• by Laurie Sullivan  @lauriesullivan, January 2, 2009

A lawsuit filed by Worlds.com against NCSoft could set off a chain reaction across virtual worlds like Second Life that use avatars if company execs do not come forward and discuss intellectual property (IP) licensing options.

Worlds.com filed a lawsuit Dec. 24 against NCSoft in the U.S. District Court for the Eastern District of Texas, Tyler Division, for violating patent 7181690. The patent is described as a method for enabling users to interact in a virtual space through avatars.

Stephen Roth, attorney at Lerner David, Westfield, N.J., the law firm representing Worlds.com., could not discuss which other companies Worlds.com might draw into the lawsuit, but said the patent covers "many ways of managing avatars in the virtual world," and there are "certainly other companies that could come within the scope of our patent claims."

Worlds.com does not have a time limit under the patent laws in which they need to file a suit pertaining to patent No. 7181690, issued February 2007, according to Roth. "Under the law, you can recover for six years back past damages, but you're only allowed to collect damages forward from the date the patent was issued," he said.

Roth said Worlds.com has yet to request a dollar amount for damages. The amount set will depend on "reasonable royalties" related to NCSoft's sales for online gaming and monthly service fees.

Alexander Poltorak--CEO at General Patent, Suffern, N.Y., which manages the intellectual property, patent and licensing--said the Worlds.com patent could affect any platform with avatars in a virtual world. "It takes time to conduct due diligence," he said. "You just don't run off and file a lawsuit. You need to look carefully at all the suspects."

At one time, lawsuits were the company's last resort after licensing discussions failed, but not any more. Poltorak explains that after the SanDisk case, carried out through the U.S. Court of Appeals for the Federal Circuit, it became impossible to negotiate licensing because it now opens the door for the defendant to file a declaratory judgment.

Poltorak said Worlds.com holds two issued patents--one recently allowed, and a fourth pending. He said the hope is that virtual worlds will step forward and enter into licensing discussions to avoid being sued.