Who Owns the Code? CE Industry’s Dirty Little Secret

NOTE: In my original story, as many have pointed out, I was completely unfair to Baumeister, a Chicago integration company that was forced to close its doors after many years of contributions to this industry. I have not heard Baumeister's side of the story. I'm usually much better at giving the benefit of the doubt but in my haste to post this story in advance of the auction (ending today), I took too many liberties. I regret the insensitivity and am currently revising the story to talk about the important issues discussed here, rather than focusing on one of many integrators that has, sadly, gone out of business.

When you install a home control system, who owns the source code when the client is all paid up?

That's a contentious issue in the industry, and no one seems to be talking about it.

The long-brewing issue, however, has become more urgent with the souring economy.

Some once-reputable integrators are going out of business and they're taking their clients' programming with them.

Consumers may be left with a lot of worthless equipment because no one else can take over a job without the source code.

This is a dirty little secret and it's giving our industry a black eye.

What Happens When You Don't have the Code?

Let's say an integrator abruptly goes out of business and takes with it the Crestron code that was customized for each invidivual client.

Without the source code, no other integrator -- not even Crestron itself -- can access a client's system. That means that even the most basic changes to a system -- say, swapping out a DVD player, adding another light switch, or changing a channel icon -- cannot be made without starting from scratch.

Starting from scratch does not mean just programming the system from scratch. It means re-interviewing the clients, determining their preferences, learning how they live, and doing all those invasive things that the homeowner dreads.

Like they really want to go through it a second time?

It also means charting the subsystems, mapping out the wiring, troubleshooting, and so on and so on.

And then comes the programming. Potentially tens of thousands of dollars spent on the original programming could all be for naught.

Dave Haddad, president of Chicago-based Vidacom Corp., is a long-time critic of the "code-as-hostage" practice. He has taken over several jobs from Baumeister AV, an established, high-profile integration company that recently was forced to shut its doors.

Haddad estimates that he would have to charge one of the affected clients $50,000 "just to sort it all out," he says.

And he is not rejoicing at that new-found business.

"Frankly, I'm embarrassed," he says. "I wish I could buy all of that locked-up code and hand it out to the customers who put their faith in this industry."

Those Poor Clients

I first became aware of this issue – indeed the whole who-owns-the-code debate -- in late January when I received an email from a Baumeister customer who had spent $50,000 to $75,000 on his system, of which the Crestron "programming" costs seemed to amount to about $10,000.

He was stunned and disappointed to learn that he'd been left with a system that no one could now support.

"It seems like I'm SOL if I can't get at that code," he says quite correctly. "Truly a shame. It would be one thing if I (and others) tried to find someone cheap on the Internet to program my system that wasn't licensed, but Baumeister had a great reputation and I paid for that. … I don't think installers want to release the source code as it is the ticket to ensuring that customers still need the installer."

I doubt that was the case with Baumeister, but it rings true for many home systems integrators.

If integrators need to hold their customers hostage by keeping the source code, then perhaps they're in the wrong business. The correct way to keep a customer is to treat them well.

Then they wouldn't need the code, right?

Many integrators are either paranoid that some other dealer will steal their code, or they simply think the customer doesn't deserve it because, like shnakz69 says on RemoteCentral.com, "I use a lot of my personally written modules."

Schnakz says, "I never give my AMX or Crestron code to clients as the intellectual rights belong to me."

That's just wrong.

Legally, maybe not. Ethically, I believe so.

Legally, who DOES Own the Code?

The attorneys assigned to the Baumeister case, Chicago-based Law Office of Deborah K. Ebner, determined that indeed the Baumeister code was the rightful property of the integrator (there's a surprise).

Apparently, the clients who complained (e.g., sued) got their goods.

"We've spoken at length to everyone who has voiced objections," attorney Deborah Ebner told CE Pro.

Cases with all of the plaintiffs have been settled, she said.

What about the company that buys the so-called intellectual property. Should they fear lawsuits from disgruntled clients who believe they own the goods?

Ebner assures us that her firm, along with the Baumeister assignee Moglia Advisors, would never put potential buyers in such a position.

A Louisiana attorney calls such claims, "pure nonsense."

Currently he is suing an integrator (not Baumeister) who refused to provide source code for a system that was badly botched.

He says, "The buyer [of the Baumeister code] may not be able to be sued for improperly installed systems or things such as that, but there is nothing they can do whatsoever to stop lawsuits from disgruntled clients … demanding code."

But it's Really Not about Legal

Many integrators like to turn this discussion into one about contracts, getting everything in writing. Yes, of course that needs to be done but it still misses the point.

If you include an item in the contract that secures your ownership of the source code, you may be protected in the courts, but it's still bad form.

Customers don't know about this stuff. They don't understand how integral the source code is to the workings of their entire home.

They're going to skip right over that line item in the contract and then thoroughly despise their integrator – and the industry as a whole -- when the dealer locks their doors with the client's vital software inside.

"They [customers] don't have a clue that they even need this," Haddad says. "And why would they?"

Even the wisest of clients don't know what they're in for -- doctors, lawyers, techies, scholars ...

Integrators go out of business all the time. It's a fact, and it's sad. But one very simple thing they can do is to make provisions so that someone else can take over their clients' projects as painlessly as possible.

This Problem Must be Exposed

The client who wrote to me originally, said, "I'd love to read an article by you guys about what customers should do (and how installers should prepare them) in the unfortunate scenario of a firm going out of business."

So here it is.

I don't suggest that programmers necessarily hand over all the code at the end of a paid-up job, although plenty of them do.

But there must be a way for the customer to gain access to the software in the event that the dealer goes out of business, or they simply don't deliver.

There are software escrow services that store the code, and help the parties negotiate the terms and mediate any disputes. (See, for example, Iron Mountain).

I don't care if the dealer gives the code away, sells it, or holds it in escrow, but they shouldn't disappear with it altogether.

In one of the most controversial threads ever posted on RemoteCentral.com, I posed the question about who owns the code when a project is completed. The post has generated 305 responses.

I said in the post that I would write a story for Electronic House (consumers), suggesting that they ask the "code question" up front. Then, I would recommend that they refuse to do business with a firm who won't give away, sell, hold in escrow, or otherwise make arrangements to make code available for a customer who has paid in full.

The majority of respondents said that such advice would not be unreasonable.

Then there were others, like a dealer who calls himself Vincent Delpino.

He wrote, "A seasoned Crestron programmer has spent years developing modules and code and who are you to 'educate' people on something you don't fully understand?"

Don't Blame the Baumeisters of the World

Again, I have not yet heard Baumeister's side of the story. My guess is that their shop was shut down unexpectedly and the code was locked up with it.

Once the bankers come in, a bankrupt company can't touch a thing and the liquidators are free to sell the assets as they wish.

To insulate themselves from such an occurrence, integrators should make provisions to keep updated programs stored somewhere off-site and available to the customer if necessary.

Many integrators will gladly hand over the source code, schematics and other documentation when a project is complete and paid for, or if the customer asks for it. But that may be too late, as the Baumeister case has shown.

Don't Blame the Manufacturer

This is a tricky one: Should manufacturers bear any of the responsibility when dealers leave their clients in the lurch?

I spoke with representatives from some of the key home control companies. Many of them provide some accommodation in their products to enable new dealers to tap into an existing system.

Others, like AMX and Crestron, let dealers control access to their own programming. That's not necessarily a bad thing. Crestron and AMX dealers can spend hundreds of hours writing customized programs, and that doesn't count the years of work they've put into their own software development.

They must ensure that their programs have some level of protection, and that the client pays for the work on schedule.

Many dealers suggest that AMX, Crestron and providers of similarly complex systems should get involved when homeowners are left stranded. The manufacturers, after all, are the ones whose reputations get damaged.

The manufacturer's involvement, however, is impractical. They cannot get bogged down in disputes between every dealer and their clients. Who are they to interpret whether or not a project has been paid for, the integrator did a good job, etc.?

Even so, Crestron's Randy Klein is adamant that dealers give clients access to the final code. He says that Crestron has an entire "task force" dedicated to this issue.

"I would strongly suggest – sort of demand – that dealers take that code and allow end users to have it," he says. "You have the professional responsibility to consumers, the industry, and the company."

Dealers' escaping with the code is "such a bad thing for the industry," Klein says, but he doesn't see the problem in the commercial space.

"Ten years ago, commercial was just as bad," he says. "They'd hold customers hostage to get repeat business. What the commercial guys have done now is to use the source code as a service and ongoing support tool, rather than a blackmail tool."

AMX did not respond to phone calls and emails concerning this subject.

With other vendors, the who-owns-the-code debate is not as problematic.

In Control4 systems, for example, any authorized Control4 dealer can take over an existing job with few problems.

"You'd come in, get access to the system, and once you're on it, the entire functionality – the project – is resident on the master controller," says Control4 president Glen Mella. "It's not sitting on some integrator's laptop somewhere that you can't get to return your calls."

Essentially, the new integrator (Control4-authorized) just needs a WEP key to access the home network.

Then again, Control4 and similar systems are not as complex as, say, Crestron and AMX projects.

What Will Become of the Baumeister Assets?

Moglia Associates, the assignee for the benefit of creditors in the Baumeister case, is selling these Baumeister assets, according to a notice filed on April 13 (pdf):

• all proprietary source codes
• CAD drawings
• schematics
• client lists
• customized job tracking system
• etc.

I spoke with Moglia's Barry Davis, who is representing the creditors in the Baumeister case.

He says that the CAD drawings and schematics are in fact owned by the end user – as spelled out in Baumeister's initial invoices. The winning bidder, though, is welcomed to any copies that may be on hand.

"But Crestron codes, it [customer's invoice] is silent about that."

Moglia has already received an offer of $55,000 for the assets (pdf).

The auction ends Friday, April 17 at 2:00 p.m.

I have no idea who placed the initial bid, but I hope it's a dealer who intends to do the right thing – that is, offer the code to Baumeister clients free of charge whether they use this particular dealer or not … and then suggest why the client should do business with the newcomer.

Industry Best Practices

I sent a draft of this story to some of the most respected integrators in the industry to make sure I wasn't totally out of whack with reality.

I am, of course, still wacky, but apparently not on this issue.

As long as the bill has been paid in full our clients own the code. ... And yes some clients for whatever reasons are just done with us and want the code so they can try someone else and as I said as long as their account is current we give them the code even if we know they are going to a competitor.
- Jeff Hoover, Audio Advisors, West Palm Beach, Fla.

We have dealt with this problem recently with two customers. We have had to explain to them that re-building these programs from scratch will cost them thousands of dollars in programming hours. These two homeowners had no idea that they did not have the code. It is a great topic that has to be addressed. As more companies are vanishing the problem is growing. I don't care what you call the property. It should be the paying customer's property.
- Greg Simmons, Eagle Sentry, Las Vegas

Engineered Environments has always been of the belief that if the client pays for the programming, they own the programming. Anyone that offers anything less is doing a disservice to their client, the industry and ultimately themselves.
- Randy Stearns, Engineered Environments, Alameda, Calif.

Any client that doesn't want us to service them deserves the code (unless they still owe us money).
- Bill Maronet, ETC, West Palm Beach, Fla.

When the client pays for a product, they own it whether it is a DVD player or code. Do what is right for the customer. That is the golden rule. It is also the professional thing to do.
- Dennis Sage, Dennis Sage Home Entertainment, Phoenix

I agree with you that the practice of locking down source code is hurting our industry tremendously. I believe that in all cases the end user owns the code when they paid for its development through programming labor fees as part of an installed system.
- Kevin Mikelonis, Process Dealer Services Group, Paso Robles, Calif.

We've spent years perfecting our Crestron programs and our user interfaces, but we still give the source code to the customer at the end of a job. If we've done our job well, the customer will never need it.
- Dave Haddad, Vidacom, Chicago

What to Tell Consumers

I am, as always, an advocate for the custom electronics channel, but I can't keep this dirty little secret from the readers of Electronic House, our sister publication for consumers.

Many of them are likely to read this story.

In the comments below, please share your advice to consumers on this matter.

If you completely disagree with my sentiments, go ahead, state your case below.

http://www.cepro.com/code