AN AUSTRALIAN man has paid £13,700 for a newly discovered island with beautiful beaches, rich gold deposits and a magnificent ruined castle.

There was just one catch: his tropical paradise existed only on the internet.

To most people, David Storey’s investment last December seems incomprehensible. But to the millions of online gamers who spend hours each day in “virtual” worlds, it made ruthless commercial sense.

The trade in imaginary weapons, property and characters for fantasy internet games is worth more than £200 million in real cash. Now a leading entertainment lawyer has called for property law to be changed to recognise virtual possessions.

Gold coins, battle-hardened wizards and the “rare” Hooded Robe of Umbra, much sought after by players of Ultima Online, are just some of 20,000 such items available for cash on the auction website eBay.

Once real money has changed hands, the properties of these “virtual” items are sent in code form to the buyer’s in-game account, where they will, it is hoped, help to improve the player’s performance.

In the two months since he bought his island in Project Entropia, Mr Storey has enjoyed a “small but steady income” from taxation. He has sold hunting rights and beachfront land plots to other players, but has more ambitious plans for the future, he said.

“When the houses start rolling out is when the dollars start rolling in.”

It is only in the past few years that these “massively multiplayer online role-playing games” (MMORPGs), with their real cash exchanges, have taken off. There are an estimated 350 worldwide, many of which claim more than 100,000 subscribers.

ItemBay, a Korean company specialising in trading virtual goods, has 1.5 million customers and revenues of $17 million (£9 million) a month.

Legal disputes are an inevitable consequence of the new environment, according to Seb Belcher, head of interactive entertainment at the legal firm Harbottle & Lewis.

“Virtual property must be recognised in law,” he said. “The projections for growth in the online gaming industry . . . suggest that the demands for legal recognition of virtual property will only increase.”

In Mexico a US company was forced out of business after setting up a “sweatshop” in which peasants played games around the clock, earning in-game credits that were auctioned at a profit on eBay.

Blacksnow Interactive employed unskilled Mexican labourers to play Dark Age of Camelot, a popular MMORPG.

The workers were given instructions in how to develop powerful characters, which were then sold for real money on eBay. Mythic Entertainment, Camelot’s creators, discovered the scam and closed the Blacksnow accounts.

Sony instructed eBay to halt auctions of goods exchanged in its EverQuest game, claiming that sales outside the game infringed the intellectual copyright of its characters.

But virtual trading is becoming an important revenue stream for eBay. A spokesman said: “There is a huge demand for game trading and we bring buyers and sellers together just like a physical exchange.”

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