Imagine it is 1980. Use of computers is growing and there are a wide variety of computers and operating systems available. Bingo Software Systems has an idea for a new operating system that it believes will be significantly better than anything that has yet been produced. Bingo is a small company employing twenty people. It obtains venture capital and spends three years developing the operating system. Over the course of three years, Bingo invests approximately two million dollars in the development of the system. When completed, the new system is successfully marketed for about a year, and Bingo recovers about 25 percent of its investment. However, after the first year, several things happen that substantially cut into sales. First, a competing company, Pirate Petes Software, starts to sell a system very similar to Bingos, but Pirate Petes system has several features not available in Bingos system. It appears that Pirate Petes Software has examined the system developed for Bingo, adopted the same general approach, possibly copied much of the code, and in any case, produced a modified and improved version. Second, copying of Bingos system is rampant. Customers, primarily small businesses, appear to be buying one copy of Bingos system and then making multiple copies for internal use. It appears that they are giving copies to other businesses as well. As a result, there is a significant reduction in demand for Bingos system. Bingo is unable to recover the full costs of developing the system and goes into bankruptcy.