Via Digg, I found an interesting dispute between Creative Labs (maker of sound cards and other multimedia hardware) and an independent programmer going by the name of Daniel_K. The full details can be read in this thread on Creative’s support forums.

What Daniel_K did was to write and release his own set of Windows Vista drivers for certain Creative sound cards. Creative’s own drivers were apparently very buggy under Vista, and Daniel_K’s drivers fixed the bugs. You would think that Creative would actually be pleased about this, since it would enable them to sell more sound cards without going to the expense of fixing the drivers themselves. However, Creative was also selling different versions of the affected sound cards with different features. It seems that the hardware on the different cards was basically the same, but for the cheaper versions Creative had disabled some of the more advanced features in the software. Daniel_K’s drivers enabled some or all of the disabled features, thus undermining Creative’s product differentiation strategy, as people could just buy the cheapest card and have the same features as a more expensive one by using Daniel_K’s drivers instead of Creative’s. On top of this, Daniel_K was also asking for donations to support his driver-writing efforts, further irritating Creative that he was making money at their expense.

Now, of course, Creative’s lawyers have threatened Daniel_K and he has promised to stop writing and releasing drivers. The interesting question for armchair lawyers is whether or not they have a legitimate right to do this. Creative claims that Daniel_K is infringing on their intellectual property rights, like any patents they might have on their hardware. I’m not a lawyer, so I can’t really speculate here, but I do know that intellectual property rights are ‘exhausted’ when a good embodying them is sold. For example, the patents that Apple has on iPods do not prevent you from re-selling your iPod or modifying it. They only prevent you from producing and selling devices that use the patented technologies.

With this in mind, it’d be interesting to hear exactly what grounds Creative has for restricting Daniel_K’s activities. However this doesn’t seem like it’s going to be contested in court. Faced with an expensive and complicated lawsuit, Daniel_K pretty much has no choice but to back down. I doubt he’s making a lot of money from donations, so the only point of going to court would be to get a moral victory, which he doesn’t seem to think is worthwhile.

In any case, the real lesson here seems to be that hardware manufacturers should not rely on crippling via software to execute a product differentiation strategy.