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What is Piracy?
by
Ron J. Goodman
Am I a software pirate? The people at Lotus would claim I am. I
disagree. In fact, I think the term "software piracy" needs a new def-
inition. So let's talk about that first.
Okay. Just what is a pirate? The audio, video, and film industries
know. They have real pirates. These are people who make and package
duplicates of records, tapes, and films; for distribution and mass
sale. They are offered to the public via apparently normal outlets at
heavily cut prices, and the original artists get nothing. There's no
doubt whatsoever that this is illegal. The equivalent would be to make
duplicates of the Lotus disks and documentation (probably minus the
copy protection), and sell the package on the open market for 10 % of
Lotus's price. I've read that there are shops in China and Japan which
do exactly that. I don't; I never have, and my intention is that I nev-
er will. Neither do I know anyone else who does it, has done it, or in-
tends to do it. And I've yet to hear anyone deny that piracy of that
sort is out-and-out theft, as illegal and immoral as any other form of
theft.
What I do do, without hesitation or qualm, is make as many copies
as I like of any software I buy, and use them in any way I choose on
any machine I happen to be using. After all, I paid for the damn thing.
I don't care what the so-called "shrink-wrap" license might say. It
isn't worth its weight in horse manure. Any unbiased attorney will tell
you there's no such thing under the Law as implicit agreement to a con-
tract. Contractual obligations must be agreed to explicitly and specif-
ically. Even then, they're not binding if they violate certain legal
criteria. (For instance, the statements on the back of parking lot
tickets that say the lot isn't responsible for loss or damage are mean-
ingless. So are many of the clauses in rental leases and agreements.) I
might use the software on any of several machines I have at home. Or I
might take one or more of my computers to a job, and use the software
there......I work on a contract basis, and do this fairly often. Or I
might take just the software to work, and use it on a machine that be-
longs to the client company. None of these things is legally or morally
wrong. Software is a tool for working on information; just as a drill
is a tool for making holes. When I buy that tool, I'm not buying a
"license" to use it only in vendor-specified ways. Once I buy it it's
mine, and I have the right to use it any way I damn well please; with
the single exception of making copies to sell at a profit. After all,
Tektronix doesn't try to tell me I can't take one of their scopes with
me to use at an on-site job assignment. Why should I let a software
publisher tell me not to use a copy of a program I paid good money for
in exactly the same way?
Of course, if the program happens to be Lotus 1-2-3, you "can't"
make a copy to take to work. Which brings us to the issue of copy pro-
tection.
One of the reasons I despise Apple Computer and would love to see
them go under is that, as far as I know, they originated the concept of
selling copy protected software. This was (and still is) unheard of in
the world of CP/M. The first time somebody mentioned copy protection to
me, I thought the guy was kidding. Like many others, the first thing I
do with a new software purchase is make backup copies, and I'm not
about to knowingly spend money for software that tries not to let me do
that.
The key word is "knowingly." Most of these outfits conveniently
"forget" to mention in their ads that their software is copy protected,
so it's possible I might buy such a package by mistake. It hasn't hap-
pened yet; but it could. So what could I do then?
A moralist might say, "Return it for a refund." But even if I
agreed, it wouldn't work. The "shrink-wrap" license prevents it. While
it wouldn't hold up in court; there's no way except going to court to
force the company to refund your money, once you've opened the package.
And you're not going to find out about the copy protection until you do
that. A classic catch-22, right?
Wrong. Because there remains the sweetness of revenge. I figure
that, if I get in an argument with someone who tries to gouge out my
eyes, he has no legitimate beef when I block his attempt and ruin his
future sex life with a well-placed foot. Copy protecting your software
tells me that you feel no obligation to be concerned with the conveni-
ence of your customers. I therefore need feel no obligation to contrib-
ute to your profits. I'll make it stronger. Doing that puts you beyond
the right to any consideration whatsoever......just like the dude who
tries to take out my eye in a fight.
Normally, I'd simply refuse to buy your product. The only way I'd
do so would be if I didn't know it was copy protected, because you
"forgot" to mention that little fact in your ads. Then, as far as I'm
concerned, you've added fraud to your previous sin, and you're really
beyond the pale.
So the first thing I'd do would be break the copy protection. The
second thing would be to disseminate the information on how to break
the copy protection as widely as possible, and maybe even give away a
few of the unprotected disks. In spite of popular belief, that last is
not illegal. Notice: I said "give," not "sell." The same unbiased at-
torney will confirm that, for nonprofit purposes, you can legally give
away quite a few copies of copyrighted material, such as software. For
individuals, the limit is 100. (Beyond that point the Law figures that
no one has that many close friends, so you must be making a profit of
some sort.)
I wouldn't deliberately buy a copy protected software package for
this purpose. I've got better ways to use my time than breaking copy
protection. So as long as you clearly label it as such in your adver-
tising, your copy protected software packages are safe from me. Though
I'd like to see it, a consumer protection law banning the sale of copy
protected software probably isn't in the cards. However, a law mandat-
ing that copy protected software must be unambiguously labeled as such
in all advertising would be to the advantage of everyone in the field
(except people who deliberately leave it out in order to sell to people
like me). In the meantime, several companies are marketing programs
such as CopyRight and Copy II PC, which are specifically written for
the backup of protected software. This is carrying my inclination to
disseminate the information as widely as possible to the ultimate deg-
ree. If I could control it, the place in Heaven for these people would
be assured, with the mansions and palaces already prepared. While I
devoutly hope that there's a special and very hot corner of Hell re-
served, along with the exclusive attentions of the nastiest demons
available, for people like Vault Corporation, who not only invent and
market copy protection schemes, but even, (so I've read), have had the
colossal gall to file a Lawsuit against some of the good guys (Quaid
Software).
A reasonable definition of a software pirate would be someone who
makes unauthorized copies for the purpose of creating illegal profits.
The copying practices described above are unauthorized; but none of
them involves either illegality or a profit motive. Therefore, I don't
think they can honestly be described as piracy.
What about the recent flurry of lawsuits? Notice; these have all
been against companies. The right to give away copies is only clear in
a non-profit situation. A company that buys a single Lotus package and
makes 50 copies of the disks and documentation for the use of 50 emp-
loyees on 50 different machines is on much shakier legal ground, be-
cause the company exists for the purpose of making a profit. Even then;
notice also that so far, none of these cases has gone to Court. Lotus
et al have been careful to sue only companies that they were sure would
settle without fighting them. This is because it's by no means certain
that they'd win. Eventually, of course, someone is going to miscalcu-
late and sue somebody who will make them prove it. The Court fight when
that happens should be very interesting, and the results illuminating.
The remaining issue is pricing.
In scores or hundreds of stores and mail order outlets all over
the country, double-sided five inch disks are available for less than a
dollar apiece. The cost of manufacturing a software package for sale is
simply the cost of the media used plus the cost of printing the docu-
mentation. Even adding the cost of packaging and mailing, it's pretty
hard to get the total above $10 or so. Now, the standard for mail order
pricing is for the price to be three to five times the cost of produc-
tion. On that basis, the maximum legitimate price for a software pack-
age would be around $50. I'll admit that that might be a little over
restrictive; though Borland International and some others are making a
lot of money selling some very heavy duty software in that price range.
But even granting that now and then it might be possible to justify as
much as fifteen times the production cost, the $500 to $2000+ prices on
some of this stuff remain outrageous. In fact, they are neither more
nor less than a flat out attempt to rip off the customer.
This last is going to produce outraged screams of, "What about our
development costs?" Well, what about them? That argument is a classic
case of "Figures don't lie; but liars figure." The cost of writing your
first program for sale, if any (it's zero if you write it yourself in
spare time, which means in time you couldn't otherwise have gotten paid
for), is part of your start-up cost; just like the cost of acquiring
the computer to write it on. Once in operation, writing new programs
and improving old ones becomes part of your overhead. Naturally, you
have a right to recover these costs out of your profits. The 200 % to
400 % profit margin is designed to allow for that, if you've got a dec-
nt product and a well run operation. After all, few programs take more
hours to write and debug than it takes to write a 100,000 word novel,
and how many novels go for $50 a book? Never mind $2000+. The usual
argument given at this point is, "Novels sell more copies than prog-
rams." Bull. WordStar, Lotus, Microsoft Basic, MSDOS, CP/M, and lots of
others have sold in the hundreds of thousands to millions range. That's
the best-seller range for a novel, and there isn't that big a percent-
age of best sellers out of all the novels published. Ask any author.
If you don't buy that argument; try this one. Compare the software
manufacturer's situation with that of a hardware manufacturer. Take any
one of the multitude of IBM PC add-on boards as an example. It takes at
least as much in the way of skill, talent, and time to develop a soph-
isticated board for a modern microcomputer as it does to develop a
large program, and a hell of a lot more in the way of capital invest-
ment. Not only do you need the computer it's going to be run on; you
need a lab full of expensive test equipment to get the breadboard de-
bugged and running, usually in wire wrap. Then you have to send it out
to get a printed circuit card made; after which you have to go through
the whole process again, because the PC card is always going to come up
with some bugs that the wire wrap prototype didn't have. Of course,
along with this you need a full scale software development project,
because any such board is going to require some custom software to be
useful and salable. Then, once you get debugged production prototypes,
you have to invest another big chunk of cash to get into production.
You have to set up to buy the parts (including having your PC boards
made); set up an assembly line to put the cards together; hire assemb-
lers to do the work; set up a test facility with another batch of ex-
pensive lab equipment to burn in and check out the assembled cards, and
hire some good technicians to do the checkout and fix the bad cards.
There'll be lots of bad cards; particularly at the beginning. At this
point, you're finally ready to start shipping, and begin to get your
investment back.
Contrast this with manufacturing software. Once you've written and
debugged your program, you don't need to invest a penny in equipment to
make duplicates for sale. All you need is the computer you already used
to develop the software. Your local print shop will run off the docu-
mentation for you at a cost of one or two cents per page, depending on
how many copies you get at a time. You merely place your advertising
and wait. When the orders start coming in, it takes you five or ten
minutes at the most, starting from scratch, to get each one ready to
ship. That's why so many more people go into the software than the
hardware business. It's orders of magnitude easier and cheaper to do.
And yet...try this. Sit down with a parts catalog, and the techni-
cal manual for any of your plug-in cards that includes a schematic or
parts list. Add up what it would cost you to buy the parts to build
that card on a standard wire wrap prototype board. You'll almost always
come up with better than 50 % of the price for the board from a mail
order house; sometimes more than 100 %. How can this be? Is the manu-
facturer a charitable institution which is losing money, as the soft-
ware houses claim they would if they charged a reasonable markup over
their production costs?
Not hardly. The manufacturer can buy the parts in quantity cheaper
than you can in singles, and has invested a lot of time and money in
reducing his labor cost per unit. He's pricing at a reasonable markup
over his real costs (remember, the mail order house also makes a prof-
it), and making lots of money. In short, he's basing the list price on
a fair profit margin, rather than on G-R-E-E-D and "All the traffic
will bear."
If this doesn't convince you that most software prices are set on
a basis of greed and "All the traffic will bear," nothing will. Of
course, not all the publishers do this. Borland International sells
lots of heavy-duty software in the $50 to $100 range, Some for less.
They have one of the biggest success stories in the industry. And how
many unauthorized copies of Turbo Pascal have you ever seen? I've yet
to run into one, and have passed up more than one opportunity to get a
copy for free.
Some other software houses have followed suit. A couple of years
ago, for instance, Eco-Soft dropped their full C language compiler to
$49.50. At the time, I was working in an engineering department where
four of us had been looking for C compilers. Now, if we'd decided on a
compiler with ATTWB pricing, we might've pooled our money, bought a
package in one name, and made copies for the other three. (The vendor
isn't really hurt by something like that, because he's made a sale he
wouldn't have made otherwise.) In this case, each of us bought the
package individually, because we all agreed that the practice of offer-
ing non-copy protected, reasonably priced software deserved all the
positive reinforcement we could give it. That's the mirror image of the
revenge motive I discussed previously, which is at least partly to give
negative reinforcement against the sale of overpriced copy protected
software, unlabeled as protected in the ads.
That, I think, is the real answer to the "problem" of software
"piracy." Just as I've yet to run into an unauthorized copy of Turbo
Pascal among the dozens of times I've encountered the program in the
last couple of years; I've yet to run into an authorized copy of cer-
tain useful, popular, but overpriced programs...which, for obvious rea-
sons, I won't name here.
I think....at least, I hope...that people like Borland, Eco-Soft,
and the others who sell solid, reasonably priced, non-copy protected
software are going to take over. People like Lotus and Vault will eith-
er have to bow to the inevitable and go along, or wind up in Bankruptcy
Court. Neither would break my heart. It seems as if the trend has al-
ready started. Should it go to completion, the "piracy problem" will be
a thing of the past. There'll always be a few people who are simply out
to get something for nothing, but the majority of "unauthorized" copies
are made for motives which are quite different, as I've tried to show.
If the shakeout I expect occurs, those motives will disappear. And I
seriously doubt that the real pirates will ever make a noticeable dent
in the industry, particularly under those conditions.
AFTERWORD
I wrote the above about two years ago. Since then, the shakeout I
predicted has been happening. In fact, at this writing, Lotus seems to
be almost the ONLY company clinging to copy-protection, though they're
still a long way from bankruptcy. However, the virtually universal bad
feelings created by their greed-motivated "look and feel" lawsuit might
just accomplish that little thing.
Things do sometimes work out for the best.
Comments and/or questions? Send them to:
Ron J. Goodman
3720 Northfield Rd.
Apt. 215
Warrensville, Ohio 44122
P.S. If you'd like a version of this file that will print out as clean,
micro-justified copy under WordStar 4.0, $5.00 to the above address
will get it for you.