Second Life, in its own words, is:
“. . . a 3-D virtual world entirely built and owned by its residents. Since opening to the public in 2003, it has grown explosively and today is inhabited by over 200,000 people from around the globe . . .
You’ll also be surrounded by the Creations of your fellow residents. Because residents retain the rights to their digital creations, they can buy, sell and trade with other residents.
The Marketplace currently supports millions of US dollars in monthly transactions. This commerce is handled with the in-world currency, the Linden dollar, which can be converted to US dollars at several thriving online currency exchanges.
” (emphasis added).
A Business Week profile on Second Life reports that it “could even challenge Microsoft Corp.’s Windows operating system as a way to more easily create entertainment and business software and service.”

American Apparel, will now open a virtual store in Second Life.
(screen shots courtesy of the store’s designer, Aimee Weber.
At the same time, people are apparently selling ‘items’ in this virtual world bearing recognizable trademarks. Pop-PR and Scobelizer give examples. Pop-PR notes the American Apparel opening and opines that:
If corporations are going to begin launching officially branded SL products in the game, if there are already trademark infringements, that is going to impede companies from going in to the SL universe.
So Scobleizer asks “Can trademarks be defended in Second Life?”
I think the answer is “probably” as long as it remains within Second Life’s interests to defend trademarks.
I was interviewed for this article in The Guardian that discusses some of the issues involved. The important point is that the users of Second Life enter into terms of service agreements. This gives SL the power to enforce trademarks. Other ‘intermediaries’ such as Verisign, Google, EBay have adopted varying models of how they go about it, but they certainly can ‘take down’ the most egregious infringements.
However if an avatar beckons you from a darkened virtual doorway, pulls up his virtual sleeves to reveal six virtual watches on each virtual arm, and a text balloon says ‘Hey buddy, would you like to buy a watch real cheap?,’ then enforcement in that case may be more complex.