By – Madan Pania – President, Soceity For Animation in Delhi
“If open source software can be developed, why should ANY software company be permitted any EULA at all. ”
“Do sau rupaye mein DVD mil jaati hai,” he said, when I asked him whether he had a “legal” version of that software.”Kahe ko khareedna, sahab?” Go to Nehru Place in New Delhi, and you’ll invariably come across those street boys offering “software, software, software… games, games, games”. I am sure they would rarely know what that software is or does. All they are concerned with is that the DVD has a “crack”, serial number or a key to unlock the application and make it run on any Computer. I have always been amused at the ways in which application software copyrights are “bought” and “sold”, implemented, violated and even simply “copied”, even by the companies that own and sell them. So let me today go into this issue – when I buy software, the legal version, what am I buying. Do I own ANY portion of what I have bought? If yes, can I sell it again? And, if no, have I actually BOUGHT it?
Buying, I know, as per any law of any country, involves transfer of ownership, and the risks associated with the purchase. And if you OWN anything, and its risks, then you are legally entitled to sell it also, or dispose of your purchase in any manner yow wish. Software companies have been wise and quick to realize this and impose upon you the EULA (End User License Agreement). The EULA has to be “accepted” before you can proceed with installation. And the EULA may contain ANY and EVERY condition of usage, howsoever prohibitive, restrictive or coercive it may be, even if it forced you to change your religion. Consequently, these companies are quick to say that you have not “bought” the software, but have only been LICENSED to use it, and proof of that license is the Serial Number, or the Product Key that goes with it, as recorded in their database. More specifically, the license only PERMITS usage of that serialized product key for a specific licensee for a specific period of time. And its legality for the user is determined by registration of the product in the database of the licensor. This is also necessary to a very large extent, as the software is an intellectual property, just like the data created by using it. It also opens up various commercial opportunities both for the licensor as well as the licensee. Intellectual Property is something someone thought up FIRST TIME and converted it into a commercially usable option. Copyright is the right of ownership stamp on that Intellectual Property. Theoretically and legally, both could belong to different persons or entities, but usually vest in a single one. However, I am not concerned, for the present, with the fine distinction between the two.
So is this a wake-up call as the addiction with the application plays havoc with the animation and design industry? We have witnessed the recent closure of very large animation and design production studios, branches of established training institutions, smaller production units galore. I need not name them, but the experiences in the recent past – Crest, Rhythm and Hues, Animation Fraud, etc – tell it all – ENTRY BY PASSION, EXIT BY DEPRESSION. Animation production is somehow not making business sense. But I am yet to come across closure of even a single software retail outlet. We now hear that Indian users paid a whopping US$ 512 million in 2012 to a single software company in the form of software licenses it imported. The Society for Animation in Delhi ambitiously came out to print the Directory of Animation in Delhi (DAD). But when it contacted a number of small production studios and freelancers, they hesitated to have their details printed. It was quite surprising that they did not want ANY form of publicity or mileage – an essential marketing input that makes production happen. “Khul kar dhandha nahin karna chaahte, software vaala pakrega”. Software companies have the unfettered right to propagate their business plans and protect them, whether through EULAs or addictions. But I have everything against those who would rather “hide” their businesses and carry on clandestinely. Agreed that the software is too expensive, and “buying” the license (if I may call it that) for a few seats (users) costs the moon. Animation has to use the costliest hardware, the costliest software, and the costliest labour. And that’s where it doesn’t make business sense. An employee of Dreamworks, USA, once mentioned in an open forum in New Delhi that making a full length animation feature film takes about a year to produce, costs US $ 1.5 billion, and another US $ 2.5 billion to market it. And, God forbid, if the revenues earned do not go beyond the costs, the studio closes, as it cannot produce another animation film.
So now I have something against the software companies also. They have immunized themselves from the swings in the economy and industry to such an extent that they are able to sideline the common laws of the country. There are certain laws in India which promote fair competition and prevent monopolistic and restrictive trade practices – the anti-trust laws. They are based on three main principles across various jurisdictions…
These premises have impacted Indian industry sectors as well, and animation and design art are no exception. The Competition Act, 2002, prohibits anti-competitive agreements (section 3), abuse of dominant position (section 4) and regulates mergers, amalgamations and acquisitions (sections 5 & 6). These sections influence mergers and acquisition activities; intra-group mergers, demergers and acquisitions; joint ventures; agreements and arrangements with competitors and agreements and arrangements with suppliers, distributors, exclusivity arrangements, agreements for sale and other commercial agreements. Acquisitions in these fields are not unknown. For example, Adobe’s acquisition of Macromedia is fast resulting in the ‘death’ of “Director” users, which was a flagship application of Macromedia along with Flash. Many such examples, I am sure, will be able to come forth. Entire non-software investments based on certain software applications go waste when such mergers and/or demergers take place. The near-similarity in the EULAs is another sphere showing a trend towards anti-competition agreements and practices. Your inability to even sell the LICENSE that you buy, mocks the concept of restrictive trade practices. Is this not a blatant abuse of ‘dominant position’?
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) re-sale price maintenance are considered void,if they cause, or are likely to cause, an appreciable adverse effect on competition in India.
In Vernor vs Autodesk, a court of appeals in the USA recently ruled that you can’t sell the software you buy. This judgment was passed in relation to USED software (second-hand software). Autodesk, the software’s developer, forces all users to accept an agreement before using their applications. This agreement makes clear that the applications are merely licensed, never sold, and that one’s license was non-transferable. Further, a licensee could not rent, lease, or sell the software to anyone else; you couldn’t even physically transfer the discs out of the Western Hemisphere. Finally, if you upgraded to a new version, the old version had to be destroyed.
The learned court held, “…that a software user is a licensee rather than an owner of a copy where the copyright owner
(1) specifies that the user is granted a license;
(2) significantly restricts the user’s ability to transfer the software; and
(3) imposes notable use restrictions.”
There are very well-meaning and user-friendly solutions to this vexed issue that can help both sides. For instance, Adobe has a license transfer policy, and you can certainly request for transfer by following their few formalities. At different levels there are many, more and much more effective, options, particularly the open source ones that can be of use in arriving at mutually acceptable eco-system arrangements in the animation and graphic design world, namely…