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

When an integration company goes out of business, and customers don't have the programming code for their system, they can be left at the mercy of the bankruptcy courts.


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. Very likely the banks simply shut Baumeister's doors and took ownership of everything, including computers and the the code.

But there are many home systems integrator who do maintain that they own the code.

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, "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, 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.

"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." (Click to enlarge)
- Dave Haddad, Vidacom
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.

What a Surprise!

"We have had to explain to them [take-over clients] that re-building these programs from scratch will cost them thousands of dollars in programming hours. "
- Greg Simmons, Eagle Sentry
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.
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Article Topics

News · Business Resources · Home Automation and Control · Home Automation · All topics

About the Author

Julie Jacobson, Co-Founder, EH Publishing / Editor-at-large, CE Pro
Julie Jacobson, recipient of the 2014 CEA TechHome Leadership Award, is co-founder of EH Publishing, producer of CE Pro, Electronic House, Commercial Integrator, Security Sales and other leading technology publications. She currently spends most of her time writing for CE Pro in the areas of home automation, security, networked A/V and the business of home systems integration. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. She's a washed-up Ultimate Frisbee player currently residing in Carlsbad, Calif. Follow her on Twitter @juliejacobson. [More by Julie Jacobson]

228 Comments (displayed in order by date/time)

Posted by Ron Goldberg  on  04/16  at  09:36 AM

Programming is documentation that the customer should be entitled to. The customer has purchased this equipment, not licensed it. The fact that there was no backup and no contingency plan is shockingly unprofessional.

Posted by EJ Feulner  on  04/16  at  09:49 AM

Julie, this is a great article about an issue that should have been addressed years ago in our industry.  Other trades don’t look at us as professionals yet our systems are the most complicated part of any construction project.  Some uneducated clients don’t view us any different from the blue shirt box pushers.  And we continually wonder why?  We need to wake up - this is a major reason why.  Every client at the Crestron/AMX level knows of at least one peer who has been burned/turned off by an integrator/project which sours the potential client and the industry as a whole.

As you point out, there are lots of ways to handle the code but the bottom line is that the client should never be without it if they want it for whatever reason.

The only caveat that should be pointed out is that not all integrators/programmers can take over existing code and make it work.  There are many different ways to program - like different written languages.  There are also well written and poorly written programs.  Many programmers wont touch a poorly written system and will demand that the project start over from scratch.  So just because the code is available doesn’t mean it is actually usable.

Posted by Julie Jacobson  on  04/16  at  09:54 AM

EJ ... great point that some programming is so poor that it may have to be redone anyway. Advice to homeowners?

Posted by SecurityGuy  on  04/16  at  09:56 AM

Selling the code to a third party is an invasion of the homeowners privacy. Essentially, the code is the keys to the lifestyle not to mention the house.  Since virtually every automation system includes security as a subsystem there are potential safety and security implications.  $50 grand is not a bad price to have the keys to a bunch of high-end homes.

Posted by Julie Jacobson  on  04/16  at  09:58 AM

great point, SEcurityGuy—not to mention that the software enables the third party to tap into all those systems remotely. Yikes

Posted by EJ Feulner  on  04/16  at  10:10 AM

QUOTE BY JULIE: EJ ... great point that some programming is so poor that it may have to be redone anyway. Advice to homeowners?

Again, reasons why we are not viewed as professionals.  I don’t know of any *REAL* way for a client to know the true level of expertise of any integrator - much less the programmer working for that integrator.  At some point trust has to enter the equation.  I wish I could tell you differently but the low price of admission and easy yet professional marketing options can make any company look like a pro. 

I would encourage the client to do their due diligence - and not just about the integrator.  Look closely at the major vendors they are specifying like control,lighitng and high end video.  What are their track records?  Industry reputations?  A smart integrator would do this work for the client if they are confident in their vendors and are working with true industry leaders.

In the end there is no real way to know for sure.  Look at the main example in this article - they had a very high reputation in their market and in the industry.  It can happen to the best of us.  Just make sure the client has the right info available to them in the contract so they don’t get burned in the end.  Not much else can be done.

Posted by whdigital  on  04/16  at  10:17 AM

Great article Julie and I agree; it’s high time we dealt with this more proactively as an industry.

With a past life involved in the consumer software industry, I can tell that there is no ambiguity as to who owns the code as it pertains to customized GUIs and scripted commands for a given control system compiled for a unique application.  It is clearly “programming for hire” and becomes the property of whomever paid the bill for the programmer(s) time to do the work.

There may be some minor arguments re: intellectual property of any unique ideas and designs within it, but even then - once assembled, it is SOLD as a compiled package. The fact that it’s married to an installed system and is not transferable while remaining “whole” means that its ownership also changes hands when/if the home changes hands.

Boxed software like MS Excel that can be move from computer to computer, and that was NOT written for one individual computer and person’s use, is used under a “license” with the code remaining the property of the programming entity.  Again, assembled home control interfaces are the exact opposite.

Dare I say that part of the problem lies with the fact that Crestron’s “assembly language” (to stick with analogous terms) does not allow for ANY reverse engineering?  As an Integrator, I appreciate any measure I can take to preserve the opportunity to continue working with my clients.  However, that’s all it is: opportunity.  I have to continually earn it, and if I don’t - or if I go out of business, there needs to be a legitimate way for someone else to pick the ball I dropped and run with it relatively seamlessly for the client.

Posted by Chip  on  04/16  at  11:21 AM

Great article, Julie.

Just thinking out loud here, but after seeing mentions of Randy Klein’s task force and software escrow services, I’m wondering if it would be practical for the likes of Crestron and AMX to create their own in-house escrow services…  They could encourage their authorized programmers/dealers to make use of it - or perhaps even work a requirement for it’s use into their contracts, perhaps?

Posted by Lee Distad  on  04/16  at  11:31 AM

Great work, Julie.

Given the ethical issues here, it’s hard to imagine anyone attaching their name to the opinion that it’s okay to hold the client’s source code hostage.  As an industry there seems to be full consensus to the contrary. 

In this case, Baumeister’s receivers were wrongly informed that the source codes were an asset that could be liquidated.  That should never have happened, but the upside is that this case brings the issue out into the light of day, and hopefully the major vendors and their dealers can find a solution that benefits the industry as a whole.

Posted by Julie Jacobson  on  04/16  at  11:38 AM

Chip—that suggestion has come up, but I think it places an undue burden on the mfr. They would be left having to mediate between the dealer and the client. There are plenty of established software escrow firms out there. Why not just use one of them?

Posted by Joe Calise  on  04/16  at  11:56 AM

Julie - as usual, you do an excellent job of pointing out both sides of the story here.  Although in the end I think you side with the homeowner / end user, let me add a few points to this discussion.

As a guy who started out very small in this industry, I would have completely agreed with you.  After experiencing the years of countless hundred hour + work weeks, I realize just how much goes into a system, and the knowledge it requires to be at this level.

We are now a pretty large Crestron dealer that is very careful on how we take care of the code in house.  Offsite back-ups to our servers is just one way we are sure the clients code is always safe and secure.  In our area, we have experienced the downfall of Harvey’s.  I tried desperately to buy their code before they shut down, but they would not consider it without me taking over their poor lease agreements (which is one reason I believed they shut down to begin with).  We have since taken over some former Harvey clients that needed us to restart from scratch, and were very upset about it.  However, as crazy as this seems, they did not ask me for the code when finished.  We assured them it was safe, and if we ever had any problems in the future, we would turn it over to them.  I also know of other larger than us Crestron firms that have many more systems out there than we do, however when they send programmers to jobs, they don’t have the code anyway since their in house system is so poor!

I believe as an industry we have a moral responsibility to at least make customers aware if we are closing down, or at least be responsible enough to offer our client list/code for sale before closing up shop.  It has to be handled in a way fair to both parties, but how is the magic question.  I like the idea of an escrow service when the client requests it.

However, in this crazy economic times, we also have to look at the whole picture here.  Look at the guys who are closing down, and the vendors that are also struggling.  There must be good reason why strong dealers of Manufacturers like Crestron are still doing well.  A product with this type of programming protects US in the end.  This is probably a good reason why there are so few good Crestron programmers out there to begin with.  If anyone could just get the code, and scan it to see some of the things that took me years to create, well that would just once again saturate another area of our industry.  Not to mention they would be stealing what I have created. 

If you are not fully aware of companies like Crestron, and how it all works, it is very easy to form an opinion in the light of the consumer.  I look at it as I am not holding anything back from them, or trying to hold them at ransom, I am just protecting my systems from becoming cookie cutter for the next guy who just decided to become an integrator because he set up his brother in laws home network and thought “this is pretty cool, I can get into this computer stuff”.  Or how about the Security guy who thinks he can just undercut my pricing and take over my territory?

Years ago I never understood why so many Crestron dealers were so passionate (or some even arrogant) about the product.  Now that I am a dealer in my 6th year, I completely understand.  It is only a Dirty Little Secret if you have plans on not doing the right thing for the client.  It would not be right to force all of us to change a format that has been successful for so many, because of poor judgement made by others.

Posted by Julie Jacobson  on  04/16  at  12:00 PM

Why not, as part of your monthly/quarterly maintenance fee, include escrow/backup services?

Posted by David Thompson  on  04/16  at  12:04 PM

A solution to this problem would be for Creston to hold the programming code in a data bank.  If a company goes out of business and there is no other way for the customer to secure the code the customer could petition Creston for the code. 

This would protect the initial programmers that developed the code from being stolen by another company that downloads the entire code when swapping out a DVD player. 

This would be one way that would protect consumers and would also protect the programmers.  Creston should strongly encourage this because their reputation is also being hurt by the negative publicity and reaction of existing and future customers.

Posted by Dallas Dingle  on  04/16  at  12:23 PM

There is incentive for the original dealer to control the programming. Handing it over to a customer, allows for easy access for other dealers.

Posted by Here we go again...  on  04/16  at  12:34 PM

Quote - Julie Jacobson:
“great point, SEcurityGuy—not to mention that the software enables the third party to tap into all those systems remotely. Yikes”

Maybe you should really figure out what you’re talking about before making all of these statements.  Having the source codes in NO WAY, SHAPE, OR FORM, gives anyone the means of connecting to a system remotely.  Not all systems are configured for remote support, and those that are usually have some sort of security measures in place.  Also, the person with the code would also need to know the WAN address (or domain) of the property they plan to connect to as well as the ports configured for that property.  You really should apply for a job at the National Enquirer with this garbage you spew.

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