> TOS also states that it has a say in what “appropriate content” may be uploaded and used. So, this seems an obvious limitation on my creation.

I may be misreading the TOS — I only helped write it and am not a lawyer ! — but what they say is that content needs to comply with the community standards. The appropriate section of the cs doc is:

“Policing
Linden Lab does not exercise editorial control over the content of Second Life, and will make no specific efforts to review the textures, objects, sounds or other content created within Second Life. We may, however, remove any materials that violate these Community Standards, or which, in our sole discretion, may be illegal, or which may subject us to liability according to our TOS. Linden Lab may cooperate with legal authorities and/or third parties in the investigation of any suspected or alleged crime or civil wrong.”

Which seems to be about as liberal as we can make it while protecting our company.

> LL’s right to delete content and limitations on liability

These sections exist to protect LL. We have attempted to model the revised TOS on the webhosting model, including the limitations and protections that you would expect to see from a service provider. If you host your business at Level 1 and their colo loses power for 3 days, they will refund you 1/10th of your monthly bill, not your lost business revenues. Similarly, if you read the Photoshop TOS (for example) they expressly limit their liability in the event of lost data to the cost you paid for the software, not the value of what you lost.

> advertising rights

Yes, we needed to reserve that right since we are a small company that doesn’t have the bazillion $ EA has to promote products. Therefore, when a user makes something very cool, we need to be able to take a screen shot of it for ad copy. Note that the user still has exclusive rights to derivative works and hasn’t lost any rights.

> ownership == tricky

We agree that this is very tricky. “Own” is a strangely loaded word and, amusingly, also means very little absent intellectual property rights. The TOS does not take your IP rights away, so the fact that Linden owns the data doesn’t mean that we can go do anything that we want with it. What it does mean is that it is easier for Linden to limit liability in the event our colocation facility gets hit by meteor or, after banning a user from the system for community standards violations, being able to purge their data.

I agree with Candace that we will learn a lot about this over the next few year. We have tried to make the TOS as clear as possible and to allow our residents to retain as many rights as possible, including critically important rights to derived works and the ability to create commerical works using Second Life.

Hope this helps!
Cory