John Deere - Right to Repair - Corporations versus Farmers - A Possible Solution

A case of corporate greed ... or an evolving context?  John Deere contends that it has the exclusive right to repair its tractors, citing provisions of the Digital Millennium Copyright Act (1998).  If followed to the limit, this means that farmers would have to engage a Deere service representative to make repairs to any part of the tractor system which is regulated in some way by software i.e just about everything in today's new models.

Farmers have challenged this notion and have used good old American (Ukranian) ingenuity as a workaround:

https://motherboard.vice.com/en_us/article/why-american-farmers-are-hacking-their-tractors-with-ukrainian-firmware

To avoid the draconian locks that John Deere puts on the tractors they buy, farmers throughout America's heartland have started hacking their equipment with firmware that's cracked in Eastern Europe and traded on invite-only, paid online forums.

Tractor hacking is growing increasingly popular because John Deere and other manufacturers have made it impossible to perform "unauthorized" repair on farm equipment, which farmers see as an attack on their sovereignty and quite possibly an existential threat to their livelihood if their tractor breaks at an inopportune time.

"When crunch time comes and we break down, chances are we don't have time to wait for a dealership employee to show up and fix it," Danny Kluthe, a hog farmer in Nebraska, told his state legislature earlier this month. "Most all the new equipment [requires] a download [to fix]."

Here is a link to the license agreement for embedded software that farmers are required to sign as part of their purchase agreement:
https://www.deere.com/privacy_and_data/docs/agreement_pdfs/english/2016-10-28-Embedded-Software-EULA.pdf

In addition to restrictive covenants on rights to use the software, the company has absolved itself of any substantial liability for damages caused by the licensed materials (software) - see article 9 Limitation of Liability.

Tractors and other agricultural equipment are increasingly being controlled by software.  I would argue that software is the differentiator between brands: manufacturers are in a race to develop machines which are faster, smarter and more productive.  In essence, the mechanicals have become commoditized. Parts can be bolted on - it's all about co-ordination of the moving parts.

An Inherent Risk to Deere's Corporate Policy

My belief is that Deere has fallen into the pit of having its corporate outlook shaped by MBA's and lawyers.  They seem to have ignored the perspective of their customers, the people who pay to keep them in business.  When did "muddy boots" last grace Deere's boardrooms?

An agile competitor could quickly gain a market share by adopting a different policy; namely, taking a more relaxed attitude to intellectual property.  In short order, this could generate a lot of goodwill and capture disgruntled farmers who have long memories.

Some aspects of a more enlightened policy for intellectual property could include:

• measures to prevent the appropriation of intellectual property by competitors (this is already done)
• provisions for owners to make repairs using company software (this would include feedback loops to the company so that it could identify shortcomings and improve its software)
• "rewards" for farmers and others who make improvements in software and its application
• software training for farmers (to make them more competent and generate goodwill) - this would be part of the purchase agreement and would enhance machine performance and indirectly, company reputation
• company-moderated forums (on line or otherwise) whereby farmers could share their experience

In my search for investments in agricultural equipment manufacturers, I will be mindful of more enlightened intellectual property agreements.  While Deere may win in the courtroom and legislatures in the short term, they have much to loose over the longer term, especially when confronted with more customer-oriented competitors.  

Deere's massive distribution network is often held up as a barrier to competitors, but the market is evolving to one of fewer and bigger customers, an outcome of consolidation in the the farming business.  Customers are smarter, more driven by business outcomes and less driven by loyalty.  Well funded innovators have the potential to upset what has worked for Deere and others for more than a century.  

I am on an alert to this possibility.

I am invested in Deere and Rocky Mountain Equipment, a Canadian distributor for CASE  which has a similar policy.  Both are good companies: well managed with the experience of having successfully negotiated troughs in the agricultural cycle.  In my view, they will do very well once things recover ... but ... innovation and "creative destruction" are forces which cannot be ignored.  My hope is that Deere and Case will adopt more customer-friendly policies.