Steam and the question of hosted-software

The software industry has always worked on the assumption that software is licensed, not purchased. Until cloud-based software became possible, licenses couldn't easily be revoked if the license agreement was breached. Now that they can be, the task of resolving question of 'ownership' of software has been given a new urgency.

There was a great article recently on the always brilliant Rock-Paper-Shotgun (RPS) concerning ownership and digital rights for hosted software which is relevant to anybody using or planning to use cloud-based services.

Let’s begin by introducing the players. Valve Software is the creator of Steam, a game platform that distributes and manages computer games. Valve has produced some of the biggest computer games in the industry including Half-Life, Counter-Strike, and Portal. Valve purportedly created Steam as a method of directly interacting with its customers. Users can sign-up to Steam to “easily buy, play, share, modify, and build communities around Valve products…” which one might take as an invitation to share games, but then that brings us to our story.

The case featured by RPS involved a Russian chap who had his Steam account disabled – effectively losing over a $1000 worth of software he had purchased. Until questioned by RPS, Valve had not been forthcoming with answers as to why they had disabled the account. It came to light that he had gifted games via Steam in exchange for a little money or beer. He saw it as a way to help his friends get access to great games at a low cost – Valve considered it a violation of the Steam TOS and cut him off from ALL the games he had purchased.

An excerpt from the article featured on RPS illustrates some of the legalities:

“But is that legal? I asked gamer lawyer Jas Purewal about this a short while back, not specifically about Valve, and he explained that the matter is still unresolved. “In fact,” he says, “it’s never been completely resolved for software generally – at best, we have some guidance to follow.” But he explains that the commonly taken position is that when we buy a boxed game, we own the DVD, but only have a license for the software on it. “A ‘licence'[sic],” Purewal explains, “is essentially a limited personal right to use the software on certain terms and conditions – it doesn’t give you the right to e.g. sell/transfer/copy/reproduce the software.” (From John Walker’s article on Rock, Paper, Shotgun.)

This raises an important question about digital rights ownership. There’s always been an assumption (inferred from most End User License Agreements (EULAs)) that one leases software and is never really the owner, this has created a legal grey-area about resell rights and has opened the door for the developer/distributor to effectively repossess software. When supplied on physical media or privately hosted by the customer it’s much harder for developers to cut off a customer. However, with cloud-based apps it is now easy for developers to take back software purchased by customers if compelled to do so, and ban them; cutting users off from potentially all the software they have purchased.

RPS quotes Jas Purewal on the issue of software ownership:

“All this could have a big impact on the ‘ownership’ question. Would gamers care about ‘owning’ a game if they had very reliable, maybe cloud-based gaming controlled by rules that they understand? Would a publisher? If a publisher gives a gamer a right to return or exchange a digital game via a fair system that the publisher controls, would it really matter to gamers that they can’t sell the game through any other means?”( From John Walker’s article on Rock, Paper, Shotgun.)

Although the secondary market for business software is not as prolific as games, there have been cases of lawsuits brought about for the reselling of ‘second-hand’ licenses. In 2009, a federal district judge in Washington State ruled that Timothy Vernor had the legal right to resell Autodesk on eBay as Autodesk had effectively sold licenses, not leased them (Autodesk quickly amended this in their EULA). Had Autodesk been cloud-based this transference of licenses could have been easily stopped.

A total reliance on cloud-based apps or infrastructure would mean disruptions to service (especially due to misunderstandings) could be catastrophic for a business. The complexity of most EULA make it difficult for any of us without an army of lawyers at our disposal to understand exactly what we can and cannot do with the software or services we’ve purchased. We need to be careful as eagerness to enroll in the latest cloud-trend may make us a shade too dependent of the benevolence and stability of providers. While I expect most enterprise-businesses to shy away from placing mission-critical business operations into the eager hands of the cloud-company next door, that doesn’t mean they might not take to the cloud for distribution, where an outage (or revocation of rights) can still cause plenty of damage.

Common sense of course goes a long way with EULA issues, but the waters can quickly become murky. As we see more and more cloud-based SAAS providers licensing their apps to resellers rather than end users, it is highly likely there will be legal fallout from disrupted services as companies merge or are bought out and rights-of-use issues are put under the microscope.

Another example of right ownership backlash came when Apple was criticized for what writers and creatives were calling a ‘greedy’ EULA in regards to their ibook licensing. Critics argue that Apple is claiming ownership not only over the software but the composition as well. The fear is that this will restrict the sale of content as it’s no longer owned by the creator but the software provider. Writer Don Wineman summed it up:

“Apple, in this EULA, is claiming a right not just to its software, but to its software’s output. It’s akin to Microsoft trying to restrict what people can do with Word documents, or Adobe declaring that if you use Photoshop to export a JPEG, you can’t freely sell it to Getty. As far as I know, in the consumer software industry, this practice is unprecedented.” (From Don Wineman’s blog Venomous Porridge.)

When looking at rights ownership there are a few questions you should make sure you can answer:

  • What level of ownership do I have over the app and the data it contains?
  • What are the limitations on transference of end user licenses?
  • Is my provider the ‘owner’ or are they in turn licensing components or apps from elsewhere?
  • In the event of a violation of TOS and a freezing of apps and/or services what are my options and whom do I contact?

Ensuring that your software is correctly licensed and used in accordance with the terms of use by the owner (commonly referred to as ‘compliance’) is a major issue for organizations and can have massive economic and legal ramifications. As with traditional desktop-based software, as cloud technology matures and supplier and end-user organizations grow, it’s likely that nuanced compliance and ownership questions will need to be addressed by the courts.

Valve Software is one of the world’s most innovative game developers, they’ve pioneered an amazing leap forward in the sales and distribution of games and I would personally rather navigate the potential minefield of legal jargon in a EULA than go back to relying on desktop apps for my software. The cloud gives us the capacity to operate anywhere we choose without being tied to a single desktop machine and that alone, in this writer’s opinion, is worth the risk and a little extra due diligence. As with any brave new venture, plan ahead, know what you are dealing with, and look to the experts for answers.