Law of the Game on Joystiq:
"It appears there has been a bit of a controversy over the recent changes to the PSN Terms of Service with regard to user-generated content, which seems to be at least in part tied to the release of the Sackboy epic Little Big Planet. Of course, user-created content is nothing new, and neither is the management of the licenses associated with that content. However, it seems like as good a time as ever to discuss the issue of managing the intellectual property rights of user created content and what that can mean for you, the user, and them, the game companies.
I guess we should get back to basics, though I'll skip the intellectual property primer this time around. When users create content for games, they're creating intellectual property that would likely qualify as a derivative work. After all, what good is the content outside of the game? Some types of mods are more derivative than others, depending on how much is taken from the original work. But the point remains, it's at some level a derivative work. In this case, however, there is at least an implicit authorization for the user to create the work based on the virtue of the developer giving the user the tools to do so. In this way, we're not dealing with a situation identical to, say, machinima."