Reuters has reported that Second Life has reached an out-of-court settlement over the lawsuit brought by Mark Bragg. The terms of the deal were not disclosed. While this settlement was self-evidently in the interest of both parties, it still leaves unresolved key questions pertaining to virtual worlds. If the case had gone to trial, then it is possible we would have obtained the first clear legal opinions on issues involving property rights and the applicability of terms of service (TOS) agreements. As I previously blogged, the court in this case had already handed down a significant ruling against the enforceability of a clause of the Linden Lab TOS. If the Linden Lab had suffered a defeat with respect to its TOS or regarding property rights in Second Life, it could have had a major impact on the future treatment of virtual worlds on tax and rights issues. Looks like we'll have to wait for another lawsuit, Congressional legislation or IRS ruling.