Public Policy Constraints
and Opportunities for OSS
Licensing Fundamentals
Open Source Licensing
& Business Models
IP Audit
Licensing
• Govt. Privilege vs. Private K
• L’or Retains Rights so Usually Licenses
are Revocable
• Complex & often favors L’or
• Too often ignored & misunderstood
• Mostly covers Intangibles because
– L’or gives L’ee only Ltd right to use
– Leases more appropriate for Ltd use of
tangibles
Licensing vs. Assignment
• License - Temporary, Revocable, NonExclusive Right to Use
– Software “sales”
• Assignment - Permanent, Irrevocable,
Exclusive Transfer: some/all of bundle
• Various types of licensing: Patents; Trade
secrets; Copyrights; Software; Computer
information; Trademarks
Common License Terms
•
•
•
•
•
•
•
Scope & Exclusivity
Duration & Termination
Geographic Limitations
Confidentiality & Non-Competition
Establishes & Perpetuates Trade Secrets
Limits on Improvements & Sub-Licensing
Warranties of IP Ownership
–
Infringement indemnity
Compensation
• Many Varying Structures
– Royalty or Residuals (entertainment)
– Fixed installments (running royalties) vs.
pmts variable on sales
– License fee upfront
– Combination
• Accurate Records
• Royalty Base
Patent Licensing
• Privilege to “practice the patent”
– Contractual exception to patent owner’s
right to exclude-infringement
• Writing required
• Patent portfolio strategies
– Cross-licensing
– Basic tech differs from improvement
Trade Secret Licensing
• Inherent Difficulties
–
If I tell you, you will gain & I will lose
• Impose secrecy/confidentiality
• How to negotiate:
– Unknown tech: progressive enticement, NDA
– Known tech: product or seller’s reputation
• Duration of royalties tough issue
– Does pmt duty persist after widely known?
Unsolicited Idea Submission
• What is the innovator’s right to
compensation for another’s use of ideas
• Unsolicited ideas considered gift to recipient
- the blurter loses – unless:
–
–
Express contract: offer, acceptance,
consideration
Implied contract from conduct or context
•
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Course of performance/dealing, usage of trade
Unjust enrichment under quasi-contract
Confidentiality & trust relationship
Unsolicited Idea Submission
• Properties of the Idea
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Novelty
•
•
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Akin to patent novelty
Originality & innovative
Concrete
•
Sufficiently definite for implementation
• Many recipients have policies to refuse
– Particularly if under development in-house
– Costly to evaluate
– Independent eval: form of Chinese Wall
Database Licensing
Distinguish B2C from B2B
• B2C generally limits extractions
•
– Boilerplate, subscription agreement, UCITA
• B2B often much broader includes raw
data
– Separately Negotiated
– Bind Licensees to Security Measures
– Best efforts to prevent 3d party copying
– Employee & consultants also restricted
Database Licensing
• Trade Secret-like Restrictions
– Subscription agreement best
– Uncertainies in click/browse-wrap enforceability
– Prohibit unauthorized access
• ProCD Inc v. Zeidenberg (7th Cir.1996)
(shrink-wrap CD-ROM license enforceable to
prohibit commercial use of 3000 phone
directories)
• Specht v. Netscape (2d Cir, Oct.2002) (click
through required to bind to EULA)
Database Licensing:
Basic Terms
• Field of Use Restrictions:
– Geographic, Time, Line of Business
Limitations (personal use only)
– Display, temporary storage, no archiving,
purge on demand
– Transfer (Resale) Restrictions
• Limitation of Liability; Warranty Exclusions
• Prohibit Infringement of Related IP: ©, ®,
T/S, patents
Copyright Licensing
• Possibly Most Common Licensing
– Web navigation, music, software “sales”
• Variety of Works & Business Models
• Many Traditional Forms not Licensed
– EX: Books & phonorecords are tangible
– Restrictions on use largely from © law
• Changes from Software & Web Access
Music Licensing
• Complex due to Various Works/rights:
– Reproduce, distribute, perform, digital transmit,
composition, sound recording, derivative work,
soundtrack, tune, lyrics, arrangement, etc.
• Complex due to Parties involved:
– Publisher, composer, record Co., lyricist, performing
rights orgs, musicians, vocalists, recording
technician
• Complex due to Industry Practice:
– Compulsory licenses, supply chain, recording
Music Licensing
• Mechanical (compulsory) licenses
– Once covered other may record & perform
• Performing Rights Organizations
– BMI, ASCAP, SESAC
– Standardized licensing, fees & remittance
• Public Domain Music
• P2P pressure for new Licensing Models
Software Licensing
• Hybrid License:
– Always a copyrighted work
– Usually includes license to use but not
decompile to view trade secrets
– Sometimes involves software patent
• © Reproduction every time loaded
– Limitations on copies, backups, # of
installed machines
Multi-Media Works
• Definition & Technical Capabilities
• Unique Features vs. Traditional Media
– Storage, hypercard transitions, interactive,
quasi-AI,
• Permissions Nightmare
– Licensing of clips of music, video, images,
text; plus trademark, trade secret, patent
• Credits Display Duties
Trademark Licensing
• B2B is Most Common
– Right to manufacture, sell, advertise,
affiliate with trademark owner
– Commonly part of supply chain (K)
– Use of logos, marks, trade names, trade
dress by reseller or licensed manufacturer
• Lanham Act Requires Owner’s QC
• Franchise is a Common Form
License Pricing
• Fixed price for deliverable irrespective of
development time or expenses
• Metering: pay/use/time/MIPS
• Delivery, Installation, Prove working,
Periodic installments, Upgrades
• Hybrid of compensations
• Application Service Providers PPV
So . . . Which do you use:
Proprietary v Free v Open?
• Proprietary Software
• Open Source Software
• Freeware Software
What is Openness?
• Openness is a characteristic based on accessibility and
responsiveness
• Most products, services, or processes are neither open nor closed,
but can be placed on a continuum of openness
• Moving towards openness means increasing accessibility and
responsiveness
• The degree of openness required depends on the purpose of the
activity and the need to exercise judgment and control
Never Shared
Open Source
Proprietary Software
Freely Given
Wikipedia
WWW
New Architecture Enabling
Participation by Openness
• Linux
• Wikipedia
• SETI—world’s fastest supercomputer
• Napster
• Flickr
• Podcasting, blogs
• Second Life
• E-Bay listings, ratings
• Amazon reviews, recommendations
• YouTube
OSS’ s/w Mkt Penetration
• Big share of cyberinfrastructure:
– web servers (70%: apache)
– mail servers (about 50%: sendmail, exim,
postfix)
– scripting languages (perl, php)
– domain name system
• User Side
– web browsers (Firefox)
– office applications (OpenOffice)
Debunking Open Source
Myths
• Free Lunch
– Free Beer
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•
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Free Speech
Free of Bill
Free of America
Free to Do what I want any ol’ time
Debunking Urban Myths
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Open Source is just a way to publish -- No
Open Source is Public Domain -- No
Open Source is Viral – Not Necessarily
Open Source is Immune from Patent Rights – No
Advantages:
Proprietary Software
• Indemnification for title & infringement ;
• Maintenance and support;
• Licensee doesn’t have to have open source
savvy staff;
• Licensees’ rights if:
– media is defective;
– software contains viruses, backdoors, etc.;
– product fails to meet written technical/business
specifications.
Disadvantages:
Proprietary Software
• COST!
– License fee
– Product bundling—example: Microsoft office.
• Licensee cannot modify or enhance the code;
• Often not built to open standards, leading to
interoperability problems;
• Shut off from continuing development and
information sharing in open source community;
• Some proprietary code is not as good as its
open source counterparts.
Advantages:
Open Source License
• PRICE: Generally no or low license fees;
• Availability of source code coupled with
permission to make modifications;
• Access open source development community,
which may be very active with respect to code
used. Continuing improvement; outstanding
development;
• More likely to be built to open standards, so
interoperable with other open standards systems.
Open source licensing
• The licence is what determines whether
software is open source
• The licence must be approved by the Open
Source Initiative (www.opensource.org)
• All approved licences meet their Open Source
Definition
(www.opensource.org/docs/definition.php)
• Approved licences >50
– EXs: GPL, LGPL, MPL, BSD
– http://www.opensource.org/licenses
Source Code Escrow
• Client or 3d party retains source code to prevent
competitor use
• Seller or 3d party retains source code to assure
payments
– Network effect: lock in leverage
• Independent 3d party source code firms
– Escrow agreement defines rightful release
Main Features of OSS
• Non-proprietary software which may or may not
be used commercially;
• Typically licensed under an Open Source license
(not given away)
– License terms differ from proprietary software license
terms
• Source code is generally made available
– Legal restriction on reverse engineering (under the
DMCA) do not apply.
Typical Proprietary Software
License
• Fairly standard terms
• Source code availability
– Source code not provided - trying to figure out
inner workings of software through reverse
engineering or decompiling of operating mode
is forbidden; OR
– Source code provided - may or may not
include permission to create modifications and
enhancements
Proprietary Software License
terms - Licensees
• Restrictions on dissemination. Licensee
and users strictly defined. Licensee has no
right to share with those not defined as
licensee users in license;
• Licensor indemnifies licensees against third
party infringement claims;
• Often, have to sign a new license each time
new licensee obtains the code.
Proprietary Software License
– Warranty and Support
• Warranties provided:
– Defects in media and existence of
viruses, Trojan Horses, backdoors, etc;
– Can negotiate for warranties re: meet
specifications in product documentation
• Maintenance and support terms
included (although may be in separate
document).
Open Source Software –
Main Features
• Non-proprietary software which may or may not
be used commercially;
• Typically licensed under an Open Source license
(not given away)
– License terms differ from proprietary software license
terms
• Source code is generally made available
– Legal restriction on reverse engineering (under the
DMCA) do not apply.
Open Source Software
License - Licensees
• Original software owner or developer
chooses to limit the rights that he asserts
over licensees
• Licensees, subject to license terms, can:
– make and distribute copies of software;
– build upon software to create modifications or
other works.
Open Source Software
Licenses - Source Code
• Source code to original product always provided;
• Licensee can modify or enhance source code (create
“derivative works”) or include source code with other
license types (create “larger works”);
• Licensee may be required to share modifications with
the world (in source and/or binary form), but not
necessarily;
• Licensee may be prohibited from charging royalties
for derivative and larger works, but not necessarily.
OSS License – Warranties,
Support
• Generally, software provided “AS-IS” with
no warranties, warranties excluded;
• No indemnification;
• No maintenance or support.
The GNU “General Public
License” (GPL)
• No standard open source license, but GPL most
widely used (roughly 85% of open source
software);
• Terms include:
– User freedom to distribute and/or modify;
– Requirement that original and modified source code be
always made available to the world under the terms of the
original license;
– Must retain copyright notices and warranty disclaimers;
– Does not include grant of patent licenses;
– Extremely viral license
Common Open Source Models
• GNU General Public License (“GPL”)
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Grants right to copy, modify and distribute
Requires that source code be made available to
future licensees
Generally Seen as “Viral”
• Applies to separate works that are
combined with distributed code
• Effect may depend on how code linked
Disclaims Warranties
May blow-up in face of patent assertion
Proprietary distribution models difficult
Common Open Source Models
• GNU Lesser General Public License
(“LGPL”):
– Similar to GPL
– Somewhat easier for licensees to
combine the LGPL code with a separate
program and distribute the combination
under separate licenses
– Often used with Open Source Libraries
that are compiled into an application
program
Common Open Source Models
• BSD/MIT/Apache Style License:
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–
–
–
–
–
More permissive licenses
Generally allow freer distribution, modifying, and
license change; much like public domain
software
• No future open source requirement
May require attribution
Variants may include non-standard restrictions
• E.g., no military use – but not OSI-compliant
Disclaims Warranties
Subject to third-party patent claims
Common Open Source
Models
• Mozilla/IBM/Apple Style Licenses
– Combine facets of both the GPL and
BSD style licenses:
•
•
Distribution of original code (and for some,
modifications) include access to source
code.
Not viral in reach.
– Explicitly contemplate patent licenses.
– Some provide backwards
indemnification.
Mozilla Public License
• Developed by Netscape for the Mozilla browser
• Terms include:
– Very similar to the GPL but,
– Can charge royalties for modified versions;
– Can include source code within larger works licensed under
different license types, thus license does not ‘infect’ all
downstream projects;
– Must retain copyright notices and warranty disclaimers;
– May provide additional warranties to downstream users but may
have to indemnify original developer for any claims arising as a
result;
– Includes grant patent licenses;
– Less viral than the GPL.
The IBM Public License
• Terms include:
– User freedom to distribute and/or modify;
– No requirement for source code availability in
downstream distribution;
– The program can be distributed in executable form
thus allowing downstream users to develop, sell, and
install customized software packages without having to
make all customizations available to the world;
– Must retain all copyright notices and warranty
disclaimers;
– Includes grant of patent licenses.
Open Software License
• Terms include:
– User freedom to distribute and/or modify;
– Viral license, source code is always made
available to the world;
– Must retain copyright notices and warranty
disclaimers;
– Requires indemnification for attorney’s fees
incurred as a result of potential claims or
litigation.
The Apache Software
License
• Governs the Apache web-server software.
• Terms include:
– User freedom to distribute and/or modify;
– No requirement for source code to be made available
to the world in downstream distribution;
– Must retain all copyright notices and warranty
disclaimers;
– Not a viral license.
IBM vs. SCO
• Linux kernal’s genealogy
• Emphasizes IBM’s role as risk underwriter
– What are IBM’s incentives to do so?
• Emphasizes Fundamental OSS Risks
– Composite only as robust as its weakest component
– Pervasive Ignorance of Property Rights, Infringement,
Permission & Fair Use among OSS community
• http://en.wikipedia.org/wiki/SCO_v._IBM_Linux_lawsuit
SCO v. IBM Impact on OSS
business models
• Essentially a chain of title dispute
– winner(s) become title insurers
– Some conventional wisdom about the incentives and
economic functions of open source
• Disruption of legacy business models by OSS
– EX: MS Windows disrupted by Linux
OSS disruption of (some) traditional business models
is evident from relationship of OSS to standardization,
network effects & monopoly effects, OSS undermines
lock-in to legacy proprietary systems & attendant
monopolization permitting consumers choice among
more competitors
– OSS overcomes many reverse engineering difficulties
of legacy s/w
Covenants Not to Compete
• Separate contract or separate
contract term restricting emp’e from
competing or working for
competitor
• Reasonable Restrictions Required
– Limited as to time & space
– Ancillary to an agreement
– Empl K vs. sale of business
Only Reasonable Restrictions
Enforced
• Non-Competes must be limited as to:
– time &
– space
• Law balances the public’s interests:
– Empe access to useful info v. joblessness
• Should be enforceable only to extent
needed to protect legit empr interest
Must be Ancillary to
Employment Agreement
• Protect misuse of trade secret,
confidences, goodwill
– EX: customer lists, product/mkt plans,
strategy
• Enforcement - Empr Seeks Injunction
– Blue pencil test blunts overbroad
covenant
Inevitable Disclosure
• Emp’r risk greatest: departing
empe
– Firms routinely attract competitor’s
emp’e to access confidences
• Cts can enjoin employment if:
– Direct competitor, nearly identical job
– Even w/o non-compete, but ltd. time
– Former empe’s intimate knowledge
– Trade secrets precisely/validly
defined & valuable to both empr’s
Fiduciary Duty of Loyalty:
Component Responsibilities
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•
•
•
•
•
•
Conflicts of interest
Self-dealing
Duty to account
Confidentiality duty
Non-disclosure agreements
Termination of Employment
Settling Work Disputes
Fiduciary Duty of Loyalty
• Abstract: Utmost & Highest Good Faith
– Loyalty, avoid conflicts, keep confidences
– Basic ethical principle of Biblical origins
• Must Avoid Conflicts of Interest
– A’s & P’s personal/financial interest not
aligned
– Dual or double agent represents both sides
• Exceptions:
– Fully informed consent
– Finder’s fee
Self-Dealing
• Self-Dealing: agent’s personal finances
conflict w/ principal’s interests
• Agent May Not Compete w/ Principal
• Exceptions:
– Fully-informed consent
– Transaction outside scope of agency
– I/C known to represent other clients
– Some post-termination competition
Confidentiality
– Information is Property
• Trust in others encourages communication
broadening impact of innovation
– Principal’s Right to Confidentiality
• Exceptions: generalized professional knowledge,
illegal activities, unethical activities?
• Distinguish professional vs. Emp’r specific
data/info.
– Agent Breaches Confidentiality Duty:
• Trade secrets revealed to competitors
• Misappropriation for personal gain
Contractual Confidentiality:
Non-Disclosure Agreements
• Separate Confidentiality Agreement
– WorkRules & Co. manual prohibits disclosure
– Provision or addendum to employment contract
imposing confidentiality
– Continuously updated list of specified
documents, projects, corporate functions, etc
• Establish ownership of particular innovations
• Define theft of IP, custody or removal of
documents, files, computer disks, E-Mail
Business Models to OSS
•
•
•
•
Purchase
Subscription
User technical support
ASP/PPView-Use/Metered Use
– Windows/Office “Live”
• touted as an ad model
• actually a prelude to migrate users to the metered ASP model?
• Web Services models emerging leap beyond
ASP’s single, centralized server to mimic some
distributed P2P models
• ePmts may emerge as the most central key to
releasing value from these new models
– Accurate, low transaction cost metering, collection &
remittance
Taxonomy of OSS business models
• What are the appropriate tools &
components of new business model
design?
• ID the Value proposition - what is charged
for (revenue capture), product/service
differentiation, customer perception of
competitive advantage
• Traditional Licensing terms & conditions,
function & placement of revenue capture,
function & placement of value proposition
• Compare/contrast MS business model
(evolution) w/ OSS evolution
Why the strong preference
for OSS internationally?
• “Plague of the infringement chill,”
• Stubbornly persistent & widespread participation
of OSS contributors
• OSS is more secure because closed legacy
proprietary s/w exposed to fewer eyes
• Genealogy of Unix/Linux
visual display to the complex chain of title
involved
• AT&T’s original software consent decree
– Presages inquisition in IBM v. SCO litigation
IP law reform impact on OSS
• On OSS (e.g., DRM, enhanced DMCA)
• OSS is complementing legacy business models
• Role of large firms (e.g., IBM) in OSS proliferation
– Function as the “house”
– Defends users from infringement risks
– Form of title insurer
• What role is there for traditional product or service liability
incentives for software generally, for legacy proprietary
business models and for OSS?
• What role is there for performance, interoperability and/or
security standards for software generally, for legacy
proprietary business models and for OSS?
IP Audits
• Marshal IP, determine enforceability
• Function:
– Many intangibles not well documented
– Tangibles misappropriation more readily known
– Facilitates transition, recognizes increased
importance of info. assets
– Manages risk of infringement
– OSS: assure chain of title