Ethics and Law in New Media/One Microsoft Way: the World of Proprietary Software

Main features

Proprietary software can be defined as software with restrictions imposed by its proprietor (owner) on its use, copying and modification. Restrictions can be

legal - mostly defined by the license agreement (EULA or End-User License Agrement), in addition to the innate copyright from its creation.
technical - the most common is binary-only release, keeping the source code which effectively blocks closer studying or modification (closed-source software).
combination of these two.

It is actually interesting to see how the roles of the measures have changed over time. When Bill Gates started to ask money for each copy of his software, he relied on legal means. During the DOS era with simplified copying between the widespread PCs (and no network yet) came the age of technical means - in addition to closed source, it was the heyday of various ingenious solutions in order to make unauthorized copying impossible. It ranged from non-standard diskette formats to special dongles which were inserted into the parallel or serial port in order to allow the software to work.

Types of proprietary software

As it is often said but still frequently misunderstood - "proprietary software" does not mean the same as "commercial software". Rather, all free software can be used commercially under their licenses, while there are kinds of proprietary software that cannot (e.g. "free for non-commercial use" freeware).

Proprietary software can be divided into the following categories.

Commercial proprietary software

The most prominent kind, which is sold commercially by unit ("boxed" software; recently sometimes also by authorized download), its license agreement grants its users a very limited set of rights. The license is typically reserved for use in one (sometimes one specific) computer at a time and often to the the specific user. Copying is very limited (often, users can make a single copy for backup; other copying is forbidden), reverse-engineering, closer studying, modifying and deriving new products is prohibited. Formerly, users were typically free to transfer their software from a computer to another, sometimes even allowing simultaneous use (e.g. at home and at work).

On the other hand, due to the increased pressure from free software in recent years, volume licensing has surfaced as an option. For example, MS Office 2007 Home and Student version allows for three separate installations, MacOS X Family Pack allows five; larger-scale schemes include [http://msdn.microsoft.com/et-ee/academic/default%28en-us%29.aspx MS Academic Alliance and various volume licensing systems in business sector.

Shareware

Typically used for smaller software and/or trial versions, this is proprietary software which can be freely copied (typically in its delivery form, e.g. installer), shared with others and also used for a limited period. But like the commercial proprietary solutions, it does not allow modifications and is distributed as closed-source. The free of charge use period is typically from 15 to 90 days, after which it must be registered (typically involving payment). To encourage registration, several measures are used:

sponsor advertisements are shown either at startup or throughout the working time when not registered (adware)
a nag screen reminding of registration is displayed for some time at startup (nagware)
some vital functions (e.g. saving your work) are disabled when not registered (crippleware)

While some of the shareware products are fully functional regardless of registration, they become illegal to use after expiration of the trial period (protected by legal means).

Freeware

This is proprietary software with zero price. Freeware and free software are different terms - not in English but in many other languages as well. Freeware can be typically freely copied and used - however, many products limit the use by purpose, the most common restriction being "free for home or non-commercial use" (in this case, commercial users need to purchase a license just as in case of commercial proprietary product). Regardless of use, reverse-engineering, studying and modifying is forbidden, just as developing new products.

Special notion 1: Public domain

Public domain, while being one of the most permissive legal categories (essentially meaning giving up copyright), can be used in proprietary context. During the DOS era there were many small utilities available in public domain (some can be found in e.g. Garbo) - but often only as binary, thus cutting away a chance for modification and further development. Second, as there is no requirement for preserving the license, public domain components can be freely used to develop a proprietary product (even some free licenses allow for proprietary derivatives (e.g. BSD, MIT or X11 license). This kind of activity is impossible with free software licenses with "strong copyleft" that forbids narrowing the users' rights).

Special notion 2: Microsoft Shared Source

Since 2003, Microsoft has run a campaign named Shared Source which is often touted as a counterpart to Open Source by the company. In fact, it is a family of special license agreements with certain partners (countries and large companies) who have been given partial access to some of the proprietary code - however, in most cases, the access has been read-only - quoting Bruce Perens: "look but don't touch - and we control everything". While the concept itself is nothing special (and nothing wrong as such), critics have disliked the (deliberate?) blurring of concepts.

Arguments for proprietary approach

Some authors argue that innovation is driven more quickly when it is lucrative. They claim that the best way to ensure this motivation is to tie revenue to innovation. The proprietor uses a temporary monopoly with copyright and sometimes software patents that makes the software more expensive. This point does have many counter-examples: a good one is Microsoft itself in many cases (especially the near-halt of Internet Explorer development after pushing Netscape aside, until the emergence of Mozilla and Firefox - IE 6 was stagnant for several years. Also, it is likely the imminent threat from OpenOffice.org that has pushed makers of MS Office to create new things recently).

Proprietary software is said to create greater commercial activity over free software, especially in regard to market revenues. This may be somewhat true in some cases, as the model uses simpler and long-used model for revenues (no need to find new inroads). However, the proprietary approach also produces monopolism, market entry barriers and vendor lock-in (see below).

The argument "Ordinary users do not care - they want a simple and working solution" is true in some cases. However, recent developments in proprietary fields have included incomprehensible licenses, oversophisticated variation of products with remarkable legal consequences (7 kinds of MS Vista) and overzealous persecution of perceived offenders ("nail the pirate"-campaigns).

Questionable stuff

Trends of greed

The evolution of proprietary licenses shows the trend towards diminishing user rights more draconian enforcement measures. While even early Microsoft licenses allowed transfering software, the Licensing Version 6 (introduced with Windows XP) effectively redefined many earlier categories. Current practices make it often impossible to transfer software or even update the computer hardware without the explicit consent of the owner.

Vendor Lock-In

This is a situation where someone is so dependent on products and services on a single vendor that he or she cannot move to another vendor without substantial switching costs, real and/or perceived. Vendor lock-in can be unintentional, but in the software world, conscious attempts towards obtaining one are much more common.

Originally, the model was known as "razor and blades". Razors are cheap and durable, but demand a steady flow of blades. A vendor could thus create a "Get Free Razors!" campaign, while selling the blades for a good profit. In case of razors, the non-consumable is cheap (changing the vendor will not result in large losses) and thus in this scale the situation is sometimes not considered a lock-in. However, considering the proprietary interfaces of Gillette and others, they are indeed conscious attempts in that direction.

Another, softer and perhaps more positive example is "loyalty programme" approach. This is frequently seen in airlines, train and ship companies as "frequent traveller" programmes ("Earn miles!"). A somewhat weird example is European furniture maker Ikea - they [sell their Continental European beds to the US and UK] (who have different bed size standards, thus the "Ikea size"), later offering bed-linen which only fits their beds.

In technology, lock-in is very widespread and despite some legal steps taken, has not been successfully controlled yet. In hardware, Sony has a long tradition of non-standard practices, Apple has also had many questionable moves in this field. But in software, nobody really matches Microsoft, especially in the two fields:

proprietary API - protected in equal shares by its messy complexity and legal means (trade secret)
proprietary file formats - from the DOS days to the recent OpenXML (in which the 'Open' is ironic at best), it has been a major weapon against competitors - especially the formats of MS Office.
attempts to 'extend' public standards - the best example is MS-HTML, a blatantly non-standard, ineffective but slickly-fitted-to-Windows version of the ubiquitous Web protocol.

Pig in a Bag

This is a wide circle of problems based on the fact that in case of most proprietary software (especially in the US) the client is more than often forced to rely on vendor's marketing and possibly the experiences of previous users - the shinkwrap (opening the package means agreement with the terms) or clickwrap ("Click to accept") licenses are a real timebomb waiting to explode. Cory Doctorow has written in the InformationWeek:

"Clickwrap and shrinkwrap agreements start with the phrase READ CAREFULLY, all in caps. The phrase means, "IGNORE THIS." That's because the small print is unchangeable and outrageous.
Why read the "agreement" if you know that:
1. No sane person would agree to its text, and 2. Even if you disagree, no one will negotiate a better agreement with you?
We seem to have sunk to a kind of playground system of forming contracts. Tag, you agree! Lawyers will tell you that you can form a binding agreement just by following a link, stepping into a store, buying a product, or receiving an email. By standing there, shaking your head, and shouting "NO NO NO I DO NOT AGREE," you agree to let the other guy come over to your house, clean out your fridge, wear your underwear and make some long-distance calls."

Irony aside, these points are fully valid. Most End User License Agreements are written to be broken - just as Microsoft itself has recently admitted that "piracy is not the worst problem - as long as they pirate our software".

Privacy issues

The problem surfaced with the Microsoft's infamous WGA (Windows Genuine Advantage) programme which checks the "authencity" (legality) of the system and installed Microsoft software. Since then, the increasing concerns of privacy violation have accompanied MS Windows.

Abandonware

This is a blurry category in proprietary software which are not anymore sold or supported. This has remained a gray area in legislation - on one hand, the software is still protected and the owner can enforce his/her rights. On the other hand, most abandonware has been truly abandoned with no interest from owner's side (lots of old DOS games are the best example - many of them cannot even be run on current versions of MS Windows). In this case, fans keeping the venerable software alive enrich the general software scene. There have been multiple calls for putting old proprietary software under free licenses, but due to ineffectiveness and inflexibility of current IP system, there has been almost no success.

Where proprietary software may be appropriate

Proprietary approach in software can be mutually beneficial in the cases where the software is highly specialized - with a well-paid, professional user base who have no problem to pay for their tools, and who at the same time have but little knowledge in overall IT (e.g. computer maintenance, fighting malware, installing new software, adding hardware). Examples include high-level CAD/CAM specialists, top photographers, media artists, musicians, directors, but also non-technological scientists etc. These people focus on very narrow fields of computing and have high demands on their tools, they cannot afford any downtime and would rather let someone else take care of technical details. Cases like this are somewhat alike to the "to the keys" building or service contracts in new cars, or tailor-made suits/costumes.

But even in this case, free software can be used (and perhaps more effectively). For the well-paying, narrowly but highly professional client, there is no difference. But for the technical provider working on the background, the difference of freedom and choice of tools may be considerable, resulting in direct savings.

References

Craig Mundie speaking at The New York University Stern School of Business
Doctorow, C. (2007). Shrinkwrap Licenses: An Epidemic Of Lawsuits Waiting To Happen. InformationWeek, February 3, 2007.
Lessig, L. (2004). Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity. The Penguin Press.

Food for Thought

Are there ways to overcome the shortcomings of proprietary software model described above, or are they originating from the essence of the model?
How has the scale of use of different proprietary models (proprietary commercial, trialware, shareware etc) changed during the last decade? Compare it to the spread of free models.
Why is it considered questionable by critics for Microsoft to promote its "Shared Source" as a kind of counterpart to "Open Source"?

To Do

What could the software licensing landscape look like in 2020? Write a short (blogged) predictive analysis.