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Another Perspective


When Madonna's children's book, The English Roses, debuts on September 15, it will appear in 42 languages.  Even the latest Harry Potter book, which sold millions of copies on its first day out, did not match this achievement.  But they share one important distinction, something that another best-seller, the OS/400 operating system, does not.  If you buy either book, you can enjoy it to your heart's content and then, if you wish, give it or sell it to somebody else.

You cannot make unauthorized copies of either the books or the software, because they are protected by copyright.  But the way the owners of the copyrights differ in their deals with customers is quite dramatic.

The right of the copyright owner to be paid by a reader extends only to the first sale.  That is, the initial price of the book includes the royalty paid to the copyright holder, so no subsequent buyer of that book has to pay.  Lawyers say, when describing this kind of arrangement, that the copyright has been exhausted by the first purchase.

A similar situation exists for other intellectual-property rights.  When the holder of rights to a patented ball bearing, for instance, sells one of these items, that's the end of the line for royalties.  If the first buyer sells the ball bearing to another party, the way a distributor might, the patent holder is not entitled to any more payment.  One bite of that cherry is the limit.  The patent rights for the ball bearing were exhausted on the first sale.  In the case of both the books and the ball bearing, what the buyer does with the goods is not the business of the holder of the rights.

This does not mean that anyone can buy one copy of a book and reproduce it, or replicate a patented ball bearing after buying one item.  That's a different matter entirely.  The rights that are exhausted pertain to the normal use of the particular item for which the holder of the rights has been paid.

The "American Life" artist sometimes lives in England

You can see what would happen if the rights were not exhausted.  No student could sell off last year's textbooks without having to pay the copyright holder some kind of license fee.  Nobody who owned a car would be able to trade it in without paying fees to the holders of all the patented items in it.

This single-payment scheme seems to be satisfactory.  J.K.  Rowling, author of the Harry Potter series, and Madonna, along with their respective publishers, are apparently willing to let buyers of their books pay once, and once only.  Both the authors, of course, may feel differently about other rights that stem from their creations.  Rowling has deals of all sorts covering the use of her written material, characters, and related Pottery outside the ink-smeared paper racket.  Madonna is a graduate of the record business, so she certainly knows a lot about complicated arrangements.

Software publishing is not book publishing, and the rules of engagement are different, at least for software sold under common commercial license terms.  The rules are different because the software companies can get their customers to sign contracts that are quite restrictive.  These contracts curtail rights that would exist if software were simply sold the way books are sold.

Operating systems, middleware products, and applications suites, for instance, are commonly licensed to a particular machine that is used by a particular customer.  Any change of user or platform can terminate the rights.

This situation affects hardware as well as software.  Because the software is so costly, a working computer system is guaranteed to lose a lot of its value on the day it is first installed, just because the software licenses that make the system productive are evanescent.  So it's hardly a surprise that cheap commodity products are driving proprietary hardware with strict and costly software licenses out of the market.

Still, it's an ill wind that blows no good.  The software-licensing culture has created an economic opportunity for service organizations that can use a system and its software for multiple successive customers (as well as more simultaneous customers, in cases where the software license fee is not based on a maximum numbers of users or equivalent metrics).  If enough service outfits succeed in stretching licenses, and the software vendors feel a pinch, it's a safe bet that software companies will start to enforce different rules for service firms versus primary users.  The only thing that might restrain the independent software vendors is fear of a backlash.  There are already signs that in some market segments the customers are pretty dissatisfied with the cost of software.

The open-source Linux operating system and the open-source MySQL relational database are two examples of widely used software packages that have no user license fees (although users routinely pay for support and services).  These programs and others like them, developed by people with non-commercial motives, have gained adherents at least as much for economic reasons as for technical ones.

There are many software packages with licensing terms that lie between the extremes of single-use, single-system packages and open-source software.  But the big-name players in the software game are not the ones offering users less restrictive deals, because they see that all their commercial competitors (except the outfits selling support for basically free software) are just as tough.

This could change very quickly, if any of the powerhouse software suppliers, such as IBM, or some new vendor with nothing to lose, decides to add value to software by making it easier to transfer between machines or customers.

For all we know, Madonna will fall under the spell of the book publishing world and try some unorthodox ways of licensing software sold under her name.  Such a spell would not be one cast by the witches and warlocks of Harry Potter's world, but it might, in its unorthodoxy, owe a debt to orthodoxy of the Jewish kind.

Until now known, with some accuracy, as the material girl, Madonna has for the past few years also become a spiritual person.  She has been studying a type of Jewish mysticism with roots dating back to the 12th century or perhaps earlier.  The realm of knowledge she has pursued is called Kabbalah, and it is interwoven with Hasidic Judaism.  Kabbalah includes the investiture of Old Testament texts with meaning based not only on literal words but on the symbols used to form the works, which have numeric values and which also may stand for various other things.  There is, however, a movement that has tried to separate Kabbalistic ideas from those of any particular religion.  It is called Hermetic Kabbalah.  (There's lots more to this, for sure, and a Google search will turn up hundreds of sites in what seems to be a burgeoning Kabbalah business.)

Rembrandt's Rabbi
Rembrandt admired many forms of scholarship

Madonna's children's books apparently owe a debt to Kabbalistic tales.  Press accounts suggest that Madonna has learned Hebrew in order to pursue her studies, a feat that might come as a surprise to those who don't know much about her, and perhaps to some who do.

Systems programmers, who have found out the hard way that every byte packs unanticipated meaning, should not be surprised if Madonna eventually moves from children's books and Kabbalah to software.  Personally, we would not be any more suspicious of a service pack from Madonna as the ones we get from Microsoft.  The iSeries users would, of course, be shocked by the idea of counting on Madonna for software support, based on their excellent experience with PTFs from IBM.

And, speaking of IBM, which is what we are paid to do, we would like to point out that, like Madonna, IBM sometimes goes back to ancient times for spiritual refreshment.  In the case of software, for instance, IBM seems to have reached back all the way to the era of unit record equipment.

In the distant past, when IBM had vast market power in the information processing equipment business and, as a practical matter, only allowed customers to rent its machines, the U.S.  government ultimately forced it to sell the equipment at a reasonable price.  (This was done through an antitrust lawsuit filed against IBM in 1952, resulting in a consent decree signed by IBM in 1956.) These days, IBM sells most of its hardware products and leases some machines, but, with the general exception of deals for government agencies that are obliged to rent, does not rent equipment at all.  It does, however, only rent many software products.

This is the case even when it says it sells software.  If the license evaporates when the machine changes hands, it's hard to say the software has been sold.  Rather, it is a rental, although of a peculiar kind.  It does not have a fixed term, but it is a deal that allows one party to use the software, and IBM never loses any of its rights over the software.  This is certainly not a traditional sale.  Nothing is permanently transferred from one party to another.

IBM is hardly alone in its way of dealing with customers.  Just about every commercial software company deals with users on terms that are similar to IBM's.  Microsoft does things a bit differently, and you can sell a PC with Windows on it, and the use of that copy of single-user Windows is still legal.  Microsoft's Windows licenses for servers are different, and more closely resemble IBM's terms.  A few years ago, with the advent of OS/400 V5, IBM locked an OS/400 license to a specific machine and it is not transferable at the original user's pleasure.

There is a connection between the rate of progress in a particular architecture and the practices of software vendors serving that architectural base.  The rule seems to be: The slower the progress, the more burdensome the software deals.  The software vendors keep tightening their rules to keep their revenue from falling as hardware turnover drops, while the users just get the boiling-frog treatment.  If you put a frog in a pot of cold water and heat the water slowly, the frog will not notice the temperature change, and consequently not jump out of the water.  It will stay there, swimming around, until it is boiled to death.

One of the very popular ploys used by software companies to boost revenue is what they call "maintenance." In the software realm, maintenance is not the cost of restoring things that have worn out but, instead, the price paid for vendors to correct their past errors, if and when the vendors get around to it.  The vendors have found that their customers are willing to live in firetraps even if they are obliged to buy fire insurance from the landlord.

And you think Madonna has some strange ideas?

— Hesh Wiener July 2003

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