There is a second suggestion, and LL is silent about it (but will also probably not implement it). Make Display Names registrable, exactly like domain names, for a fee. Whatever the price is, it might be cheaper than litigation. And I’m sure that at least the dozens of thousands of merchants, landowners, and event hosters and performers will be willing to pay something to make sure their Display Name isn’t spoofed. It feels unfair — after all, for seven years LL has ensured us, via ToS, that we would have a unique in-world identification, and they’re removing that — but it might be a reasonable compromise. In fact, it’s not an unheard-of solution. I’ve read a few articles where in some virtual worlds (IMVU comes to mind) you get a “temporary” name while you’re a free user, and have to pay to get a definitive name. I’m actually used to that on some chatrooms too, where your display name becomes “guest” until you register and pay a fee. Or, for instance, they could make this service included in a Premium account (another great suggestion) but not for Basic users — an excellent idea to encourage more Premium accounts! A side-effect would be that Display Names, once registered, could be easily traded — just like domain names — on a “name exchange”, where names might be up for auction, as some people would most certainly start registering names like crazy (if the fee is low enough) hoping to resell them later. Depending on your views, this might actually be a good idea (like license plate numbers on the Anglo-Saxon world — or, well, domain names) or a horrible idea, but in either case, it would be far better than the free-for-all identity usurpation feature that LL will implement.
And make no mistake, they will implement it. It’s not “under discussion”, it’s a feature announcement. The best we can hope for is that some good, common sense is triggered on some Linden mind and that at least they include a way of protection.
So far, the only thing they came up with is the limitation that Display Names can only be changed once a week. This will limit the silliness of people joining a chat and starting to change their Display Names to match the names of other avatars — e.g. a measure that is also commonly used on some IRC servers and several chatrooms. Ok, it’s a start, but… it completely fails to address one of the largest group of residents that will use Display Name changes profusely: role-players. RP fans — and there are hundreds of thousands in SL! — love the ability to change their avatar name to someone more fitting to the role they play, and this is a very appealing feature for them. But… most of them play several RP games during the week, and they won’t be able to change their names to match the setting they’re in. So, in fact, this continues to be useless for them, and they will have to resort to the usual trick of having different alts, each for a RP area they’re active in, but still keeping no connection between the alts (except what they claim on the profiles). For them, a better solution would be to have a list of potential Display Names (say, 5 or 10 — with some reasonable limit) and be able to switch between them at will. Combine that with the limitation that nobody can use a registered Display Name and it would definitely suit both the merchants and landowners as well as the role-players.
Nevertheless, I feel that LL has already closed the door on this discussion. As is usual for them, they don’t actually think that the impact of spoofing, harassment, identity theft, and trademark violation will affect more than a tiny part of the resident population. They don’t fear the consequences. They also won’t be liable to litigation for improperly protecting resident’s names, since they’re so keen to make changes on ToS that you have to agree with or terminate your account — keeping their own lawyers happy, and making our claims of changing the rules without our permission void and null (we have to enter a new agreement when we click to accept the ToS changes…). So unless some dramatic thing happens — a sudden drop of the economy, or Philip Linden’s avatar being spoofed on a fake Town Hall meeting — I don’t see any reason for LL to change anything.
It’s ironic that for years people have been struggling with the issue of real life validation and identity. But the truth is, our virtual identity, tied to the value of the in-world economy, is far more important — because it ties to real value, not merely “perceived” importance (e.g. who cares if I’m Jane Doe or Helen Smith in RL; will either of those RL names make me sell more Dance HUDs? No!). I would expect that a Linden Lab which has shifted their focus towards the residential market and the in-world economy would understand this better, but I guess they simply don’t.