IANAL, but a lot of this strikes me as being very wrong.
Lord Zardoz said:
Wizards wants to have the same kind of business model as Valve. They want people to create user mods for their game. They want to license out the game engine to other companies so they can also make content for that game. However, Valve does not let someone take Half Life, make an entirely new game, and then sell it in direct competition to their games.
This is an incorrect analogy. Valve licenses its engines to other companies who then use the engine to produce games which directly compete with Valve's. Ubisoft's Dark Messiah of Might and Magic is the first one that comes to mind. Now, Valve makes money from licensing the engine, so a more apt comparison might be a situation like id releasing the Quake 3 engine under the GPLv2. Anyone can take the engine, modify it, and release a new game. This is conceptually similar to the OGL, in that GPL-derived code cannot (in theory) be closed, Tivoization loopholes aside.
The publishers of those books realized that the OGL did not really work in their favor though, because people were copying those OGL derived D&D compatible rules and putting them in free rules collections. This also hit Wizards, but Wizards could dictate what was OGL or not. But if you published OGL derived material, than your material could be put online for free more or less in its entirety. So how could a 3rd party publisher prevent their customers from cherry picking their best content from free online sources that they could not shut down?
This doesn't make any sense. If I release a work under the OGL, I'm within my rights to release as much or as little of it under the OGL as I choose, so long as I don't try to exclude licensing material which was originally published in or directly derived from the SRD or other OGL source. For example, in Iron Heroes (the book I happen to have closest at hand), the entire stunts system is closed. So I don't understand your implication that 3rd party publishers were helplessly watching their innovations published online for free. If, as a 3rd party publisher, you created something innovative and didn't want to make it open content, you didn't have to. The only time you were forced to make something OGL is if it came from a previous OGL source, in which case I'd argue it's an enhancement, and not particularly innovative.
The current situation for Wizards would be like people giving away full copies of Half Life alongside their own user created mods. On top of that, people are doing the equivalent of also giving away or selling games that compete directly against half life. There is a reason why videogames do not use the GPL license that Linux uses.
No, the current situation would be like someone making a game using the Quake 3 engine or a derivative, and distributing the source so anyone with the inclination can make their own tweaks to it as well. You're conflating the engine (Source, id Tech 3, d20, and so on) with the content (Half-Life 2, Quake 3, etc), which in OGL terms is protected as Product Identity. If I wanted to package a complete game along with my supplement (mod), the best I could do would be to get together all of the Open Game Content ever made, and release it all in one huge compilation. But without all of the PI (the fluff), it's still just an engine, not a game. There's no setting, no descriptions, stories, etc. It's a set of tools to simplify making a game, just like a video game engine is.
The rest of your post is predicated on two ideas that I don't think hold up - a) that companies cannot be profitable making supplemental products, and b) that the GSL will "protect" 4e's mechanical innovations from appearing in OGL works. As I said above, nothing obligates a 3rd party publisher to release all of their innovations under the OGL. Most 3rd party books that I own
do open the vast majority of the mechanics, but it's not required.
To your second point, others have already pointed out that the system itself isn't protected by US Copyright. To use another software analogy, I can't copyright the concept of a binary search (that would be patent territory, if anything, but I don't want to derail this thread with one of my software patent rants
), but I could probably copyright my specific implementation of a binary search algorithm if so inclined. Coming back to RPGs, 4e's rulebook text (the specific implementation) will be protected by copyright, but the general concept of, say, characters having at will, per encounter, and per day powers isn't copyrightable, so long as you describe it using text that differs significantly from 4e's. Point being, if 4e comes out and has mechanical innovations that current 3e publishers like, there's nothing stopping them from integrating those mechanics into material published under the OGL, ignoring the GSL completely.
Now, my own speculation is that WotC is well aware of this fact, and that's why the GSL contains at least one carrot - the ability to use the D&D name on GSL products. As others have said, the D&D name recognition is a very powerful draw, and (in theory) anyone who wants that signs away their ability to release 4e mechanics under the OGL. I suspect that there are probably myriad ways to wriggle around that license provision for someone who's so inclined, but that's a discussion best left to real lawyers, not armchair ones.
