Category Archives: Software Law

New for Harvard Business Review, what business leaders must do to make AI agents trustworthy

As AI agents shift from back to front office applications, consumers are understandably wary of turning over the keys to their personal and financial data to autonomous software. But the potential for Agentic AI technologies to improve lives and make business more efficient is a powerful incentive.

In Harvard Business Review, Larry and co-author Blair Levin review the risks and opportunities of personal AI agents, and identify the three key initiatives business and government leaders must take to ensure a smooth adoption.

What Silicon Valley Thinks of Hillary Clinton’s Innovation Agenda

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In June, Presidential candidate Hillary Clinton surprised business leaders by issuing a detailed Technology and Innovation platform.  Tech issues rarely feature in Presidential campaigns, but Clinton seems determined to shore up an already strong position in Silicon Valley by promising an administration that recognizes the singular role disruptive innovation has played in driving U.S. economic growth over the last two decades.

Clinton’s plan may have been designed to deflect concern here in California and other innovation hubs about growing criticism of the tech economy from the Obama Administration and Democrats on the left.  Just a day after Clinton released her plan, for example, Sen. Elizabeth Warren, who has taken an increasingly active role in the campaign, directly attacked leading technology companies including Apple, Amazon and Google, hinting that they had grown too large to escape the blunt instrument of antitrust to break them up.

Overall, the Clinton agenda is something of a dog’s breakfast, mixing unlikely promises for significantly increased federal spending in education, basic research, and infrastructure with more specific reforms in such hot-button areas as immigration, intellectual property, and tech infrastructure.

Though nearly every aspect of the plan would require a cooperative Congress, there is still much to admire in the particulars, and, more to the point, much that innovators and their investors have wanted to hear from Washington for a long time:

Immigration – Among Silicon Valley’s highest priorities, for example, Clinton promises “comprehensive” immigration reform, including a pledge to “staple a green card” to the diplomas of non-U.S. masters and PhD students in science and engineering, “enabling international students who complete degrees in these fields to move to green card status.”  No technology company would object to that proposal.

Patents – Clinton also pledges to fix the badly out-of-balance patent system, although here the promised reforms are modest.  Clinton endorses legislation floating around Congress that would break the stranglehold of the notoriously plaintiff-friendly Eastern District of Texas, which openly courts patent trolls and frivolous litigation.  But there is no mention of larger patent issues, notably the scaling back or eliminating patent protection for software and business methods, an invention of the courts and the patent office in recent years.  The consensus, even among many leading software providers, is that those new categories have done far more harm than good.

Copyright – On copyrights, Clinton promises a law that would “unlock” a ballooning number of older written and audio-visual works that, thanks to repeated and retroactive copyright extensions on behalf of Disney and other large rights holders, can’t be licensed or used because no one knows who owns them anymore.  (Liberation of so-called “orphan works” would have been enabled by a proposed settlement in a case involving wholesale scanning by Google Books, but that settlement was scuttled in 2011.  Google went on to win the case outright.)  The Clinton plan is silent, however, on scaling back the expanding copyrights that created the orphan works problem—and others—in the first place.

The Sharing Economy – During the primaries, both Sen. Bernie Sanders and Secretary Clinton raised repeated concerns about new “sharing economy” services, including Uber and TaskRabbit, that help contractors and freelancers coordinate their work through network technologies.  Sanders dismissed these services as “unregulated” and said he had “serious problems” with Uber in particular.  For her part, Clinton said last year that network-based employment raised “hard questions about workplace protections and what a good job will look like in the future.”

Clinton’s Tech and Innovation plan is more measured, if non-committal, about whether she sees the sharing economy as a direct attack on unions and labor regulators.  She promises only to “convene a high level working group of experts, business and labor leaders to recommend how best to ensure that people have the benefits and security they need no matter how they work.”  Depending on what specific “benefits and security” her experts believe casual workers need, that could mean either an endorsement of the sharing economy or its death by a thousand regulations.

Broadband Infrastructure – The recent decision by the Federal Communications Commission, at the urging of the White House, to transform Internet access into a public utility has already spooked investors, who spent nearly $1.5 trillion over the previous twenty years continually upgrading broadband infrastructure even as America’s roads, bridges, water pipes, gas mains and electrical grid—the actual public utilities—fell catastrophically behind.  (D.C.’s own Metro system, once the city’s pride and joy, is largely closed for the summer for repairs.)

On that front, the Clinton agenda gets a mix grade.  On the positive side, the candidate strongly endorses reducing regulatory barriers (largely at the state and local level, however) that unnecessarily deter more and more efficient private infrastructure, including “dig once” and “climb once” policies to encourage faster deployment of, respectively, fiber optic cable and next-generation mobile equipment.

But at the same time, and even as the Clinton plan waves in the direction of continued Internet self-governance under the multistakeholder process that has worked so well, Secretary Clinton “strongly supports” the idea that Internet access should be closely regulated as a utility.  As I’ve argued before, that approach is bound to slow both the speed and size of investments in continued infrastructure improvements.

Radio Spectrum for 5G Networks – On the plus side of the ledger, Clinton promises to continue President Obama’s support for next-generation mobile networks, known as 5G, which utilize densely-packed cellular antennae and higher-band radio spectrum to offer as much as 100 times the speed and capacity of today’s wireless Internet. Secretary Clinton promises to release spectrum warehoused by the federal government itself, and to support a mix of licensed, unlicensed, and shared new frequencies that will accelerate nascent 5G applications including the Internet of Things and autonomous vehicles, as well as increasingly high-definition video.

Internet Adoption –  The Clinton plan also promises to expand broadband entitlement programs aimed at closing what remains of the digital divide.  But these programs, including the troubled Broadband Technology Opportunities Fund, have had limited (if any) success.  So far, they’ve produced little besides wasted taxpayer billions and corruption.

While everyone shares the goal of universal broadband adoption for all Americans, the solution doesn’t come from raising taxes on consumer phone bills (currently approaching 20%!) to fund poorly-managed programs to subsidize rural and low-income communities.  Among those who do not have a broadband connection at home, as repeated surveys make clear, availability and even price are rarely cited as the principal reasons.

Non-adopters—especially older Americans—don’t have a broadband connection, it turns out, largely because they don’t want one.  Rightly or wrongly, digital hold-outs don’t see the Internet as having any relevance to their life.  That was a problem identified as long ago as 2010 in the visionary National Broadband Plan, from which the Clinton agenda cribs frequently without acknowledgment.   And it’s one problem government could play a crucial role in solving through public education and the President’s bully pulpit.  But not from throwing more money at federal contractors.

***

As Secretary Clinton’s wish list suggests, what Silicon Valley really wants from both presidential candidates is not more government, but less.  In many cases, much less.

That desire, of course, distinguishes tech from most special interests, and Clinton’s team deserves praise for getting it at least partly right.  For years, I’ve watched visiting politicians looking to partner with the venture community grow disappointed to hear from tech leaders across the political spectrum that they don’t actually want new federal programs or legislation aimed at promoting innovation.

What they really want most is to be left alone; to be allowed to continue to practice the kind of largely unregulated experimentation that the Mercatus Center’s Adam Thierer calls “permissionless innovation.”  That wise policy has been strongly supported by a bi-partisan coalition since the mid-1990’s.  It has done more than any grant or subsidy could to promote U.S. leadership in the Internet and other emerging technologies, in sharp contrast to Europe, where centralized innovation planning and micromanagement have had the opposite effect.

But Washington’s commitment to permissionless innovation has been under attack, particularly in the last few years.  As the innovation economy increasingly becomes the economy, lawmakers can’t help but refocus their attention there.  Law enforcement and intelligence operations, at the same time, are increasingly wary of open networks and encrypted communications (about which the Clinton plan hedges), generating some very public fights with innovators in the name of both consumer privacy and national security.

The closer the next President–whoever it turns out to be–can hew to the U.S.’s longstanding if battered commitment to let a thousand Silicon Valley start-ups bloom, the better off everyone will be, in the short as well as the long run.  Political pandering aside, what the innovation ecosystem really needs is a reboot of the 1990’s promise to leave the Internet “unfettered by Federal or State regulation” – a policy that now needs expansion to equally high-potential disruptors in energy, materials, robotics, genomics, health care, transportation and manufacturing.

That, in any case, is the lesson of the last election in which innovation policy played a major role—the election, that is, of that other Clinton.

What Makes an Idea a Meme?

Ceci c'est un meme.

On Forbes today, I look at the phenomenon of memes in the legal and economic context, using my now notorious “Best Buy” post as an example. Along the way, I talk antitrust, copyright, trademark, network effects, Robert Metcalfe and Ronald Coase.

It’s now been a month and a half since I wrote that electronics retailer Best Buy was going out of business…gradually.  The post, a preview of an article and future book that I’ve been researching on-and-off for the last year, continues to have a life of its own.

Commentary about the post has appeared in online and offline publications, including The Financial Times, The Wall Street Journal, The New York Times, TechCrunch, Slashdot, MetaFilter, Reddit, The Huffington Post, The Motley Fool, and CNN. Some of these articles generated hundreds of user comments, in addition to those that appeared here at Forbes.

(I was also interviewed by a variety of news sources, including TechCrunch’s Andrew Keen.)

Today, the original post hit another milestone, passing 2.9 million page views.

Watching the article move through the Internet, I’ve gotten a first-hand lesson in how network effects can generate real value.

Network effects are an economic principle that suggests certain goods and services experience increasing returns to scale.  That means the more users a particular product or service has, the more valuable the product becomes and the more rapidly its overall value increases.  A barrel of oil, like many commodity goods, does not experience network effects – only one person can own it at a time, and once it’s been burned, it’s gone.

In sharp contrast, the value of networked goods increase in value as they are consumed.  Indeed, the more they are used, the faster the increase–generating a kind of momentum or gravitational pull.  As Robert Metcalfe, founder of 3Com and co-inventor of Ethernet explained it, the value of a network can be plotted as the square of the number of connected users or devices—a curve that approaches infinity until most everything that can be connected already is.  George Gilder called that formula “Metcalfe’s Law.”

Since information can be used simultaneously by everyone and never gets used up, nearly all information products can be the beneficiaries of network effects.  Standards are the obvious example.  TCP/IP, the basic protocol that governs interactions between computers connected to the Internet, started out humbly as an information exchange standard for government and research university users.  But in part because it was non-proprietary and therefore free for anyone to use without permission or licensing fees, it spread from public to private sector users, slowly at first but over time at accelerating rates.

Gradually, then suddenly, TCP/IP became, in effect, a least common denominator standard by which otherwise incompatible systems could share information.  As momentum grew, TCP/IP and related protocols overtook and replaced better-marketed and more robust standards, including IBM’s SNA and DEC’s DECnet.  These proprietary standards, artificially limited to the devices of a particular manufacturer, couldn’t spread as quickly or as smoothly as TCP/IP.

From computing applications, Internet standards spread even faster, taking over switched telephone networks (Voice over IP), television (over-the-top services such as YouTube and Hulu), radio (Pandora, Spotify)—you name it.

Today the TCP/IP family of protocols, still free-of-charge, is the de facto global standard for information exchange, the lynchpin of the Internet revolution.  The standards continue to improve, thanks to the largely-voluntary efforts of The Internet Society and its virtual engineering task forces.  They’re the best example I know of network effects in action, and they’ve created both a platform and a blueprint for other networked goods that make use of the standards.

Beyond standards, network effects are natural features of other information products including software.  Since the marginal cost of a copy is low (essentially free in the post-media days of Web-based distribution and cloud services), establishing market share can happen at relatively low cost.  Once a piece of software—Microsoft Windows, AOL instant messenger in the old days, Facebook and Twitter more recently—starts ramping up the curve, it gains considerable momentum, which may be all it takes to beat out a rival or displace an older leader.  At saturation, a software product becomes, in essence, the standard.

From a legal standpoint, unfortunately, market saturation begins to resemble an illegal monopoly, especially when viewed through the lens of industrial age ideas about markets and competition.  (That, of course, is the lens that even 21st century regulators still use.)  But what legal academics, notably Columbia’s Tim Wu, misunderstand about this phenomenon is that such products have a relatively short life-cycle of dominating.  These “information empires,” as Wu calls them, are short-lived, but not, as Wu argues, because regulators cut them down.

Even without government intervention, information products are replaced at accelerating speeds by new disruptors relying on new (or greatly improved) technologies, themselves the beneficiaries of network effects.  The actual need for legal intervention is rare.  Panicked interference with the natural cycle, on the other hand, results in unintended consequences that damage emerging markets rather than correcting them.  Distracted by lingering antitrust battles at home and abroad, Microsoft lost momentum in the last decade.  No consumer benefited from that “remedy.”

For more, see “What Makes an Idea a Meme?” on Forbes.

 

Updates to the Media Page

 

We’ve recently added over two dozen new posts to the Media page. Most have to do with SOPA, the Stop Online Piracy Act, introduced a few weeks ago in Congress to cheers from the entertainment industry and jeers from Silicon Valley. The bill would make it easier–too easy–for copyright and trademark holders to turn on and off Web content they don’t like.

Larry’s early analysis of the bill for CNET, and his on-going work on the poor relations between Hollywood and Palo Alto, led to a great deal of press coverage and speaking engagements. His detailed review of the bill was praised across the political spectrum, including by TechDirt’s Mike Masnick and the National Review’s Reihan Salam.

Larry participated in a Capitol Hill debate on SOPA and other pending piracy legislation sponsored by the Congressional Internet Caucus, debating the bill against industry representatives. He also appeared on CNET’s Reporters’ Roundtable and This Week in Law, as well as podcasts by the Heartland Institute.

Net neutrality also stayed in the news, as did the AT&T/T-Mobile merger, privacy, spectrum reform and online human rights. Larry was quoted in a wide range of publications on these topics, including Politico, Reason, NPR’s Marketplace, the Wall Street Journal and the Daily Caller.  Conference footage from this year’s Compass Summit panels on privacy and tech policy are also available.

Supreme Court affirms First Amendment in Cyberspace

John Perry Barlow famously said that in cyberspace, the First Amendment is just a local ordinance.  That’s still true, of course, and worth remembering.  But at least today there is good news in the shire.  The local ordinance still applies with full force, if only locally.

As I write in CNET this evening (see “Video Games Given Full First Amendment Protection“), the U.S. Supreme Court issued a strong and clear opinion today nullifying California’s 2005 law prohibiting the sale or rental to minors of what the state deemed “violent video games.”

The 7-2 decision in Brown v. EMA follows last week’s decision in Sorrell, which also addressed the role of the First Amendment in the digital economy.  Sorrell dealt with a Vermont law that banned data mining of pharmacy information.  That application, the Court said, was also protected speech.

The CNET article is quite long (duh), and I’ll let it speak for itself.  There is also excellent commentary on both decisions from Adam Thierer and Berin Szoka at the Technology Liberation Front.  Adam and Berin submitted an amicus brief in the EMA case that closely tracked the Court’s opinion, which in fact quoted from another amicus brief from the Cato Institute.  Berin also contributed a brief in the Sorrell case, again on the winning side.

Perhaps the most interesting commentary on today’s decision, however, comes from Prof. Susan Crawford.  Prof. Crawford’s blog on EMA notes that an important feature of the majority decision (written by Justice Scalia and joined by Justices Kennedy, Ginsburg, Sotomayor and Kagan) is what she calls the “absolute” view it takes of speech.  Crawford writes of Scalia’s opinion:

“Whether government regulation applies to creating, distributing, or consuming speech makes no difference,” he says in response to Justice Alito’s attempt to say that sale/rental is different from “creation” or “possession” of particular speech.

That view is absolute in the sense that it does not distinguish between different stages of the supply chain of information provisioning.  The “speaker,” for First Amendment purposes, is not only the author of the content, but also distributors, retailers, and consumers.  Each is equally protected by the First Amendment’s prohibition on government interference, whether that interference is a ban on certain content (violent video games) or a requirement to promote it (must-carry rules for cable).

Why does this matter?  Though I have written and tesftified extensively about the FCC’s December, 2010 “Open Internet” order, I have so far avoided discussion of a possible First Amendment challenge.  Frankly, I hadn’t initially thought it to be the strongest available argument against the legality of the rules.

But Prof. Crawford, a strong advocate for “net neutrality” in general, reads EMA as adding support to such an argument:

Today’s opinion may further strengthen the carriers’ arguments that any nondiscrimination requirement imposed on them should be struck down.  Although a nondiscrimination requirement arguably promotes speech rather than proscribes it, the long-ago Turner case on “must-carry” obligations for cable already suggested that the valence of the requirement doesn’t really matter.

If challengers to the Open Internet order (which today added the State of Virginia to the list of those waiting in the wings to file lawsuits) can convince a court that rules requiring nondiscriminatory treatment of packets are effectively requiring carriers to speak, such a rule would be seen as content-based.  Under EMA and last year’s decision in Stevens, such a rule could fail a First Amendment challenge.

It’s an interesting argument, to say the least.  I think I’ll give it a little more thought.

The end of software ownership




My article for CNET this morning, “The end of software ownership…and why to smile,” looks at the important decision a few weeks ago in the Ninth Circuit copyright case, Vernor v. Autodesk.  (See also excellent blog posts on Eric Goldman’s blog. Unfortunately these posts didn’t run until after I’d finished the CNET piece.)

The CNET article took the provocative position that Vernor signals the eventual (perhaps imminent) end to the brief history of users “owning” “copies” of software that they “buy,” replacing the regime of ownership with one of rental.  And, perhaps more controversially still, I try to make the case that such a dramatic change is in fact not, as most commentators of the decision have concluded, a terrible loss for consumers but a liberating victory.

I’ll let the CNET article speak for itself.  Here I want to make a somewhat different point about the case, which is that the “ownership” regime was always an aberration, the result of an unfortunate need to rely on media to distribute code (until the Internet) coupled with a very bad decision back in 1976 to extend copyright protection to software in the first place.

The Vernor Decision, Briefly

First, a little background.

The Vernor decision, in brief, took a big step in an on-going move by the federal courts to allow licensing agreements to trump user rights reserved by the Copyright Act.  In the Vernor case, the most important of those rights was at issue:  the right to resell used copies.

Vernor, an eBay seller of general merchandise, had purchased four used copies of an older version of AutoCAD from a small architectural firm at an “office sale.”

The firm had agreed in the license agreement not to resell the software, and had reaffirmed that agreement when it upgraded its copies to a new version of the application.  Still, the firm sold the media of the old versions to Vernor, who in turn put them up for auction on eBay.

Autodesk tried repeatedly to cancel the auctions, until, when Vernor put the fourth copy up for sale, eBay temporarily suspended his account.  Vernor sued Autodesk, asking the court for a declaratory judgment (essentially a preemptive lawsuit) that as the lawful owner of a copy of AutoCAD, he had the right to resell it.

A lower court agreed with Vernor, but the Ninth Circuit reversed, and held that the so-called “First Sale Doctrine,” codified in the Copyright Act, did not apply because the architectural firm never bought a “copy” of the application.  Instead, the firm had only paid to use the software under a license from Autodesk, a license the firm had clearly violated.  Since the firm never owned the software, Vernor acquired no rights under copyright when he purchased the disks.

The Long Arm of Vernor?

This is an important decision, since all commercial software (and even open source and freeware software) is enabled by the producer only on condition of acceptance by the user of a license agreement.

These days, nearly all licenses purport to restrict the user’s ability to resell the software without permission from the producer.  (In the case of open source software under the GPL, users can redistribute the software so long as they repeat the other limits, including the requirement that modifications to the software also be distributed under the GPL.)  Thus, if the Vernor decision stands, used markets for software will quickly disappear.

Moreover, as the article points out, there’s no reason to think the decision is restricted just to software.  The three-judge panel suggested that any product—or at least any information-based product—that comes with a license agreement is in fact licensed rather than sold.  Thus, books, movies, music and video games distributed electronically in software-like formats readable by computers and other devices are probably all within the reach of the decision.

Who knows?  Perhaps Vernor could be applied to physical products—books, toasters, cars—that are conveyed via license.  Maybe before long consumers won’t own anything anymore; they’ll just get to use things, like seats at a movie theater (the classic example of a license), subject to limits imposed—and even changed at will—by the licensor.  We’ll become a nation of renters, owning nothing.

Well, not so fast.  First of all, let’s note some institutional limits of the decision.  The Ninth Circuit’s ruling applies only within federal courts of the western states (including California and Washington, where this case originated).  Other circuits facing similar questions of interpretation may reach different or even opposite decisions.

Vernor may also appeal the decision to the full Ninth Circuit or even the U.S. Supreme Court, though in both cases the decision to reconsider would be at the discretion of the respective court.  (My strong intuition is that the Supreme Court would not take an appeal on this case.)

Also, as Eric Goldman notes, the Ninth Circuit already has two other First Sale Doctrine cases in the pipeline.  Other panels of the court may take a different or more limited view.

For example, the Vernor case deals with a license that was granted by a business (Autodesk) to another business (the architectural firm).  But courts are often hesitant to enforce onerous or especially one-sided terms of a contract (a license is a kind of contract) between a business and an individual consumer.  Consumers, more than businesses, are unlikely to be able to understand the terms of an agreement, let alone have any realistic expectation of negotiating over terms they don’t like.

Courts, including the Ninth Circuit, may decline to extend the ruling to other forms of electronic content, let alone to physical goods.

The Joy of Renting

So for now let’s take the decision on its face:  Software licensing agreements that say the user is only licensing the use of software rather than purchasing a copy are enforceable.  Such agreements require only a few “magic words” (to quote the Electronic Frontier Foundation’s derisive view of the opinion) to transform software buyers into software renters.  And it’s a safe bet that any existing End User Licensing Agreements (EULAs) that don’t already recite those magic words will be quickly revised to do so.

(Besides EFF, see scathing critiques of the Vernor decision at Techdirt and Wired.)

So.  You don’t own those copies of software that you thought you purchased.  You just rent it from the vendor, on terms offered on a take-it-or-leave-it basis and subject to revision at will.  All those disks sitting in all those cardboard albums sitting on a shelf in your office are really the property of Microsoft, Intuit, Activision, and Adobe.  You don’t have to return them when the license expires, but you can’t transfer ownership of them to someone else because you don’t own them in the first place.

Well, so what?  Most of those boxes are utterly useless within a very short period of time, which is why there never has been an especially robust market for used software.  What real value is there to a copy of Windows 98, or last year’s TurboTax, or Photoshop Version 1.0?

Why does software get old so quickly, and why is old software worthless?  To answer those questions, I refer in the article to an important 2009 essay by Kevin Kelly.  Kelly, for one, thinks the prospect of renting rather than owning information content is not only wonderful but inevitable, and not because courts are being tricked into saying so.  (Kelly’s article says nothing about the legal aspects of ownership and renting.)

Renting is better for consumers, Kelly says, because ownership of information products introduces significant costs and absolutely no benefits to the consumer.  Once content is transformed into electronic formats, both the media (8-track) and the devices that play them (Betamax) grow quickly obsolete as technology improves under the neutral principle of Moore’s Law.  So if you own the media you have to store it, maintain it, catalog it and, pretty soon, replace it.  If you rent it, just as any tenant, those costs are borne by the landlord.

Consumers who own libraries of media find themselves regularly faced with the need to replace them with new media if they want to take advantage of the new features and functions of new media-interpreting devices.  You’re welcome to keep the 78’s that scratch and pop and hiss, but who really wants to?  Nostalgia only goes so far, and only for a unique subset of consumers.  Most of us like it when things get better, faster, smaller, and cheaper.

In the case of software, there’s the additional and rapid obsolescence of the code itself.  Operating systems have to be rewritten as the hardware improves and platforms proliferate.  Tax preparation software has to be replaced every year to keep up with the tax code.  Image manipulation software gets ever more sophisticated as display devices are radically improved.

Unlike a book or a piece of music, software is only written for the computer to “read” in the first place.  You can always read an old book, whether you prefer the convenience of a mass storage device such as a Kindle.  But you could never read the object code for AutoCAD even if you wanted to—the old version (which got old fast, and not just to encourage you to buy new versions) is just taking up space in your closet.

The Real Crime was Extending Copyright to Software in the First Place

In that sense, it never made any sense to “own” “copies” of software in the first place.  That was only the distribution model for a short time, necessitated by an unfortunate technical limit of computer architecture that has nearly disappeared.  CPUs require machine-readable code to be moved into RAM in order to be executed.

But core memory was expensive.  Code came loaded on cheap tape, which was then copied to more expensive disks, which was then read into even more expensive memory.  In a perfect world with unlimited free memory, the computer would have come pre-loaded with everything.

That wouldn’t have solved the obsolescence problem, however.  But the Internet solved that by eliminating the need for the physical media copies in the first place.  Nearly all the software on my computer was downloaded in the first place—if I got a disk, it was just to initiate the download and installation.  (The user manual, the other component of the software album, is only on the disk or online these days.)

As we move from physical copies to downloaded software, vendors can more easily and more quickly issue new versions, patches, upgrades, and added functionality (new levels of video games, for example).

And, as we move from physical copies to virtual copies residing in the cloud, it becomes increasingly less weird to think that the thing we paid for—the thing that’s sitting right there, in our house or office—isn’t really ours at all, even though we paid for, bagged it, transported and unwrapped it just as do all the other commodities that we do own.

That’s why the Vendor decision, in the end, isn’t really all that revolutionary.  It just acknowledges in law what has already happened in the market.  We don’t buy software.  We pay for a service—whether by the month, or by the user, or by looking at ads, or by the amount of processing or storage or whatever we do with the service—and regardless of whether the software that implements the service runs on our computer or someone else’s, or, for that matter, everyone else’s.

The crime here, if there is one, isn’t that the courts are taking away the First Sale Doctrine.  It’s not, in other words, that one piece of copyright law no longer applies to software.  The crime is that copyright—any part of it—every applied to software in the first place.  That’s what led to the culture of software “packages” and “suites” and “owning copies” that was never a good fit, and which now has become more trouble than it’s worth.

Remember that before the 1976 revisions to the Copyright Act, it was pretty clear that software wasn’t protected by copyright.  Until then, vendors (there were very few, and, of course, no consumer market) protected their source code either by delivering only object code and/or by holding user’s to the terms of contracts based on the law of trade secrets.

That regime worked just fine.  But vendors got greedy, and took the opportunity of the 1976 reforms to lobby for extension of copyright for source code.  Later, they got greedier, and chipped away at bans on applying patent law to software as well.

Not that copyright or patent protection really bought the vendors much.  Efforts to use it to protect the “look and feel” of user interfaces, as if they were novels that read too closely to an original work, fell flat.

Except when it came to stopping the wholesale reproduction and unauthorized sale of programs in other countries, copyright protection hasn’t been of much value to vendors.  And even then the real protection for software was and remains the rapid revision process driven by technological, rather than business or legal, change.

But the metaphor equating software with novels had unintended consequences.  With software protected by copyright, users—especially consumers—became accustomed to the language of copies and ownership and purchase, and to the protections of the law of sales, which applies to physical goods (books) and not to services (accounting).

So, if consumer advocates and legal scholars are enraged by the return to a purely contractual model for software use, in some sense the vendors have only themselves—or rather their predecessors—to blame.

But that doesn’t change the fact that software never fit the model of copyright, including the First Sale Doctrine.  Just because source code kind of sort of looked like it was written in a language readable by a very few humans, the infamous CONTU Committee making recommendations to Congress made the leap to treating software as a work of authorship by (poor) analogy.

With the 1976 Copyright Act, the law treated software as if it were a novel, giving exclusive rights to its “authors” for a period of time that is absurd compared to the short economic lifespan of any piece of code written since the time of Charles Baggage and Ada Lovelace.

The farther away from a traditional “work of authorship” that software evolves (visual programming, object-oriented architecture, interpretive languages such as HTML), the more unfortunate that decision looks in retrospect.  Source code is just a convenience, making it easier to write and maintain programs.  But it doesn’t do anything.  It must be compiled or interpreted before the hardware will make a peep or move a pixel.

Author John Hersey, one of the CONTU Committee members, got it just right.  In his dissent from the recommendation to extend copyright to software, Hersey wrote, “software utters work.  Work is its only utterance and its only purpose.”

Work doesn’t need the incentives and protections we have afforded to novels and songs.  And consumers can no more resell work than they can take home their seat from the movie theater after the show.