This turned into a long article on software distribution.
NEW YORK (AP) _ A little-known patent could raise the cost of doing business over the Internet for companies selling software, video or other digital products delivered online.
E-Data Corp. of Secaucus, N.J., is suing 17 companies, including McGraw-Hill and CompuServe, to collect licensing fees on the patent, which protects downloading of encrypted digital information. A court hearing is scheduled Dec. 6 in New York on the company's claims.
Although this is one of the most bogus and indefensible patent claims about I don't think it has any material bearing on the Web. Any that it does have is likely to be beneficial since the Freeny model is inherently broken and non-Web. What Freeny does is to claim the idea of encrypting an information product, delivering it through a computer network (though not a physical medium, there is another patent that claims that), and selling the decryption key rather than the product. It is a hot idea if you are trapped in traditional, pre-Web thinking but not if you understand the dynamics of the net. The problem is that encryption is not such a great barrier to preventing proliferation of software. If encryption is free than you might as well add it in, if there are patent costs then you have to ask what precisely you gain from encryption. The problem is that the information good has to be decrypted before use. Since it is very difficult to prevent copying after the decryption has occurred all that the encryption is really doing is to slow down the process of proliferation. A more important question is what if anything one gains from preventing proliferation. Microsoft has not been hurt by the massive bootleg copying of its software, far from it. Many business users are keen to buy non copy protected software because they can then obtain a "free" copy for their home machine at no cost to themselves. This minor peculation is in my view the principle reason for the dominance of the PC in the home market. There is no good reason why a person would buy a $2000 business machine rather than a $500 home machine when the latter plays much better games. But add the idea that one can use the software bought by one's employer and the PC looks the better buy. I believe that the success of Netscape demonstrates that copy protection is a bad idea. If you believe in free markets then the price of any given product is going to come down to the marginal cost of production. For software sold via the net the marginal cost is pretty close to zero. The price of the various "Office" bundles sold via the stores is astonishingly low. $200 for MSOffice or Corel Office is a silly price. If the product is bundled with the machine the price gets even sillier - a few dollars. I expect that before long we will see machines coming bundled with more than one office suite because the prices are just too low to make the choice irrelevant. An important fact to bear in mind is that companies are in general interested in being honest. There is little incentive for an employee to cheat the software vendor. The cost of lawsuits is a good deterrence since the type of company where management are likely to encourage software theft is also the type of company that is likely to have disgruntled ex-employees willing to inform. As a system manager my principle interest in net O/S such as WNT and VMS is that they have good, centralized and standardized licensing mechanisms that allow me to make sure that the software has been paid for. Its another reason why site licenses are useful! The price of net software is likely to be close to the price the OEM pays, a few dollars. This is likely to be structured somewhat differently however. I expect to see growth of two trends, software rental and componentware. Componentware, selling the package in small increments is a poor proposition if selling via physical media. The cost of a CDROM is low, (few cents), but the cost of post and packing is high. Selling componentware via the net is considerably more interesting. Just as I paid a few bucks for my XV program, I'm willing to pay a couple of bucks for additional input filters. I'd certainly be willing to pay a couple of bucks for specialized document tools or specialized canned document formats (e.g. IDEF0, ESA-Requirements whatever). I see the potential for componentware being primarily low cost, high volume. Componentware is now on the brink of being practical for three reasons. First as previously stated the net makes distribution costs lower. Second modern software applications are considerably more "open" to extension than previously. In the past most software houses attempted to produce products that satisfied every need. Today the large software houses realize that they cannot hope to satisfy every need but that if they can cover 95% of a persons needs in a way that allows them to add in the remaining 5% everyone is happy. Finally, Java has legitimized the componentware idea. Its worth noting that the technical suitability of Java to the task is irrelevant. What is important is the fact that several hundred startup companies have been created to do nothing else than make Java applets. Such companies are effectively committed to make componentware work and it is inevitable that at least one will succeed in establishing a paradigm for the others to copy. The second interesting development is software rental. To an extent this already occurs since the rapid rate of software development means that software rapidly becomes obsolete. Anyone who is using WordPerfect 3.1 for more than a few hours a year should probably upgrade to the latest version simply because it offers so much more functionality. The recent move by Microsoft to incorporate the year into their products is intended to encourage frequent software upgrades. It is a small step from this model to one in which software is "leased" for a period of a year or more at a time. Of course both componentware and rental strategies have been around before the net existed. What the net does is to change the economics so that low cost, high volume is the mainstream strategy. Software rental traditionally involves expensive agreements, typically brokered by lawyers on both sides. The network means that it will become economic to rent software in low volume and for short periods. Joining the componentware and rental strategies together would point to a distribution strategy in which a corporation would lease a certain number of seats worth of fully updated packages. The seats would be continuously updated on a daily basis as additional components passed the supplier's QA. In this model the purchaser is buying the up-todateness of the package. There would be little value in bootlegging the software since its unlikely that the bootleg version would be anything like as convenient. There would also be scope for different levels of uptodateness. Just as the Microsoft developer network delivers a bulging binder full of CDs to my desk each quarter there will inevitably be a large number of developers willing to risk buggy software to have access to the cutting edge technology. On the other hand there will be people who prefer to wait until others have found the bugs, waiting a judicious length of time before updating unless a patch is a response to a known bug. Encrypting the distribution process might be worthwhile to reduce fraud but the main vulnerability is probably unauthorized copying after distribution. What the Freeny patent covers is thus the old model of software distribution in the new sales paradigm. There is little point in taking costly measures to protect the copyright of products being sold for small dollar amounts. First Virtual proves this. Where more expensive software is concerned it would ideally be best to use the net. But here the price of the patent is simply too much. The 1% extorted under the patent would easily pay an intern to stuff a CD in an envelope and send it. The role for encryption in the software distribution process is in authenticating the delivered goods. The role of encryption is to provide privacy. It is very hard to keep a secret that every one knows about, still harder to sell information that is public knowledge. The net is not an information economy, it is an access to information technology. Nobody will profit from merely selling information, they will have to sell the ability to access information in better ways, better indexing, faster access, lower publication delays and so on. comments? Phill PS in checking this document Microsoft's spellchecker suggested "Mosaic" when checking the word MSOffice!