That Time Xbox Invested in an AI Company that violated Nintendo's copyrights

Back in 2023, when generative AI was shiny new tech, Xbox started eyeing it early. This was unsurprising as Microsoft (Xbox's parent company) had been making massive investments in AI for years, including a massive $13 billion investment in OpenAI to build "artificial general intelligence", but this hadn't translated to their gaming division at the time.

Enter Inworld, a generative AI company specializing in chatbots for use in video games and customer service. Xbox announced in November that they would be partnering with Inworld to leverage their expertise in working with generative AI characters in order to build an "accessible, responsibly designed multi-platform AI toolset to assist and empower creators in dialogue, story & quest design". Inworld was already being funded by several venture capital funds, including Peter Thiel's Founders Fund and Microsoft's own AI-focused M12 fund.

Xbox claimed that throughout their multi-year partnership with Inworld, they would follow Microsoft’s Responsible AI Standards, which include a focus on accountability and addressing racial biases that AI models have become known for.

As a fan of many Xbox games, I immediately took notice of this announcement. After some surprisingly brief investigation, I'm not sure that Xbox did any vetting around this company whatsoever...

Meet Wol!

In 2023, Inworld was primarily focused on selling its own character software to developers having collaborated with Pokémon Go developer Niantic on "Meet Wol" an AI-based talking owl app with VR and AR support that same year.

Meet Wol app is still online, so I decided to try it out.

It's bad. Really bad.

Meet Wol functions similarly to the augmented reality features in Pokémon Go. After placing a "portal" on a surface using my iPhone's camera, a virtual environment appeared and Wol the owl flew in from behind a tree. Unlike Pokémon Go, where the creatures can only say their names, Wol immediately started infodumping about Redwood trees to me and wouldn't stop no matter how many times I asked and insisted on calling me his "featherless friend". It's like if Kaepora Gaebora for The Legend of Zelda had a terrible voice actor and decided to lecture Link about the tree he's standing on. The trailer for Meet Wol wisely doesn't showcase his voice which is extremely unpleasant and robotic.

Wol served as an advertisement and tech demo for 8th Wall, Niantic's software platform that boasted of a feature called "Metaversal Deployment" to create and host apps that support both VR headsets and augmented reality features on phones.

8th Wall stopped development in February of this year and will take down all apps hosted on its platform in 2027.

Copyright Violation!!

Besides Meet Wol and its other collaborations, Inworld marketed its products using character-based chatbots inspired by both real life and media, even going as far as setting up a separate website at npc.ai to show them off. You can see some of the examples below:

Many of these characters originate from copyrighted intellectual property such as It's Always Sunny in Philadelphia, Devil May Cry, The Big Lebowski and The Elder Scrolls (which was not yet acquired by Xbox). In some cases, the properties belonged to Xbox's rival companies Sony and Nintendo.

Bizarrely, I noticed that almost all of these chatbots were created by users whose names are related to the IP they're based on. For example:

• Hermione Granger from Harry Potter was designed by "WitchWeekly" - "Witch Weekly" is the name of a popular magazine in the universe
• Geralt of Rivia from the Witcher series was created by "Destiny Sword" - one book in the series is named "Sword of Destiny"
• Bowser from the Super Mario games was created by "King Morton" - Morton is Bowser's father in Super Mariolore
• Wednesday Addams from The Addams Family was created by "CousinLit" - Cousin Itt is the name of one of the characters
• Pikachu from Pokémon was created by "KetchumCorp" - Ash Ketchum is Pikachu's trainer in the TV show

It goes on and on. I wouldn’t dare cast aspersions on the good folks at Inworld, but it seems possible that all of these bots were created by the same employee using different aliases and trying to be clever — it’s extremely unlikely that so many actual users were interested in creating chatbots given that Inworld was an unknown company and npc.ai was in alpha when their partnership with Xbox was announced. 

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AI Impersonations of The Dead!!!!

Inworld founder Kylan Gibbs demonstrated the process of creating one of these chatbots in a blog post. The post was accompanied by a now-unlisted video narrated by Gibbs clearly shows a chatbot based on Deckard Cain from Blizzard's RPG series Diablo in the "Video Game Characters" section. Also featured is a posthumous facsimile of famous sci-fi writer Ursula K. Le Guin, who has been dead since 2018 and could not provide her consent for such a chatbot.

This wasn't just an example for the tutorial video - Ursula K. Le Guin's character was visible on Inworld's website alongside "Grandpa Rick", a.k.a Rick Sanchez from Adult Swim's Rick and Morty. Other real life figures represented on npc.ai included YouTube celebrity Mr. Beast, TV chef Gordon Ramsay, and Elon Musk.

Later in the video, Daenerys Targaryen from Game of Thrones appears as a character you can chat with, accompanied by the dialogue "I have in my possession a magical dragon's egg. Are you interested in making a trade, traveler?".

While the video mentions several of Inworld's 2022 safety guidelines for AI characters, it skips over the section banning the violation of intellectual property rights and impersonating "any person or entity".

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AI Assistants!!! (Featuring Uncomfortable Racial Dynamics)

Besides video game NPCs, Inworld's other line of business in 2023 was its AI chatbots created to do advertising and sales for corporate brands. Inworld brags that their AI character technology can be used to "cast virtual influencers", "populate the metaverse with brand ambassadors", and "extend ad campaigns". To show that these AI characters would be a good investment, Inworld points to a 2018 study (that didn't use their software) showing a 19% increase in chatbot "likability" when a personality is added.

Many of the characters shown off in Inworld's promotional imagery are Black women.

The imagery of these fake Black women alongside literal sliders that determine how "positive" and "peaceful" comes off as an AI generated Mammy stereotype and mirrors how African-American women were considered property under chattel slavery. This is even more unnerving knowing that Black women make up a tiny minority of the corporate managers who make up Inworld's business-to-business customer base.

Now, in 2026, Inworld has rebranded and seems to pretend like this whole affair never happened. The company now focuses on AI text-to-speech and speech-to-text software and its current homepage features completely new language that barely mentions video games. npc.ai has been taken down entirely. It's unclear what, if anything, came from their plans to make game development tools with Xbox.

Artificial general intelligence still hasn't materialized, but that hasn't stopped Microsoft from tripling down on its AI investments, contributing to what many are now calling a bubble in the industry.