The Right to Reverse Engineer

One of the results of the PCs open design was that it was easy to copy and so producing clones was much easier than it was for other competing systems. The production of clones would have quickly cut into IBM’s profit margin and undermined its position as the rising leader in the home computing market. The only piece of technology that was pure IBM was the PC’s BIOS. The BIOS – Basic Input Output System – controlled basic hardware functions and decided which peripherals sent and recieved data from the processor. This code was proprietary and copyrighted. Although it would not have been technologically challenging for a competitor to produce an identically working BIOS, this was made very hard by the fact that the entire code was published in the PC Technical Manual {techman}. Thus anyone producing a compatible BIOS would have a difficult time proving that their engineers had not at some point seen some of IBM’s proprietary code. This in turn made it easy for IBM to limit competition by purely legal means.

It was Compaq Computer Corporation that would finally be able to produce a compatible BIOS chip. It took a full time team of 15 senior engineers a year’s time and over a million dollars to produce a working chip. The first 100% IBM compatible machines began shipping in November 1985. Compaq avoided lawsuits by having their engineers sign affidavits prior to beginning work stating that they had not seen the IBM source code. Phoenix technologies would repeat this feat in much the same way a few months later. But instead of building IBM clones they sold compatible BIOS chips to other manufacturers, opening up the PC market to smaller competitors. The final end of IBM’s dominance came in 1985 when a small company called Chips and Technologies designed and sold a set of five chips for $72 that duplicated the functionality of 63 chips in the IBM PC. Suddenly small manufacturers could build computers that were smaller, cheaper, more reliable and even faster than a real IBM. By the late 1980s the only major non-PC machines were special multimedia computers and by 1995 even these had almost disappeared {accemp}.

The final effect of reverse engineering IBM’s BIOS and then making clones easily avilable was to essentially level the playing field. The demise of closed, proprietary hardware configurations meant that the computer industry could standardize around a common platform. Software manufacturers could now focus on improving the software itself rather than worrying about cross platform compatibility. The timing of the reverse engineering (barely a year after the original product launch) meant that IBM could not properly establish itself as a monopoly. Had IBM gained a monopoly advantage, it would have given them control of the emerging home computer industry allowing them to artificially limit computing power to serve their business interests. IBM was known to deliberately limit performance in its low-end business models in order to prevent them from “cannibalizing” profits from higher-end models {blue}. The fact that the raw computing power available in all the IBM PC models from 1981 to 1984 was the same (despite Moore’s Law) shows how IBM could artificially limit its products to the detriment of consumers.