Tangled Webs

    What Gives Them the Right?
Issue 4.13
Oct 19, 1999

Winning the Game

I have the answer.

In one simple step we can we can improve software quality, increase competition and innovation in the marketplace, and render the recent US government and industry lawsuits against Microsoft unnecessary. No companies need be broken up, and no nervous industry coalitions need be formed. All we need to do is revoke the special legal privileges enjoyed by the software industry and place them in the same legal framework as the rest of the world economy.

Granted, talking about special legal privileges seems odd at a time when the industry is portraying itself as a victim of relentless government intervention. However, the fact is that the software industry enjoys a level of intellectual property protection that would be considered absurd in any other industry.

Don't get me wrong. I own a software development company myself, and like all other companies, software companies need to protect their intellectual property from piracy or outright theft. Only in the software industry, however, does intellectual property protection give the owner the ability to use the force of law to enforce arbitrary restrictions on what consumers can do with their products.

For example, when the web was new, Microsoft used this privilege to eliminate competition from the web-server market. They simply rewrote the NT Workstation license agreement to make it a breach of contract for anyone to run a non-Microsoft web-server without first buying an $800 Microsoft upgrade to NT Server which, coincidentally, came with a "free" copy of Microsoft's own web server.

Letting Everybody Play

The software industry sees its dependence on intellectual property as somehow unique. In today's world, however, almost every industry depends on the protection of their intellectual property for survival. An automobile, for example, contains a tremendous amount of intellectual property. The design of the components, the processes by which they are assembled, and even the algorithms to control fuel injection are all the jealously guarded intellectual property of the automaker.

The auto industry has prospered without the legal right to restrict how consumers can use their cars. They cannot forbid you to open the hood. They cannot put restrictions on to whom you may resell the car. They cannot have you fined or thrown in jail for having your car serviced at a non-approved garage. Only the software industry has these privileges, and they use them regularly.

Software companies acquire these special privileges via license "agreements." But why shouldn't auto manufacturer's enjoy the same privileges? Perhaps after arranging financing and making the down payment, the consumer would be handed an envelope containing the owners manual and the keys.

By opening that envelope they would agree to have the car serviced only at the dealer, to hold the dealer and automaker blameless for any defects, that any defects would be fixed at the automaker's sole discretion and convenience, and that the fixing of defects could involve the purchase of a new automobile.

With such an arrangement, the auto industry would also enjoy 60% profit margins, but it would be a disaster for the consumer. Imagine the price gouging, the poor service, the dismal product quality and the nonexistent customer support that would result from such an arrangement. It won't take you too long to realize that this is exactly the state the software industry is in today.

Of course, the auto industry takes a more sane view of intellectual property. If I want to design an after-market carburetor for Toyotas, I can take apart Toyota engines, measure them, modify them, test my carburetor, and market my product. All without Toyota's consent. In the software world, I would be heavily fined as soon as I opened the hood, and could be jailed if I tried to bring my innovation to market.

Granted, most consumers have no desire to open up and modify their software. Just as I have no desire to examine the inner-workings of my car's carburetor -- certainly not after what happened last time. However, it's worth looking at the multi-billion dollar after-market auto parts industry and asking why we are keeping the analogous software market illegal.

Reading the Rulebook

I was once accused of being a Marxist for pointing this out, but the fundamental purpose of intellectual property law is not to maximize the profit of the property holders, but to promote the public good by providing a financial incentive to create new works and advance the state of the art.

Patent law requires patent holders to make their designs public in exchange for legal protections of those designs. All members of the public are free and encouraged to study these designs and to develop upon them. Thus advancing the state of the art. In all other industries, intellectual property is protected as a way of promoting the long-term public good. In the software industry, however, the protections are given unconditionally, and studying intellectual property to advance the state of the art is considered illegal.

The acid test is to see if these special protections encourage the creation of new works. Clearly they do not. The creation of new products is a very poor strategy in today's software world. Most companies focus on locking customers into a product and then making money from the upgrade cycles, in which customers are forced to buy expensive updates every year to compensate for designed-in incompatibilities.

There would be little incentive for Ford to come up with new models if they could simply announce that would no longer service cars after three years -- knowing full well that it would be illegal for anyone else to service them.

Would the software industry survive if it had to operate under the same laws as every other industry on the face of the planet? Undoubtedly it would, and it would prosper. The guaranteed sales and profit margins would evaporate in short order, but the industry would thrive, and we would see a return of the innovation and quality that was once the hallmark of this industry.

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© Copyright 1999, Tim Romero, t3@vgkk.co.jp
This article fist appeared in the Sep 8, 1999 edition of The Japan Times.
Tangled Webs may be distributed freely provided this copyright notice is included.
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