Software and Copyrights

Computers haven’t always been as ubiquitous as they are today. In the early years of computing, “mainframe” computers could only be found at research institutes or big corporations. The hardware was very expensive and the software that ran on those machines was distributed along with the hardware. Software wasn’t considered a commercial good; it was shared among developers. Closed source software is a phenomenon that only emerged in the seventies with the advent of companies that made software their business.

In 1969, IBM was the first to price its software and services separately from its hardware. This “unbundling” of hardware and software acknowledged the value of something that had previously been perceived as free of charge. IBM’s decision is often seen as the pivotal event in history that helped enable the creation of the software industry.

Microsoft was founded in April 1975 and made its first money by selling licenses for Altair BASIC. Altair BASIC was an interpreter for the BASIC programming language that ran on the Altair 8800. The Altair 8800 was a microcomputer designed in 1974 by the Micro Instrumentation and Telemetry Systems (MITS). You could buy this computer as a build-it-yourself kit for $439, or you could buy an assembled computer for $621. It is considered being the first commercially successful “personal” computer.

MITS paid a royalty for using BASIC to Microsoft, but soon discovered that competitors were shipping a “borrowed” version of Altair BASIC with their products. Ed Roberts, the founder of MITS, was dismayed by these practices: “Anyone who is using a stolen copy of MITS BASIC should identify himself for what he is, a thief.” David Bunnell, editor at the Computer Notes magazine, and MITS employee at that time, wrote: “Now I ask you—does a musician have the right to collect the royalty on the sale of his records or does a writer have the right to collect the royalty on the sale of his books? Are people who copy software any different than those who copy records and books?”

Software copyright: Historically, computer programs were not effectively protected by copyrights because computer programs were not viewed as a fixed, tangible object. In the US, the Commission on New Technological Uses of Copyrighted Works (CONTU) was established in 1974. CONTU decided that "computer programs, to the extent that they embody an author's original creation, are proper subject matter of copyright." In 1980, the United States Congress added the definition of "computer program" to Title 17 “Copyrights” of the U.S. Code. The Apple vs. Franklin case in 1983 was the first time an appellate level court in the United States held that a computer's operating system could be protected by copyright. This legislation gave computer programs the copyright status of literary works. Europe followed in 1991 with the Software Directive of the European Economic Community.

In January 1976, the Homebrew Computer Club Newsletter published an “Open Letter to Hobbyists” written by Bill Gates.

The Homebrew Computer Club: The Homebrew Computer Club was an early computer hobbyist group in Silicon Valley, founded by Fred Moore and Gordon French. The first meeting was held in Gordon French’s garage. Hundreds of people turned up to attend, and the meetings soon moved to an auditorium at Stanford University.

Moore was a political activist who even went to jail for draft refusal. His goal with the Homebrew Computer Club was to offer an alternative approach to the commercialization of computers. His hope was to bring together engineers who would contribute more to the world than merely creating companies. Eventually, it frustrated him to see that the Homebrew Computer Club attracted more and more people who were also interested in the industrial and commercial aspects of technology.

Several very high-profile hackers and computer entrepreneurs emerged from the ranks of the Homebrew Computer Club, including Steve Wozniak and Steve Jobs, the founders of Apple. The Apple I was first demonstrated in Palo Alto at the Homebrew Computer Club in July 1976.

The open exchange of ideas that went on at its biweekly meetings, and the club newsletter, helped launch the personal computer revolution.

In his open letter, Bill Gates put a price on the work done on Altair BASIC by himself, by Microsoft’s co-founder Paul Allen, and by their first hire, Monte Davidoff: “Though the initial work took only two months, the three of us have spent most of the last year documenting, improving and adding features to BASIC. Now we have 4K, 8K, EXTENDED, ROM and DISK BASIC. The value of the computer time we have used exceeds $40,000.”

He continues: “The feedback we have gotten from the hundreds of people who say they are using BASIC has all been positive. Two surprising things are apparent, however. 1) Most of these "users" never bought BASIC (less than 10% of all Altair owners have bought BASIC), and 2) The amount of royalties we have received from sales to hobbyists makes the time spent of Altair BASIC worth less than $2 an hour.”

“Why is this?” he asked. “As the majority of hobbyists must be aware, most of you steal your software. Hardware must be paid for, but software is something to share. Who cares if the people who worked on it get paid? Is this fair? One thing you don't do by stealing software is get back at MITS for some problem you may have had. MITS doesn't make money selling software. The royalty paid to us, the manual, the tape and the overhead make it a break-even operation. One thing you do do is prevent good software from being written. Who can afford to do professional work for nothing? What hobbyist can put 3-man years into programming, finding all bugs, documenting his product and distribute for free? The fact is, no one besides us has invested a lot of money in hobby software. We have written 6800 BASIC, and are writing 8080 APL and 6800 APL, but there is very little incentive to make this software available to hobbyists. Most directly, the thing you do is theft.”

He concluded his letter by saying: “Nothing would please me more than being able to hire ten programmers and deluge the hobby market with good software.”

Bill Gates’ rant received some strong reactions at that time, as many felt that software should be bundled with the machine.

Jim Warren, founder of many computer magazines, wrote in ACM’s SIGPLAN Notices, that “There is a viable alternative to the problems raised by Bill Gates in his irate letter to computer hobbyists concerning ‘ripping off’ software. When software is free, or so inexpensive that it's easier to pay for it than to duplicate it, then it won't be ‘stolen’.” Nevertheless, it would take several years before the concept of free software was born.

In the eighties Borland’s license statement asked the user to treat its software just like a book, except that you may copy it onto a computer to be used and you may make archival copies of the software for the sole purpose of backing-up the software and protecting the investment from loss. Just like a book, the software could be used by more than one person, and moved from one computer to another, as long as it wasn’t used by two people simultaneously on different computers. There were special provisions for the use of the software on a network. You either had to purchase a separate license for each user, or you had to buy a LAN Pack for a number of authorized users.

In spite of the fact that the comparison with books is very clear, the industry introduced a concept that made software very different from books. Software was not sold as a book; it was merely licensed. License agreements soon became lengthy documents, limiting the rights of the customer. For instance:

Not being allowed to reverse engineer prevents a buyer from examining a product that is paid for. That limitation wasn’t derived from copyright law, nor from any other common commercial practice, but it turned out to be a practise that could be legally enforced. As no one was allowed to discover how the software worked, not even to fix bugs, a vendor could charge maintenance fees.

All of this was a big thorn in the side of a developer in Massachusetts.


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