Last week I received the following email from Samuel Weis of the US Patent and Trademark Office (USPTO):

I am a Patent Examiner at the U.S. Patent & Trademark Office in the area of Business Methods, Finance.  I am the examiner of record of multiple patent applications  (20+) involving virtual worlds and different types of credit accounts, charge accounts,  escrow transactions, risk mitigation (to name a few) used within these worlds….I am looking for references from 2004 and earlier.   A published paper, game manual, or even a detailed blog entry that details the economic system / banking system / shopping / business creation in a MMORPG (especially Second Life) would be amazingly helpful.

As a relative newcomer to virtual worlds (I started writing on these matters in May of 2007), I promised Mr. Weis that I would pass on this challenge to Terra Novans.   But I can’t help also asking for opinions on a few aspects of the patents that raise some pretty interesting issues.  More background and gory details below the fold, if you dare. (There are a LOT of details).

First, here are summaries of two patents (which I have uploaded as pdfs on Metanomics in this post.  I have 16 more, if you really care).

Virtual World Property Disposition After Virtual World Occurrence
A method and system provides transactions and arrangements in virtual world environments.  A user can participate in transactions to acquire virtual property and related virtual rights.  In some implementations, real-world and virtual parties can be involved in possible transfers of various types of virtual property and virtual property rights.

Virtual Credit in Simulated Environments
A method and system provides for the use of credit arrangements in simulated environments.  A user can participate in credit transactions involving purchases of virtual products, virtual services, and virtual items of value.  Feedback is provided to the user regarding results of the credit transactions.  In some embodiments multiple users can make simulated purchases or incur simulated credit obligations that are posted to virtual accounts, and the multiple users can also make simulated compensation against balances due or obligations owed for said virtual accounts.  The user is also provided with an opportunity of engaging in real-world financial transactions related to the virtual credit arrangement.  In some implementation of the system and method, multiple players at different locations can use virtual charge accounts and/or real world financial accounts in connection with arranging or resolving a virtual credit transaction.

These claims raise a few questions in my mind:

• If you take out the words ‘virtual’ and ‘simulated,’ is there anything new here?  If not, is this novel enough to be patentable?

• Does the term ‘virtual credit’ mean anything?  Either the transaction involves items of value or it doesn’t.  We can argue about the ‘magic circle’ all day (something Terra Novans are known to do), but if people are willing to hassle with accounts, they obviously think they are getting (and owing) something of value.  This doesn’t seem any different from my relationship with Visa—which, by the way, is every bit as paperless and virtual as any business relationship I have had in Second Life.

• If you buy the notion of virtual credit, it hardly seems new.  I don’t think I was the only one to borrow and lend money when playing Monopoly.  Does anyone know the first uses of credit in virtual worlds?  It has to be well before 2005.

Mr. Weis passed along the following insights from the USPTO:

Even if the subject matter sought to be patented is not exactly shown by the prior art, and involves one or more differences over the most nearly similar thing already known, a patent may still be refused if the differences would be obvious. The subject matter sought to be patented must be sufficiently different from what has been used or described before that it may be said to be nonobvious to a person having ordinary skill in the area of technology related to the invention. For example, the substitution of one color for another, or changes in size, are ordinarily not patentable.

Even if the subject matter sought to be patented is not exactly shown by the prior art, and involves one or more differences over the most nearly similar thing already known, a patent may still be refused if the differences would be obvious. The subject matter sought to be patented must be sufficiently different from what has been used or described before that it may be said to be nonobvious to a person having ordinary skill in the area of technology related to the invention. For example, the substitution of one color for another, or changes in size, are ordinarily not patentable.

I asked for some insight from a patent attorney, Genie Lyons , who knows nothing more about virtual worlds than what she heard me say on NPR.  She replied:

That is a completely typical, and, it appears at first glance, a very well written "Business Method" patent application.   These applications are very difficult (but not impossible) to get issued into patents. Part of the difficulty is the tremendous backup in the Business Methods sections of the USPTO.  I worked on a case for awhile that was filed in 2002, but still, as of last year, has a projected date of examination in 2011.

Since that application was written, the Supreme Court decided a very important patent case, KSR , which has (insert hemming and hawing here) produced significant changes in the likelihood of such an application getting issued.  Now, if the individual portions of the claims (virtual worlds, generally recognized accounting practices) are previously known, behave as they already behave, but are arranged in a slightly different manner, it's pretty much seen as obvious by the Patent Office. 

It is worth pointing out that the filers are no schlubs, either. Edward Jung, the CTO of Intellectual Ventures, is the lead author on all of the patents I have seen.  Again, Ms. Lyons:

Nathan Myhrvold was CTO of Microsoft prior to forming Intellectual Ventures  -- Microsoft was very down on "Patent Trolls" i.e., people with patents that they didn't use, but asserted against others.  Myhrvold decided the opposite--he took the idea of the patent troll to the n'th degree.  IV, as far as I can tell, has no intention of actually using their myriad patents to produce anything, rather their business plan is to assert the patents against those that are making use of the technology--they're "trolls."  I, personally, have nothing against "trolls."  A Patent, by its very nature is not a positive right, rather it is the right to forbid someone from doing something.  Complex, fascinating, and IV is right at ground zero.

Hmmm….definitely an idea for a Metanomics session.  For those who are interested, our summer season starts June 23rd, noon Pacific time, with Rik Panganiban  of Global Kids and Douglas Thomas  of USC.  You can watch in Second Life or on the web.  We have new technology that allows you to text chat with Second Life our second life audience and guests, which makes it a lot more fun than watching video on a web page all alone (but not as fun as actually being there).