Software Rental

by Stacey Peterson

Does software rental encourage piracy? That's the position the Software Publishers Association took with Congress last fall. This article was originally published in the September 5, 1988 issue of Computer System News, a computer trade paper; we're reprinting it for you because of the long-term effects the software rental battle could have on the ST community.

The software industry, which prides itself on keeping government out of its business, is knocking on lawmakers' doors asking for protection against what they call a looming threat from software rental.

"The development of a large-scale rental business would jeopardize the future of companies such as WordPerfect," said WordPerfect Corp.'s president Alan Ashton at recent U.S. Senate hearings held in Provo, Utah.

Ashton and several other software company representatives rallied round the Computer Software Rental Amendments Act of 1988, which would ban software rental without authorization from the copyright holder. The Senate judiciary Subcommittee on patents, Copyrights and Trademarks is considering S2727 as an amendment to the U.S. Copyright Act.

The argument against software rental operations is that they "are nothing more than invitations to rent the product, make a copy and then return the disk for someone else to do the same" according to testimony of Heidi Roizen, president of software developer T/Maker Co. and the Software Publishers Association.

And while the same can be said about video rentals and even books borrowed from libraries, the software folks insist their case is different. They liken it to the sound-recording industry, which successfully lobbied for its own ban on rentals in 1984, using the argument that technology had reached a stage that allowed people to make perfect copies in their homes.

The situation for software however is even more serious, Ashton argued.

Compact disks cost only $16.95 and take about an hour to copy, but software have prices of several hundred dollars or more and can be copied in seconds.

"The incentive to rent software for the purpose of avoiding purchase of a copy is much greater than in the case of records," Ashton insisted.

The prices software companies charge, he added, reflect the "costs of creation." A strong rental market would sap funds the industry needs to reinvest in improving products and in research, and development.

In addition to time and cost factors, Ashton-Tate Corp. deputy general counsel Thomas Chan maintained that there is no good reason for rental. No one really rents software to perform some data processing and then to return the original software without making a copy. To do so would be like creating a bunch of files, locking them up and throwing the key away"

Chan, who spoke for ADAPSO at the hearing, stressed that some software rental operations are, in fact, "reincarnated" software pirates. They used to sell illegal copies of software program but have had to find other entrepreneurial outlets as the government makes pirating more difficult.

"Unless I'm a really stupid pirate. Why would I make copies when I can rent," Chan recently said in an interview. In his testimony Chan cited a Canadian company, Crazy Irving, as "one of the most notorious pirates" that was prosecuted for software theft and fraud earlier this year. Within 24 hours, Chan said, Crazy Irving reopened its door, "this time renting software and openly challenging the software industry and government to action."

Right now, software companies depend on their end user license agreements, which prohibit rental, to protect them from these operations. But no one has tested the enforceability of these agreements, Chan said.

There is some doubt that "you can do by a contract what the Copyright Act does not specifically let you do." he added. If the contract itself does not hold up in court, the companies are left having to prove that a rental company has contributed to infringement.

The software companies, while insisting that rental is obviously "contributory infringement," find that changing the Copyright law is the easier way out.

But then again, at this point it's only a one-sided argument, since no rental companies we're called to testify at the Senate hearings.

Stacey Peterson is the Senior Editor of Computer Systems News.