There's been an awful lot of community discussion around the first version of Microsoft's recently released Game Content Usage Rules. Most likely a result of Halo 3's upcoming Saved Films feature, Microsoft is the first game publisher to openly publish such rules, instead of simply remaining silent over copyright violations that do benefit them insofar as they help promote the games.

Shortly after the rules were noticed, some machinima studios claimed that its restrictions against "adding to the game universe" and prohibition against usic "music and audio effects" forced them to close down.

Don "DonkeyXote" McGowan in Micrsoft's legal department, who helped draft the rules, also posted in his blog about them, touching on the story, audio, and reverse engineering items specifically.

Machinima For Dummies has two news articles on the rules: one, two. Hugh Hancock provided an analysis of the rules, stating that they do need revision but are mostly positive.

However, probably the best analysis comes from EFF attorney Fred Von Lohmann, linked to in Hancock's post. The bottom line is: using this license is not mandatory, and even if you do use it, it provides rights additional rights to the fair use rights you already have.

The new license appears to give you permission to do things that would otherwise be forbidden by copyright law. These permissions are in addition to any fair use rights you might otherwise enjoy (according to Microsoft's lawyers, Xbox games do not include any contractual terms intended to strip you of those rights). So machinima creators who use Microsoft games now have two choices -- they can follow the rules set out in the new license, or they can fall back on their fair use rights.

In short, if you've been making machinima up to now based on your fair use rights, you can keep doing that. If you're doing something that requires more than those rights, you can use the license if it covers what you need. If you need more than that, you need a commercial license.

This is not to say there aren't problems with the current revision of the license. The clause about extending the game universe is still very vague, and it's unclear to me how the prohibition against allowing others to build on your derivative work can ever function; after all, those people could just operate under fair use rights as well.

If there's a real kicker in this story, it's this gem from Von Lohmann:

To those of us who are licensing lawyers, that's an interesting development, as there are those who have questioned the GPL to the extent it's not a contract. Apparently Microsoft agrees with the FSF that unilateral permissions "work" in the world of IP licensing.

That's got absolutely nothing to do with gaming or machinima, but everything to do with the entrenched competition between traditional closed source software development and sale, and the open source, free-as-in-speech/free-as-in-beer software development model. There's not a small amount of irony in the possibility of Microsoft's biggest entertainment software hit inspiring an admission of legitimacy for the legal framework that underpins the greatest threat to the software giant.