I am certainly not confused.
I didn't mean to imply that you were! Quite the opposite.
But I do see a lot of threads on the OGL where posters do not distinguish between the OGC (mostly in the form of the SRD) and the licence itself.
I would add the caveat that it is possible for a book to contain mechanics that are OGC next to mechanics that are not, under the terms of section 8. Section 1, which you are citing does say that if you publish a mechanic which incorporates OGC then the derivative must itself be OGC. Now, that being said, most users of the OGL, like Paizo, are pretty free with what they declare OGC (ie. everything); but if you introduce a non-derivative mechanic, you can declare it closed, even within the same book.
The relevant text reads in full, "Open Game Content" means the game mechanic and includes the methods, procedures, processes and routines to the extent such content does not embody the Product Identity and is an enhancement over the prior art and any additional content clearly identified as Open Game Content by the Contributor, and means any work covered by this License, including translations and derivative works under copyright law, but specifically excludes Product Identity. "
The phrase "enhancement" refers to derivative mechanics but excludes non-derivatives. The phrase "and any additional content," clearly refers to possible non-derivative work you should choose, in section 8, to include. But that does create the aforementioned possibility of choosing not to include non-derivative work in your section 8 declaration.
I don't agree that Section 8 gives rise to the implication you are deriving from it. Section 8 would have a perfectly sensible operation even if all mechanics in an OGL-licensed publication were, ipso facto, OGC: namely, it would require a publisher to expressly call out OGC in the publication. For instance, in a module which contains both story elements (Product Identify), generic "how to use" info (neither OGC nor Product Identity) and stat blocks etc (let's suppose this is all OGC taken fromthe SRD), then the publisher has to clearly identify where the OGC is found in the text that you are publishing. All the work has to be done by Sections 1 and 2: when you use OGC in your text, you are bound by the Licence (s 2), which therefore includes the definitions (s 1).
You are right that Section 1 identified the declaration of "additional material" as OGC - what I described as "Method (i)".
But I think a lot of material is going to be captured by what I described as Method (ii), and I think in practice many publishers would probably want to err on the side of caution.
The relevant parts of section 1 seem to be:
(b) "Derivative Material" means copyrighted material including derivative works and translations (including into other computer languages), potation, modification, correction, addition, extension, upgrade, improvement, compilation, abridgment or other form in which an existing work may be recast, transformed or adapted
. . .
(d) Open Game Content" means the game mechanic and includes the methods, procedures, processes and routines to the extent such content does not embody the Product Identity and is an enhancement over the prior art and any additional content clearly identified as Open Game Content by the Contributor, and means any work covered by this License, including translations and derivative works under copyright law, but specifically excludes Product Identity
. . .
(g) "Use", "Used" or "Using" means to use, Distribute, copy, edit, format, modify, translate and otherwise create Derivative Material of Open Game Content.
So derivative works under copyright law are expressly declared to be OGC. Likewise any work covered by the licence, which clearly includes material declared to be OGC by someone else's use of Method (i).
OGC is said to mean game mechanics, including methods, procedures, processes and routines are said to be OGC to the extent that such content "is an enhancement over the prior art". To the best of my understanding, "prior art" is a notion from patent law. So the reference to "enhancement over the prior art" seems to be an attempt to both expand and limit what counts as OGC: the same mechanics, methods etc reproduced using different words (and hence perhaps not counting as reproduction in the most literal sense) are nevertheless OGC (this is the expansion, from copyrightable text to the mechanics that text expresses), provided that they were enhancements to prior art (ie not already in the public domain when originally written up - this is the limitation).
The least clear matter, to me at least, is the status of material that falls under the OGL's definition of "Derivative Material" but is not a "derivative work" within the meaning of copyright law.
First, it's not clear to me how extensive that category is, because of the use of the words "addition", "extension" and "upgrade".
Second, the creation of such work is permitted by the OGL subject to the OGL (per Section 2). Is such work "work covered by the licence" - and hence ipso facto OGC?
To the best of my knowledge, the OGL has never been litigated, and so we have no definitive answer. (If I'm wrong about that, I would love to be pointed to any info.) But my own gut feeling is that the answer is yes - because it is Use of the OGC which must be "under and in terms of" the OGL, which itself declares that the OGC is "the game mechanics". Hence game mechanics that are derivative material seem to me to be work "covered by the licence".
If you think I am wrong, then anything which is not a derivative work in the copyright sense need not be identified under section 8.
If I am right, then anything which is a derivative work in the copyright sense, or is otherwise derivative material as defined in the OGL, must be identified as OGC under section 8.
In practice, I think this creates an incentive to identify as OGC anything inspired by, or clearly building on, ideas and mechanical techniques found in the SRD.
After writing the above, I decided to check the notice of OGC in the Malhavoc book "Mystic Secrets" - because these books are somewhat notorious for their thin OGC declarations. The declaration includes all the feats and magic items, plus all the mechanical elements of the spells. But not other mechanical elements which clearly build upon and interact with elements of the SRD (eg various rituals and runes). Do you have a view on whether that is compliant? I have doubts.
