Reminiscent of Marvel v. NCSoft, but just without the lawsuit, Katie Dean writes for Wired about how players in SWG don't have the freedom to play virtual instruments because IP makes that possibility too dangerous for Sony Online:
As musicians, the characters play pretend, virtual instruments like the slitherhorn, ommni box or the nalargon, but are limited to a handful of canned tunes. Lawyers at Sony Online Entertainment and LucasArts envision a legal nightmare if musicians were to re-create music copyrighted in the physical world.
"If we allowed someone to play anything they want, they could play a song by Madonna and then we'd have licensing issues," said Julio Torres, a producer for Star Wars Galaxies at LucasArts. "We don't want to give them the option to try, because the bottom line is, if we open that gate, they will go through it," he said.
My friend Eric Goldman gets quoted on the legal issues. As to my personal thoughts about all this, I'm again with Fred -- this is a problem that needs a solution.