Open Source Software –
Licences and Business
Models
Andrew Katz
Moorcrofts LLP
andrew.katz@moorcrofts.com
www.moorcrofts.com
+44 1628 470003
Twitter: andrewjskatz
Background
Andrew Katz – Partner, Moorcrofts LLP
Thames Valley, UK
 IP Law – Software licensing, compliance
 Corporate Law – due diligence on corporate
transactions (M&A, VC investments)
 Employment law – IP transfer for employees
 Commercial Property – as software companies
develop...
Open Source - Introduction
What is open source?
 Freedom to tinker, freedom to distribute, freedom to
share.
 Also called “free software”
 Free as in freedom – but also free as in no licence fees.
How does it work?
 Source code used to create object code
 Recipe used to create a cake
 Cake = the software you run on the computer
 With proprietary software, you only get the cake. You
can't tinker with the recipe.
 Free/open source software lets you have the recipe,
and make your own cake.
 In practice very few people actually tinker with the
recipe – but they can, and others can take advantage
of that tinkering.
Licensing
 Author chooses to license under a licence granting
open source freedoms
 Some very easy to comply with
 “You can do anything you like with this software, as long
as you buy me a beer sometime if we meet”
 Some more difficult to comply with
 GNU GPL says that you can only use GPL code if
modified/distributed code is also released under the GPL
 “copyleft”
Licensing
 There are hundreds of different licences.
 But the 6 most common licences cover about 90% of
open source projects
 About 55% use a copyleft licence
Open source in the Real
World
 Google – runs on open source and sponsors open
source projects
 Amazon – runs on open source infrastructure –
developed an open source cloud strategy (EC2)
 Apache – by far the most popular web server
 Firefox – world's most popular browser
 Android, Symbian – open source phone operating
systems
 Linux – >78% of the world's top 500 supercomputers
How does it make money?
 80% of a typical IT project spend:







Project consultancy/management
Implementation
Custom coding
Integration
Data migration
Training and implementation
Maintenance and support
 Only 20% typically licence fees
 Collaborative R&D
 Avoids reinventing the wheel
Who makes money out of it?
 Oracle/Sun - $7bn acquisition of Sun
 IDC – projected $8bn open source revenues worldwide
in 2013 – 22.4% compound annual growth rate
 Red Hat – over $500mn revenue in 2008/9
 Google – mkt cap $169bn
 etc...
“Linux is a cancer that
attaches itself in an
intellectual property sense to
everything it touches”
Steve Ballmer, Microsoft, May
2001
“Linux potentially violates 238
patents”
Steve Ballmer, Microsoft,
November 2004
?
We counted over a million
lines of code that we allege
are infringed in the Linux
kernel today.
Darl McBride September 11, 2003
Oracle vs. Google
 Claimed patent infringement and copyright
infringement in Android mobile phone operating system
What are the real risks?
 Copyright infringement
 Patent infringement
Copyright infringement
 Two types of copyright user:
 End-users
 Software companies/developers
 Two types of infringement
 Inclusion of proprietary code in OS
 Breach of strict terms of OS licence
End users
 Unlikely to suffer a claim anyway – will copyright
owners sue potential customers, or the infringing
distributors?
 SCO only example case. Coders want to replace
infringing code!
 If breach is of open source code, end users will NOT
get sued
 Even if the distributor is in breach, end user is protected
under GPL
 Open source programmers want their software to be used
 How can damages be quantified?
Software Companies
 Can ALWAYS remedy a breach of the GPL with
payment of zero pounds
 But compliance will require them to release source
code of derived code, and make it available for no
licence fee.
Patent Risk
More difficult to quantify, but no reason should be any
different for an open source company than a proprietary
company.
Big proprietary suppliers see patents as a lever to scare
people away from open source.
In the UK and Europe, relatively fewer software patents
than the US, therefore less risk – eg Microsoft has 945
patents potentially affecting the UK, 14,195 registered in
the US.
Patent Risk
 Even so, patents are a potential risk
 Many open source companies have, or have access to,
patent portfolios:
 IBM
 Open Invention Network
 Patent Commons Project
the GPL, under which Linux is
distributed, violates the United
States Constitution
Darl McBride, CEO SCO, Open Letter, December 2003
Linus Torvalds
(originator of the Linux
kernel):
"If Darl McBride was in charge,
he'd probably make marriage
unconstitutional too, since clearly it
de-emphasizes the commercial
nature of normal human
interaction, and probably is a
major impediment to the
commercial growth of prostitution."
Open Source Software
Andrew Katz
Moorcrofts LLP
www.moorcrofts.com
andrew.katz@moorcrofts.com
+44 1628 470003
Twitter: andrewjskatz