Raph Koster made an excellent post in his blog (required reading), which Frans quoted in the last post here on the SLOG. He makes an excellent analysis of the issues around copyright in the digital realm from years of experience in the MMO industry. And, I am afraid, everything he says is true: it is more or less impossible, to effectively protect "content" in Second Life - like it is impossible to protect content in First Life - especially in digital form. There is not much Linden Lab can do about this. Like there is not much the music industry can do about it on the internet of today.
This already has been true for quite a while. CopyBot just made it apparent. It will change the content industry in Second Life dramatically over the coming year. It won't be impossible to make money with content like fashion, skins, prefabs etc. but it will be harder, maybe much harder - like it is harder now for the music industry to make a profit than it was some 10 years ago.
I don't think the publishers (or platform companies like Linden Lab) are to blame. It is us, the consumers, who drive this development by doing what serves us best - short term! Still I did not like one part of Raphs original post where he describes this in words that seem a bit harsh to me, because, what he decribes is not true in Second Life (as to my personal experience):
And all of a sudden, the same folks who likely argue cyberliberties and donate to the EFF and have gigs of video stored on RAIDs they keep in their garage suddenly feel the sting of perfect digital copying. CopyBot is a mirror, and what we see reflected in it is the unsavory fact that we all want DRM, if it favors us.I tend to seriously doubt that it is really the same "same folks who likely argue cyberliberties and donate to the EFF and have gigs of video stored on RAIDs" who are protesting in Second Life now. This has got to do with the very special demographics of Second Life and the fact that many, many of the - so far - successful entrepreneurs in Second Life are not rooted in the game player/ script kiddie/ hacker culture. If you look at the fashion industry for example, you will find very many people (a lot of women) far into their 30s, 40s or even 50s who probably won't have 60 megs of stolen MP3s on their iPod.
I don't want to sound too pharisean, but I - besides being male - am maybe a better role model for these "inworld business people" than the stereotypical Open Source advocate you are describing. I am 46 just now and most of the tracks on my iPod stem from CDs I actually own. The rest was downloaded from iTunes. And you won't find a single copied DVD in my household. ;)
I am sure, though, that from a technical viewpoint Raph's assessment is right and in the long run not much can be done to prevent content theft from websites or Second Life. So society will have to adapt to this fact - as well as they will have to adapt to the fact, that soon most of this content will be "manufactured" in south east asia or to the fact that major publishing houses (music, print, movies ...) will die in the coming years. Society allways adapts.
What I find a bit hypocritical, though, is Linden Lab's attitude towards the issue. They are seriously tooting SL as a platform to make real money on, while being rather laissez faire with the whole issue of Copyright (in action, not in words). This seems either naive or maybe a bit dishonest to me.