, Mia Consalvo, Randy Farmer, Thomas Malaby, Jessica Mulligan, and David Pullinger. The issues in virtual environments, however, may be at once simpler and more complex than they appear on the surface.

'As an example, consider how landlord laws might apply to virtual worlds. If it's assumed the "residents" are renting their virtual space from the people who make and maintain the game, does banning a player equate to evicting them from an apartment?,' writes Despain, 'Now consider the fact that landlord laws vary from city to city, not just internationally, and you have an idea of how complex a simple account ban can become with a little creative litigation.'

However, we'll defer to the combined wisdom of Belgian surrealist painter Réné Magritte and philosopher, historian, intellectual and sociologist Michel Foucault, who more accurately stated, Ceçi n'est pas une pipe.

Another step has been taken along the road for the dispute between Richard Minsky (registered owner of the SLART trademark), and Linden Lab (applicant for the SL trademark). The United States Patent and Trademarks Office (USPTO) has dealt something of a blow to Linden Lab's background effort to convincing the USPTO that Minsky committed fraud in registering the SLART trademark and that the SLART trademark should be cancelled.

In short, the Trademark Trial and Appeal Board (TTAB) has suspended cancellation proceedings for now, so the Lab won't make any further progress on that front for the time being. Minsky asked the TTAB for the suspension of proceedings, and the Lab argued against it -- but the Lab's argument apparently didn't hold up on basic reasoning.

We realize that the suspension of a cancellation proceeding generates a little confusion. Just bear with us, okay? One part is the cancellation process by which the USPTO determines if the SLART trademark should be cancelled. Whatever happens, there's no guarantee that it will be cancelled, even if the process resumes. The process itself has been suspended however, based on the TTAB agreeing with Minsky's reasoning that the cancellation process should not proceed at this time. Suspension. Cancellation Process. Got it? Right, on with the show ...

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	Are you a part of the most widely-known collaborative virtual environment or keeping a close eye on it? Massively's Second Life coverage keeps you in the loop.

The BBC is reporting that the WoW Glider case (MDY vs. Blizzard) is moving closer to resolution. If you'll recall, the court found in favor of Blizzard Entertainnment back in July, awarding them victory in their long-running feud with 'botting' software. WoW Glider is the best known 'bot software packages, allowing World of Warcraft players to automate their AFK play. Now a damages reward has been awarded to the software developer, to the tune of $US 6 million. The article notes that damages could have been even greater had MDY not won some legal arguments during the court battle.

The piece continues, "The damages award could be delayed if Blizzard appeals against the judgement which threw out its claim to double or triple the cash settlement. The case is due to go to court again in January 2009 when the remaining issues in the legal conflict look likely to be settled." Massively will continue to follow this case as it moves (slowly) towards conclusion.