Quote - > Quote - Unless you are the original copyright owner of the textures you converted - Second Life textures may only be used on your own personal avatar and may not be transfered, shared or sold in the Second Life online world.

from the Rosity EULA:

Quote - The Buyer may not redistribute this archive file, in whole or in part. The Buyer may not store it any place on a network or on the Internet where it may be referenced by a third party. Buyer acquires the copyright to any derivative works created using this work, provided none of the original materials can be extracted from the derivative work by any means.
If Artist can show that any of the original material can be extracted from Buyer's derivative work,
Artist can demand both the original and derivative work, and all copies thereof be deleted.

by converting it to a Second Life avatar skin, you are violating the EULA in several ways:

1. you are essentially 'distributing' the texture to anyone that sees your avatar
2. it is extractable through copy bots that run rampant in SL (and always will)
3. by uploading your avatar skin you are actually granting Linden Labs a royalty free license to use and distribute that content - even to third parties. you do not have the right to grant this.

Quote - Recently, the topic of intellectual property rights and virtual worlds has taken center stage. On Monday, Linden Labs reported that Second Life had been invaded by a “copybot”, a nefarious program capable of duplicating resident’s creative content. Because the Second Life economy is propped on the sale of user-generated content, the copybot was essentially stealing people’s intellectual (or virtual) property. In the copy-bot’s wake, Second Life residents were finally challenged with the predicament — Is the content that we create in a virtual world our own? Or does it belong to the owner of that world?

In Second Life, residents create unique clothing, buildings, hairstyles and artwork, etc., to sell for virtual dollars that can be exchanged for real money. As a result, virtual intellectual property is tied to a real-world dollar amount. Yet, Linden Lab’s terms of service agreement has the following to offer:

“…you understand and agree that by submitting your Content to any area of the service, you automatically grant (and you represent and warrant that you have the right to grant) to Linden Lab: (a) a royalty-free, worldwide, fully paid-up, perpetual, irrevocable, non-exclusive right and license to (i) use, reproduce and distribute your Content within the Service as permitted by you through your interactions on the Service, and (ii) use and reproduce (and to authorize third parties to use and reproduce) any of your Content in any or all media for marketing and/or promotional purposes in connection with the Service;”

It is both interesting and sad at the same time. I'm majoring in Film and Digital Media and one of the concepts that was addressed in the curriculum was the "loop hole" factor regarding digital or "new"  media. The medium is still new in the world when compared to cinema, books or other means of distribution. Therefore, laws governing this medium are few and far between. Most existing copyright laws are older than the medium itself. The sad thing is people know this and take advantage of it big time. Best cases that illustrated this loophole were the Napster case of the 1990s and the 2008 Writer's Strike. The problem is nobody can clarify what or who the legal jurisdiction of the internet really is.