Problem Solving Guy 5: Computer Licensing and Software Piracy

John: What is a software license, Guy?

Guy: A license of this type is somewhat unique in the world of commerce. According to the fine print (that only lawyers could possibly understand), you don’t actually OWN the product itself. Yes, after installation it resides on the hard drive ready, willing, and able to perform whatever task or entertainment value you purchased it for, but the manufacturer has the right at any given time to demand that you cease and desist using the software, remove it from your hard drive, return all materials to the place of origin, and deny that
you have ever heard of the software, the company that made it, the computer on which it never resided, any programmers you have ever met, and your first-born son. Well, only Microsoft insists on that last part. Keep in mind that they can do this most likely without reimbursing you what you paid for the item in the first place. While I can’t think offhand of a single instance when this right was actually invoked, the point is that while you may have physical possession of a CD or DVD containing the software, in the strictest sense of the word, you don’t own that medium.

John: So what do I actually get when I buy software?

Guy: What you receive when you buy software in most cases (remember that each company has its own unique licensing agreement policy) is the right to use the software for the intent on which it was created. Usually, but not always, you are also allowed to make one hard backup of the medium on which it was created in case of catastrophic failure or unintentional destruction of the medium itself. You are entitled to install the software on one machine for the use of one person. If the software is to be installed on more than one machine or if more than one person is expected to use the software on a single machine, most agreements stipulate that you must have a multi-user/machine license, usually at additional cost.

John: Does that mean that anything I create using the software is the property of the software maker?

Guy: Typically no. If I create a movie using iMovie or a song using GarageBand, the creation is mine and I can do whatever I want with the end result as long as no portion of it contains other copyright material. Let’s say I make an iMovie of my kid’s birthday party. During the movie, I drag and drop “Helter Skelter” by the Beatles during the gift opening sequence (those parents with young children can probably relate). After that, say I have shots of them sitting around the table, singing “Happy Birthday,” and devouring cake and ice cream like the little suger-vores that they are. If I decide to sell this video, the RIAA (Recording Industry Association of America) will come down on me faster than ticket sales for a Jimmy Buffett concert. Why? Because of the Beatles song. I don’t own that tune and the owner of said copyright is within his rights to sue me. Remember what happened when Apple had the commercial with that kid singing some rapper’s song? OK, so to keep from being sued, I remove Charles Manson’s lullaby. I’m good to go now, right? Nope, I’m still in trouble. Why? Because my kids sang “Happy Birthday.” This song (believe it or not) is still under copyright and cannot be used for profit without the express consent of the owner.

John: Why can’t I buy software, like everything else in the world?

Guy: The problem is that items of this nature can be reproduced and reused in a form that can be utilized by other people without additional payment or compensation to the maker or holder of the intellectual property copyright. Other items don’t lend themselves to this. Take cars for example. When you buy a car, you’re most likely not going to create a copy of it to sell or giveaway yourself. When you dispose of the car, by selling it, giving it away for charity, or smashing it into a bridge support at 50 MPH (don’t ask), you will no longer have possession or use of the vehicle in question. Software can’t be looked at in the same way because of the easily reproducible nature of the item itself. You could sell the floppy/CD/DVD that contained the software and still have it on your computer.

John: Are we talking about the U.S.A. only here?

Guy: Not necessarily. In theory, everyone in the world is subject to copyright and intellectual property laws. Of course not every country has the same copyright laws and enforcement of said laws is somewhat sketchy depending on what part of the world you happen to be in. If you’re a struggling manufacturer of gizmos in, let’s say India, and you can’t afford to spend ten of thousands of Rupees in licensing fees, you probably aren’t going to be too concerned about some software company in the U.S. Heck, even the ones NOT struggling aren’t going to be too concerned for that matter. The governments of many of these countries are going to turn a blind eye toward enforcement of intellectual property laws if you’re paying a tidy sum in taxes or baksheesh (bribes).

John: Yes, but what about books or CDs or DVDs? Do I buy or license them?

Guy: Prerecorded CDs and DVDs fall into the same category as computer software with some notable exceptions. One exception is that even the RIAA (which has become the enforcement arm of most music) or the MPAA (ditto for the movie business) cannot reasonably expect that you and ONLY you will listen to music or watch movies that you’ve purchased in your home or in your car at any given time. What they do expect is that you won’t charge others for the privilege. You can certainly invite the neighbors over to watch your DVD of “High School Break Dancing 4: The Return of the Chiropractors,” but you can’t charge them an entry fee. The same kinds of rules apply to cable Pay Per View events. Invite a bunch of buddies over to see a Pay Per View boxing match (Tyson vs. really cheesed off Girl Scouts) is fine as long as you, the purchaser of the event in your own home, do not charge admission or receive compensation from anyone else viewing it. The moment one of your friends hands you a beer that you did not purchase yourself, you’re technically in violation of copyright. Unless it’s really crappy beer.

John: What about music?

Guy: Prerecorded music works the same way. As many people as you want can sit and listen to your soundtrack CD from the Barney movie. You just can’t charge them for it. On the up side, they can’t sue you for putting that “I Love You, You Love Me” song deep in their heads along with “It’s a Small World After All.” The same kinds of rules apply for making a backup copy of your music CD as your software, as long as the copy is not being sold. The RIAA would love to take that right away, but they currently can’t. The FAIRUSE agreement covers making backups. Same thing with compilation CDs. You can certainly make music compilations for your own use AS LONG AS you legally own every song and no other copies of those songs from the same CD/cassette/vinyl record/8-track are in use at the same time.

John: How about books then?

Guy: Books and the print media are covered by many of the same laws as the music and movie industries. Reading a book yourself or to your kids is no problem, but stand in front of a paying audience and read the screen play to “Star Trek V: The Final Frontier” and you will get in trouble. Not just for your questionable taste either.

John: And how does that relate to Apple’s iTunes Music Store?

Guy: There lies a slippery slope. The music industry has shown itself to be very shortsighted when it comes to new media. They were fat and happy as long as you could only buy music on vinyl records because for a long time, there was no way to copy them off to something else. The real die-hards could copy them to reel-to-reel tapes, but it was too much of a hassle (not to mention expensive) for most people. Enter cassette tapes. Cheap recordings could be made either off the radio or your own records. The music industry of course went nuts. A compromise was eventually reached in that a certain portion of the sales of blank cassettes are earmarked for the music industry no matter what the intent of the end purchaser was in buying cassettes.

John: Ancient history Guy.

Guy: You would think so, but I’m constantly amazed at how little people learn from the past. Hi-ho, time marches on and digital recordings to CDs or DVDs of near perfect quality come along. Again, the entertainment industry goes bananas. The same type of compromise is reached in that a portion of the sales of blank media is given to the movie and music industries. Of course they are completely off the point of music piracy. It isn’t Danny Disccopy that they need to worry about. Or even Peter Peertopeer that is really costing them. It’s the big pirates protected by countries that turn a blind eye to copyright infringement that they should concern themselves with. Charge less or make it easy to get a product than you did before and most people will buy it legally.

John: I asked about iTunes, remember?

Guy: Is that what we were talking about? OK, back on topic. As hard as it is to believe, Apple was not the first to offer legal music downloads. They ended up creating the easiest method for doing so and with the iPod the most elegant overall solution. The music industry completely missed the boat and probably thought that legal music downloads would never go anywhere. They saw Apple (and by extension iTunes) as a cash cow that didn’t really cost them anything. They gave Apple very comfortable terms and off we go. Only now are they finally seeing that legal music downloads are most likely the future of music distribution and they’re desperately trying to redo the deal they did with Apple.

John: What is it that you think they would change?

Guy: To begin with, they want to start charging more for the same product than they did before, but can’t, based on the deal they made. Ironically, they’re doing this just as legal music downloads are beginning to make a dent in music piracy. Apple so far is refusing to knuckle under. So what can the recording companies do? They’ve tried to set up their own digital downloading system, but have done it so clumsily, that it really hasn’t made a dent in the overall market share of iTunes. I frankly suck at predictions (see my Intel on the Mac MyMac blogs for proof of that), but if the music industry ever manages to take down iTunes, you will see a sharp rise in the prices for legal music downloads. Why? Because the music industry doesn’t get it.

John: And how about downloaded songs from Apple’s iTunes Music Store? Can I do what I want with them without getting into trouble?

Guy: Within reason. Apple sells their music downloads with built-in Digital Rights Management (DRM). You and Owen did a series of articles on DRM which readers can check out by clinking this link HERE (helpful PSG link). They come as AAC files, which means that no other player other than the iPod can play them legally. Within the structure of iTunes, you can put them on a playlist (or multiple playlists) and burn them to a CD that will work in any player supported by that particular CD technology if you don’t have an iPod. Apple lets you burn as many as 7 CDs from a playlist before you can burn no more. There are of course ways around their DRM, but most people with legitimate needs don’t have to worry about it. It would probably be easier to say what you CAN’T do with your legally downloaded music:
1. Sell them to someone
2. Give them to someone
3. Use them in a for-profit scenario, unrelated to your listening pleasure

John: Let’s get back to software Guy. Why does Apple insist I only install Tiger on one personal computer when I buy the standard version of OS X 10.4?

Guy: When you buy the regular version of OS X 10.4 (Tiger), it comes with a one-user license. Apple’s terms are fairly standard as compared to most others in that this gives you the right to install one copy of Tiger on one computer. Since you can have multiple users on the same computer, it might be fairer to say it is a one-computer license as compared to a one-user license.

John: Will something bad happen if I install it on both my computers plus my wife’s PowerBook?

Guy: Not a ding-dang thing bad will happen. Apple relies on the honesty (giggle) and integrity (snort) of its users. Software isn’t cheap, but Apple doesn’t charge a lot for its OS as compared to some other large maker of operating systems that rhymes with sicromoth. Look up how much they charge for a non-OEM (Original Equipment Manufacturer) copy of their latest operating system and compare it to Apple. Add in their piracy protection scheme (manually entering a 15 digit or more license number and a hardware detection system that will shut you down when you make what is in their opinion too many changes to your computer) and Apple doesn’t look too bad.

John: Is that why you bought the Tiger family pack, or whatever it’s called?

Guy: Once I started getting multiple computers in the house, I decided to go ahead and get the family pack. Considering Apple gives you a five-user license at about $20 bucks a crack after the first one, it just seemed more than fair. Plus I had a $50 rebate from Amazon to help cushion the blow.

John: Do you get five physical installer DVDs with that family package?

Guy: Other than a piece of paper with additional serial numbers, there wasn’t any difference between the single and five-user package that I’m aware of.

John: Then what if you install it on your sixth computer too?

Guy: A black hole will open in my front yard, engulfing everything and everyone I know. I will be sucked down to the 12th level of hell and forced to take Dell telephone support calls for eternity. Or something like that. Actually, nothing will happen at all other than tweaking my conscience for not being a good legal user of software.

John: Are serial numbers on the horizon, to help Apple keep all these matters under control?

Guy: Man I really hope not. I hate keeping track of those things. They’re a royal pain in the keister. Oddly enough, if Apple grows significantly on the Intel platform, they may be forced to do so to keep track of who are legal customers and who is not. Not as much as a money standpoint, but from a software support position. If Macs gain major market share (hey, it could happen), do they want to have to support illegal copies of their software? Software support isn’t cheap, even if it’s off-loaded to Indonesia.

John: Is it fair that some products require registration and serial numbers and others don’t?

Guy: What is fair? Is it fair that I have to work so very hard when I am obviously extremely smart and good-looking? Wait, my wife might read this and then I’m in big trouble for lying. I guess it really depends on the philosophy of the company in question. The problem is that software is not cheap to develop and the makers are entitled to compensation for their efforts. Unfortunately there are those people out there that refuse to pay for software that they use every day. The game industry has it the worst. Many of these people think of themselves as pirates, but all they really are is thieves. They attempt to justify it by boo-hooing about the high cost or limited use (I just need it for this one thing), or darn near any other reason to not pony up the cash for something they find useful.

John: How is the consumer supposed to know, or keep track of all these serial numbers and registration codes?

Guy: As best they can. I usually either write them down in a notebook, or if the serial numbers are on stickers, I’ll put them on the CD or DVD (obviously not on the data side of the disk) that contains the application program.

John: How much theft actually occurs from bootlegged or stolen or “shared” software installers?

Guy: Some sources have pirated software percentages at 35% per computer. That’s a significant number no matter how much is lost in retail. How much is actually lost is harder to quantify since it would depend on what the retail value of lost sales per computer would be.

John: Is that in the United States, or worldwide?

Guy: According to a British website called “The Register” (www.theregister.co.uk), the U.S. actually has one of the lower percentages of software piracy per machine at 21%. Think about that. According to this, 1 out of every 5 programs on most people’s computers in the U.S. is pirated.

John: Should we here in the US really care about what we hear about software piracy in the rest of the world, such as China and Russia, for example?

Guy: While we should care, I fail to see what we can do about it. It’s not like Microsoft can invade Moscow for illegitimate copies of MS Office. Or ID Software can bomb Pakistan for illegal copies of Doom 3.

John: Is this a crime without a victim, since software often is expensive and the companies sure appear to be financially healthy?

Guy: The cost of the item is irrelevant to the intent of those doing the pirating. Since a good percentage of illegal software is games, lets use that as an example.

John: Alright, I’m READY!

Guy: Thanks for that SpongeJohn Nemopants. Company X makes the latest version of their “Bodacious Babes” series of first person shooters (Bodacious Babes 3: The Return of Les Bien). When released, it retails for $49.99. Since it is the must have game of the week, the price remains stable for the first three months. After that, it’s competing with “Death Derby 4: Pedestrians AHOY!” The price begins to come down. After 6 months or so, it’s in the bargain bin at $19.99 where it remains forever more. Company X makes most of its money during the first three months or so of the game’s release. Software thieves will claim that the game is just too expensive at its original release price, so they feel justified in pirating it to “Teach Company X a lesson for charging too much.” After all, a blank DVD only costs 50 cents and the game packaging is less than a buck. So Company X is making $47.49 profit for each game sold. They can afford it. Except that Company X has spent a large amount of money in developing the game. The retail outlets take their cut. Programmers expect to be paid, artists expect compensation, rent must be paid for the offices, a support staff, cleaning crew, advertising, utilities, computers, IT staff, and on and on. Also keep in mind that not every game sells millions of copies. One bad review in a major gaming magazine could probably cut those sales in half or more.

John: I’m more interested in music than games.

Guy: So let’s switch to the music biz. The same kinds of rules apply. Just because the latest CD from the boy band “Half-shaven Beach Bums” sells a gazillion copies, doesn’t mean the record company is awash in cash. They too have studios to support as well as making up for all those unsold “Rap Country Kings” CDs. Yes, these companies make money. Why shouldn’t they? What other reason do they have for existing?

John: Software, round three. What would you do, Guy, if you were in charge of intellectual property rights for Apple, Adobe, Microsoft, and other similar corporations?

Guy: Implement a company-wide policy of thrashings and beheadings for policy violations. I guess I would have to do something about software piracy too. I’m a big fan of what has been called crippleware. What this means is releasing a fully functioning version with critical features disabled (Printing, saving, and the like). This allows users to try a product before they buy it to see if it meets their needs. For the gaming industry I would do something different. A two or three level demo of the game lets people get a feel for the game. I would put at the end of the demo an unbeatable boss to entice people to get the full version just so they can kill that SOB.

John: How much would that cost to implement, and who would benefit?

Guy: The medium is cheap enough. How much for a DVD or CD these days? Especially in bulk. Release it as well to bit-torrent and other download sites for next to nothing. Everyone benefits since you don’t buy the software that doesn’t meet your particular needs.

John: What about us ordinary consumers, as opposed to corporations?

Guy: There has been a trend over the last few years for companies to come up with limited versions of industry favorites. I like this very much. Take Adobe for example. The full version of Photoshop retails for about $650. That’s a lot of cash for your average user. Photoshop Elements sells for about $90. Elements gives you about of the functionality of the full-blown version at much less than 1/5 of the price. That is a bargain and I use it all the time. Apple’s Final Cut video editing software is another prime example. Final Cut Pro is around $1000. Final Cut Express is $300. Both offer a similar interface and for the casual user that has grown beyond iMovie, Final Cut Express is very affordable. I’ll even give Microsoft credit for releasing a Student/ Teacher version of MS Office for 1/3 the price.

John: Any closing words for our readers on this fascinating topic?

Guy: Do a bit of soul searching and check your computer for software that you haven’t paid for. If you don’t need it or use it, delete and get back some hard drive space. If you do use it, go a get a legal copy. Be fair and support those companies that support the Macintosh platform. The best way to get companies to make software for the Mac is to show that they can make a profit in doing so.

John: Thanks, Guy.

Our previous PSGs can be found at the following links:
PSG 1: Computer Frustration
PSG 2: Monitors and Displays
PSG 3: iPod and iTunes
PSG 4: When Disaster STRIKES!