Three men in Shanghai were convicted this week on charges of producing and selling weapons -- only the weapons existed solely as computer data for a virtual world.

Prosecutors allege the trio earned illegal profits of more than 2 million yuan (US$250,000) by using the computer code database of Legend of Mir 2, a popular online game operated by Shanda, to produce and sell large quantities of high-level game weapons. The weapons are normally only available to high-level winners, and hadn't been for sale.

Possession of the weapons would allow less skilled players to succeed more easily. The activities of the three also circulated far more virtual weapons than the company planned, which alerted the company that something was amiss.

Note that at no time did the weapon data ever leave the company-controlled servers. This wasn't a simple case of copyright violation by making copies for use elsewhere, it was much more akin to the production and distribution of controlled items. But because these were virtual goods, not physical goods, the defendants were charged with copyright violations, not theft or smuggling.

In a world where virtual goods have definable real money value, however, the question of the precise nature of the crime committed is not an easy one to answer. Existing players weren't harmed directly. They didn't steal the weapons, at least in terms of taking them from one group of players to sell to another group. They didn't reduce the use value of the weapons -- the +10 Swords of Überness presumably still worked as designed. They did decrease the perceived value of the weapons held by those players who had acquired them legitimately, but that in and of itself isn't a crime.

In a virtual world, there's no intrinsic reason for scarcity to be the core economic driver. The +10 Sword of Überness could be duplicated over and over again at effectively zero economic cost. Artificial scarcity is imposed by the game managers, however, as a means of both maintaining a semi-functional economy and providing a set of incremental goals for players to work towards.

This issue moves from being somewhat abstract and geeky to being a Potential Big Issue when we start thinking about objects that have an existence as both virtual and physical products, whether we're talking about Sven Johnson's Kirkyan concept, where changes to the virtual representation of an object influences changes to its physical manifestation, or simply being able to fabricate physical objects at home, with the only restrictions being the artificial scarcity of access to designs.

The rules we come up with to grapple with virtual objects of real value will haunt us for decades to come, if we're not careful.