Law & Life: Silicon Valley

Change in Address

2008-10-21T10:49:00.000-07:00

I have moved my blog to www.lawandlifesiliconvalley.com/blog/. I hope that you will join me there!

Silicon Valley: Financial Crisis or Opportunity

2008-10-15T23:11:00.000-07:00

I just returned from Silicon Valley Bank's Twenty Fifth Anniversary celebration (Silicon Valley Bank is the leading bank for venture capitalists and venture backed companies). It was attended by many venture capitalists and entrepeneurs, so it was a great event to determine the attitude of the Silicon Valley ecosystem to the rapid changes in the last month. Until recently, Silicon Valley had watched the financial meltdown as an observer, but last week the financial crisis reached Silicon Valley. The crisis became very real to Silicon Valley when Sequoia Ventures, one of the most successful venture capital firms, held a meeting for its CEOs announcing that the "Good Times" are over.
http://www.slideshare.net/eldon/sequoia-capital-on-startups-and-the-economic-downturn-presentation?type=powerpoint . They recommended strong measures: cutting expenses very aggressively, raise as much money as possible, establish a heavily commissioned sales structure and become cash flow positive as soon as possible. Further, they suggested that any company without a year of cash in the bank was in trouble.

However, this message of gloom has generated a contrary response from experienced investors such as Alan Patricof, founder of Apax Ventures. http://www.paidcontent.org/entry/419-patricof-on-rip-good-times-dont-burrow-into-a-dark-hole/ . However in a tribute to the respect for Sequoia Ventures and its success, the Sequoia powerpoint has been on the agenda for every Board meeting which I have attended (my friends who are Board members confirm that this discussion is ubiquitous). My experience has been that the Boards have decided that they need to be cautious, but that business will continue. The Sequoia presentation has even generated its own parody. http://www.alleyinsider.com/2008/10/the-last-vc-memo-we-ll-publish-this-week-

This view was confirmed by the conversations that I had at the Silicon Valley Bank event. Both venture capitalists and entrepeneurs were modestly optimistic. They believe that the situation is serious, but that the need for innovative products and services will continue. We will all find out in five years, so stay tuned.

Raku Museum: A Japanese Gem in Kyoto

2008-10-12T17:16:00.000-07:00

I was in Japan on business for the first week of October visiting my Japanese clients. I always to try extend these trips over a weekend to visit other parts of Japan. I was fortunate to be able to a short weekend in Kyoto this trip. Kyoto is a charming city which is best known for its many beautiful temples and their gardens. Although I was enchanted by the gardens that I visited, the concierge at the hotel also suggested that I visit the Raku Museum http://www.raku-yaki.or.jp/museum/index-e.html. Until I visited the museum, I had always thought of Raku as a technique for making pottery originating in Japan which is characterized by low firing temperatures and removing the pot from the kiln while still hot. The results are difficult to predict, but have a special charm for that reason. The ceramics produced using Raku techniques are quite identifiable and striking (many years ago, I worked with ceramics and used the Raku technique).

However when I visited the museum, I learned that Raku was developed in the sixteenth century and is actually the name adopted by the family that developed the technique (the name is based on a seal granted the family by Toyotomi Hideyoshi, the leading warrior statesman of the sixteenth century). The museum is small, with only three rooms, but this size and focus makes it a gem. In fact, the museum is in a building next to the family's kiln. The kiln is still being used. The visit reminded me of several other Japanese museums of similarly small size (all very focused) which I have visited. They appear to form a special class of museums in Japan. They are well worth the effort of seeking them out. If you are in Kyoto, you should visit the Raku Museum and when in Japan you should try to visit its other small museums!

Competing with Open Source: Strategies by Harvard and Stanford

2008-10-05T01:08:00.001-07:00

You know that open source has arrived as a business strategy when Harvard and Stanford professors write papers about how to compete with the open source model (although the article covers all free goods).

In their words:

It’s not easy, and it’s more than just a theoretical question. U.S. newspapers are finding it difficult to compete with free news and the commentary of bloggers and other internet sources. And in the software world, the rise of open source products, which are available for free on the internet, is reshaping the technology industry.

“Divide and Conquer: Competing with Free Technology Under Network Effects,” Deishin Lee and Haim Mendelson, Production and Operations Management, January-February, 2008 http://www.gsb.stanford.edu/news/research/mendelson_div_conq.html

They mention three strategies for commercial companies to compete with "free" products:

1. Timing

2. Product features

3. Network effects across other markets.

Thanks to Matt Asay on finding this article and his insightful commentary. http://news.cnet.com/8301-13505_3-10047872-16.html

Open Source Think Tank Paris 2008: Day Two

2008-10-05T00:59:00.000-07:00

Unfortunately, computer problems (my hard drive died) and travel have delayed my summary of the second day. First, we ended the first day with a magnificent dinner cruise on the Seine River. Our hosts, Alexandre and Celine arranged for a sommelier to select special wines for the cruise which meant that we had great wines from all over France. On the second day, we focused the brainstorming sessions on Open Source Licensing and the Definition of Open Source. The licensing discussion was lively, with the European attendees focusing on the challenges imposed by the number of open source licenses. During the licensing discussion, they were particularly interested in the effect of the Jacobsen decision which clarifies the enforceability of open source licenses in the US, an issue was viewed as settled in the European Union.

The discussion of the definition of open source ranged from who should control the definition to whether a new group, focused on commercial open source should be created to provide guidance about how to determine whether products (or companies) are “open source”. The consensus was that OSI definition has served the industry well and should continue to be the core definition and that a new non profit focused solely on commercial open source is unnecessary. The discussion about whether a company can be considered “open source” was very interesting. Most attendees agreed that it is very difficult to meaningfully designate a company as “open source” because most companies follow a variety of approaches to software development and distribution. The better approach is to focus on products as following an open source model. An interesting side note to this discussion was the conclusion that all companies are now following a “hybrid” business model which includes both proprietary and open source products. Even Microsoft is now part of this trend. This conclusion is consistent with the results of our 2008 Napa Open Source Think Tank that open source software is now becoming part of the mainstream. The final presentation was by Rudy Salles, the Vice President of the French National Assembly. Linagora had assisted the French National Assembly in implementing an open source environment and Mr. Salles discussed open source from the point of view of both a user and a policy maker.

The Open Source Think Tank Europe was a great success and was particularly useful in helping the US companies understand the European perspective. We hope to see you there next year!

Open Source Think Tank Paris 2008: First Day

2008-09-22T10:08:00.000-07:00

The first day of the Open Source Think Tank has been very productive. Alexander Aitken of Olliance Group and Alexandre and Celine Zapolsky (both of Linagora) have done a great job in organizing the conference. The discussion has quite different from our Napa Open Source Think Tank and emphasized the differences between the US and EU software industries. For example, system integrators are the primary contact for European customers in contrast to the United States where the software vendor frequently has direct contact with the customers.

During the brainstorming, my group identified two major challenges for the open source market:

1. The rejection in the EU of commercial open source companies by many customers because they are not viewed as "true open source". Based on the discussion, a significant number of customers in the EU identified "open source software" as a product which is community supported and preferably has multiple service providers providing support to licensees. Clearly, this position poses a significant challenge to many of the US commercial open source vendors which use a dual distribution model based on a commercial product with more functionality than the open source version.

2. The reluctance of major corporations to "openly" contribute to projects. Although many major corporations do contribute to open source projects, they frequently do so in an indirect manner so that their contribution cannot be associated with them. If the corporation does not contribute its improvements to the open source project, then the community and all licensees will not be able to take advantage of the changes. If the corporation contributed indirectly, the open source project misses the legitimacy which open support would confer. Although this reluctance can be based on valid legal concerns, these concerns appear to be exaggerated.

More tomorrow!

Open Source Think Tank: Paris September 21-23, 2008

2008-09-12T18:19:00.001-07:00

I wanted to alert you to the Open Source Think Tank this month in Paris Sept 21-23, in conjunction with the Paris Capital du Libre conference. It takes a lot to pull me away from Northern California during the grape harvest, but this event will be great. As in the United States, the Open Source Think Tank is the only by-invitation gathering where leading global experts will come together to collaborate on the issues facing commercial open source. Like the Open Source Think Tank in Northern California, the format will focus on brainstorming sessions, CIO panels and networking activities. We expect that all attendees will actively participate. We have a great agenda and confirmed list of attendees, and unique networking activities including a private reception at the Paris Chamber of Commerce and the main event - wine tasting and dinner while cruising down the Seine through Paris. We have some great speakers including Marten Mickos and Larry Augustin. You can learn more at http://thinktank.olliancegroup.com/. If you need an invitation, please contact Andrew Aitken at andrew@olliancegroup.com.

I have participated with Andrew in all of the prior Open Source Think Tanks and they are great events. They provide an opportunity for everyone to work together in small and large brainstorm groups, addressing the future of open source. The Think Tank will also ensure that you have great opportunities to network with your fellow attendees. In Paris, the first night we will have a reception at the Paris Chamber of Commerce and the second night main event, wine tasting and dinner while on a barge cruising down the Seine through Paris

Most of the attendees of our annual Napa events have said it was either the best or one of the best events they have ever attended and we have almost 100% return attendance. In Paris, the schedule will include analyst meetings, press events (Sun and Jaspersoft and some of the other attendees are planning announcements) and a meeting of North American ISV and European SI/VAR.

I hope to see you there!

DEMO: Web 3.0 and Beyond

2008-09-09T19:15:00.000-07:00

I have been attending DEMO on San Diego since Sunday. The presentations have been lively and the six minute limit ensures a brisk pace. Having worked with startups for over 25 years, I was impressed by the maturity of the “demos”. The presenters manage to get their message across (frequently with a few jokes).

Many of the companies focus on “Web 3.0” (and one company claimed to be the first Web 4.0 company). Two of the most interesting companies provided solutions to the problem of user generated content: how do encourage users to continue to contribute without any income. They combined the web’s capability for distributed collaboration with micropayments. This combination could be very powerful, enabling user generated content to go to the next level: income generation.

Photrade (http://www.photrade.com/) has developed the infrastructure to permit photographers to share, store, protect and license their photographs to advertisers and web publishers. Photographers get paid for each view of their photos.

MixMagicMusic Service (http://www.mixmatchmusic.com/) provides all the tools needed for musicians to collaborate online. They can also communicate with fans and sell their works. It includes a Remix Wizard to permit fans to create music mashes.

However, some of the most interesting companies were not material companies, but more about that later

Practical Guide to GPL Compliance: Both Practical and Valuable

2008-09-05T09:12:00.000-07:00

The Software Freedom Law Center (“SFLC”) recently published “Practical Guide to GPL Compliance” (“Guide”).
http://www.softwarefreedom.org/news/2008/aug/20/compliance-guide/The Guide is a major contribution to the open source community. It is very clear and valuable explanation about how to comply with the obligations in General Public License Version 2 (“GPLv2”), General Public License Version 3 (“GPLv3”), Lesser General Public License Version 2 (“LGPLv2”) and Lesser General Public License Version 3 (“LGPLv3”) and more generally how to best manage the use of FOSS.

The most critical point made by the Guide is the need to understand what third party open source software is in your software product in order to comply with obligations under FOSS licenses. However, companies should be equally concerned about complying with the terms of upstream proprietary software licenses. The Internet has made numerous software components easily available and my experience is that most software programs now include numerous third party components (both open source and proprietary).

Yet software companies frequently do not have an effective procedure for managing this new reality. This failure can raise significant problems at critical points in a company’s history, such as a financing and a merger. Many acquiring companies regularly perform a software scan of the target company’s software: they will discover these third party components and demand that the target company provide proof of compliance with the upstream licenses (both FOSS and proprietary). The failure to have a procedure for monitoring use of third party software means that the target company must scramble during the merger (or financing) process to prove compliance with upstream obligations. These problems are likely to cause delay in closing the merger (or financing) and, in some cases, may cause a reduction in the price or, rarely, termination of the merger. Recently, I assisted a startup in its sale to a large publicly traded company: the target company had over 100 third party software components of which it was not aware. We had to find a method to comply with the obligations in these upstream licenses in a very short period. The result was costly in management time and legal fees (rush jobs always cost more). In that case, however, the resolution of compliance with the obligations imposed by third party proprietary software component licenses created more problems than the FOSS components licenses.

The Guide is also very valuable for its practical suggestions about how to avoid compliance problems with the GPL such as training multiple developers how to “build” the software and distributing the Corresponding Source with the binary code (rather the alternative of making a written promise to provide the Corresponding Source). The Guide also provides detailed instructions on how to comply with the obligations relating to providing Source Code: the definition of Corresponding Source and the different options available under GPLv2 and GPLv3. For example, one nuanced, but important point is that Corresponding Source under GPLv2 cannot be provided solely by download (although it can be an option), but that option is available under GPLv3.

I strongly recommend that anyone dealing with FOSS compliance should read this guide.

Jacobsen: Critical to Commercial Software and Other Copyright Licenses

2008-09-05T08:08:00.000-07:00

Although my earlier post focused on the effect of the Jacobsen decision for the open source industry, the case has significantly broader implications. http://lawandlifesiliconvalley.blogspot.com/2008/08/major-victory-for-open-source-in.html. The court’s reasoning applies to any copyright license which means that it will have an impact on licenses well beyond open source licenses: it will impact licenses for commercial software, books, music, television, and movies. The decision will also be important for licenses which govern the growing amount of user generated content on the Web; such content is frequently subject to standardized licenses, such as those created by the Creative Commons and websites like Wikipedia, which do not involve direct economic consideration. The decision sets forth the basic rule very clearly:

“Copyright licenses are designed to support the right to exclude: monetary damages alone do not support or enforce that right. The choice to exact consideration in the form of compliance with the open source requirements of disclosure and explanation of changes rather than as a dollar-denominated fee, is entitled to no less legal recognition.”

Jacobsen deals with the fundamental issue of the appropriate remedy for breach of a copyright license: the basic remedy for breaching a contract such as a license is monetary damages, but under some circumstances a copyright licensor can obtain remedies under copyright law. The courts have established a standard that the breach of obligations that are covenants rather “conditions” or “restrictions” on the scope of the license can only obtain contract remedies. However the line between covenants and “conditions” or “restrictions” has always been murky. The decision provides clear guidance: obligations in a license agreement which are expressly described as a “condition” or, even better, which are introduced by the phrase “provided that” meet the criteria in Jacobsen.

Copyright law remedies include injunctive relief, attorneys fees, actual damages and, potentially, statutory damages. The remedy of injunctive relief is particularly valuable for many licensors because such licensors frequently seek compliance with the terms of the contract. Courts may grant attorneys fees at their discretion and such fee awards can be significant and even exceed the damage awards. Actual damages can be difficult to determine for many copyrightable works and are particularly difficult for breaches of licenses to open source software or other works which are licensed without fee. Statutory damages,on the other hand, are not connected to actual damages and can be as much as $150,000 per copyright for willful infringement and are awarded by the court. However, such statutory damages are only available if the copyright is registered prior to the infringement (or in the case of a recently published work, the copyright is registered within three months of first publication).

Since many open source companies use the dual license model, the decision may be equally important to them for their commercial licenses. In addition, the decision will be important for software vendors with a pure commerical model as well as licensors of other copyrightable works such as books, music and film. These licensors should read Jacobsen carefully and revise these licenses appropriately to take advantage of the new clarity on these issues provided by the decision.

Major Victory for Open Source in Jacobsen Decision

2008-08-13T09:21:00.000-07:00

On August 13, the Court of Appeals for the Federal Circuit (CAFC) issued its decision in the Jacobsen v. Katzer case.
http://www.cafc.uscourts.gov/opinions/08-1001.pdf
This case was the first real test of the remedies for breach of open source licenses in US courts (for more background, see http://lawandlifesiliconvalley.blogspot.com/2007/08/new-open-source-legal-decision-jacobsen.html). Unfortunately, the District Court decision was wrong and wrong in a way that could have been a disaster for open source community. The District Court found that the requirements in the Artistic License for notice were merely a contractual covenant rather than a condition on the scope of the license (the courts sometimes use the word "restriction" on the scope of the license and "condition" at other times, but they have the same meaning). Consequently, under the District Court's analysis, Katzer's actions were not copyright infringement. Thus, Jacobsen was limited to the traditional remedy for breach of contract, monetary damages, rather than the copyright remedy of injunctive relief (injunctive relief means that the court will order Katzer to comply with the terms of the contract).

The CAFC reversed the District Court's decision and its reasoning is very helpful for the open source community. The court found that the limitations in the Artistic License were "conditions" on the scope of the license and, thus, Katzer was liable for copyright infringement (as well as breach of contract). The CAFC noted that the Artistic License imposed its obligations through the use of the words "provided that" which is generally viewed as imposing a condition. Although the reasoning is limited to the Artistic License and the interpretation of each open source license will depend on the wording of its provisions, this decision is a welcome change to the District Court decision. The case has been remanded for the District Court to determine if the other criteria for injunctive relief have been met, but the CAFC's decision strongly suggests that they have been met.

The open source community should thank the lawyers who worked hard and on a pro bono basis (i.e. free) to achieve this victory. Any such list is bound to be incomplete and I apologize in advance for anyone that I have missed, but I think that the major contributors were: Victoria Hall (Jacobsen's counsel), Chris Ridder and Anthony Falzone (Creative Commons counsel, authors of the amici brief), Karen Copenhaver (Choate Hall, counsel for the Linux Foundation who assisted on the Creative Commons amici brief), Allison Randal and Roberta Cairney (counsel for Perl Foundation who assisted on the Creative Commons amici brief), Larry Rosen (Rosenlaw & Einschlag, who assisted on the Creative Commons amici brief), Scott Peterson (HP, member of OSI's Legal Advisory Council who assisted on the Creative Commons amici brief), David Gross (DLA Piper, counsel for OSI who assisted on the Creative Commons amici brief) and Steve Chiari (DLA Piper, counsel for OSI who assisted on the Creative Commons amici brief).

Linuxworld: Looking to the Future of Open Source

2008-08-06T16:31:00.000-07:00

Linuxworld was very interesting this year. As Bob Sutor noted, we stand at a crossroads on the development of Linux and open source (see below for Bob’s predictions).

I spoke on Implementing Your Open Source Business Strategy http://linuxworldexpo.com/live/12/conference//tracks/tracksessions/Legal+and+Licensing/QMONYB00BIOE. The audience was very interesting: although we had some open source companies, most of the attendees were traditional software companies who are trying to learn about implementing open source strategies. This shift is consistent with my experience working with software companies in Silicon Valley and around the world: open source software is becoming part of the mainstream software industry. We have recently seen this trend among large companies: Adobe Systems, Inc. released Flex and Nokia releasing the Symbian operating system under an open source license. This is consistent with the conclusion of the CEOs and senior executives of the Open Source Think Tank 2008 http://thinktank.olliancegroup.com/ and the recent Open Source Alliance survey http://www.opensolutionsalliance.org/.

One of the most interesting presentations was by Bob Sutor from IBM. Bob reviewed the history of IBM’s involvement with Linux and then went on to discuss the future (you can see his slides at http://www.sutor.com/newsite/blog-open/?p=2446). His predictions are as follows:

1. The desire to be “green” will drive use of Linux with hardware optimized to reduce energy use

2. Linux will not be replaced by another open source operating system

3. Linux will expand on many hardware platforms but x86 will be less important; the use of Linux will be less visible through SAAS and cloud computing where the operating system is not clear

4. The concept of Linux desktop will shift as Web 2.0 and new technologies will change the concept of desktop

5. The path of SMB adoption is unclear: will they adopt open platforms vs. cloud computing

6. The adoption of new FOSS licenses will probably slow down and the adoption of licenses will focus on the five or six most frequently used licenses, but products will be issued under multiple licenses increasing complexity of legal issues

7. Open standards in licenses will grow and a model similar to Creative Commons will evolve

8. Proprietary applications will be developed for Linux, but some industries (such as education and health care) will continue to develop open source applications specific to that industry

I think that most of these predictions are very insightful. However, I don’t agree with his seventh predictions on licensing. As the General Counsel of the Open Source Initiative for many years and being involved in our efforts to reduce license proliferation, I think that the legacy of multiple licenses (we now have more OSI approved licenses than when I started) will be difficult to overcome. Sadly, I think that we are beyond the point where we can take the rational approach adopted by Larry Lessig in the Creative Commons. The existing licenses have such strong backing that the adoption of a new “cleaner” approach is not likely to be successful. I hope I am wrong, but habit is hard to overcome.

Red Hat: How to Settle a Patent Lawsuit for an Open Source Community

2008-07-16T08:11:00.000-07:00

In a recent post, I described at a very general level the patent litigation settlement agreement between Red Hat and Firestar and that the settlement was unusual for its protection of the Red Hat open source ecosystem, not just its own products. http://lawandlifesiliconvalley.blogspot.com/2008/06/red-hat-settlement-and-linux-ecosystem.html.

I am pleased to note that Red Hat has recently published the text of the settlement which I believe will serve as a model for future settlements (in the interests of transparency, my firm does a modest amount of work for Red Hat, but we were not involved in the litigation or drafting the settlement agreement). The settlement is sufficiently important that I am going to write several posts about it and describe it in some detail (non lawyers be warned!).http://www.redhat.com/f/pdf/blog/patent_settlement_agreement.pdf.

I strongly recommend that lawyers who work with open source companies should review the entire settlement agreement because it is a great guide to the special issues arising in settling lawsuits involving open source products. Rob Tiller who was in charge of the settlement provides a "Reader's Guide to the Firestar Settlement" in the Red Hat blog. http://www.press.redhat.com/2008/07/15/a-readers-guide-to-the-firestar-settlement/

The scope of the settlement agreement is particularly important because of the complexity of many open source products (including Red Hat's products): they include software from a wide variety of sources and the software, in turn, may be modified by any of the licensees. And the settlement must take into account "upstream licensors" of products used in the Red Hat products to avoid an end run by the patent owner. And the scope of the patent license must be carefully drawn to avoid "free riding" because much of this third party software is distributed in third party products which are not Red Hat products. Red Hat does not want to cover uses of third party products when they are not linked to Red Hat products. This complexity undoubtedly created tension in the settlement negotiations because patent owners want to describe the scope of the settlement as narrowly as possible. Red Hat solved this problem by defining the scope of the settlement as including "Red Hat Licensed Products" which includes "Red Hat Products"(which covers more than simply products distributed under the Red Hat brand), "Red Hat Derivative Products" and "Red Hat Combination Products". The relevant definitions are set forth below:

"Red Hat Product" means (a) any product, process, service, or code developed by, licensed by, authored by, distributed under a Red Hat Brand by, made by, sold under a Red Hat Brand by, offered for sale under a Red Hat Brand by, sponsored by, or maintained by Red Hat, (b) any predecessor version of any of the foregoing, including without limitation any upstream predecessor version of any of the foregoing, (c) an identical copy of the foregoing or (d) a combination of the foregoing.

"Red Hat Derivative Product" means any product, process, service, or code that is a direct or indirect Derivative of at least one Red Hat Product. "Red Hat Derivative Product" does not include any Red Hat Product. An indirect Derivative of a Red Hat Product includes, for example, a derivative work based on a derivative work of the Red Hat Product.

"Derivative" means any derivative work or any other product, process, service, or code that is based on another product, process, service, or code."

"Red Hat Combination Product" means any product, process, service, or code that is a combination of (a) at least one Red Hat Product or Red Hat Derivative Product and (b) at least one product, process, service or code portion that is neither a Red Hat Product nor a Red Hat Derivative Product. A "Red Hat Combination Product" does not include any Red Hat Product or Red Hat Derivative Product. A combination includes, without limitation, two products distributed together, two products that interact or that interoperate, and two products that call each other.

Red Hat must then define to whom the license applies so they have a definition of Red Hat Community Member:

“Red Hat Community Member” means any Entity that is a licensee or licensor of, contributes to, develops, authors, provides, distributes, receives, makes, uses, sells, offers for sale, or imports, in whole or in part, directly or indirectly, any Red Hat Licensed Product, including without limitation any upstream contributor to, or downstream user or distributor of, a Red Hat Licensed Product. An upstream contributor includes, for example, an Entity that contributes to a software product, so long as a copy or derivative work of that software product is distributed or used by Red Hat. For example, an Entity would be an upstream contributor if it contributes to a version of Open Office if that version or a derivative work of that version is distributed by Red Hat as part of Red Hat Enterprise Linux. A downstream distributor includes, for example, an Entity that distributes a copy of a Red Hat software product received from Red Hat or another Entity or that distributes a derivative work of such software product. For example, an Entity would be a downstream distributor if the Entity received a derivative work of Hibernate Tools from either Red Hat or another Entity and then distributed a copy of the derivative work.

“Entity” means an individual, company, trust, corporation, partnership, sole proprietorship, joint venture, limited liability company, association, unincorporated organization, university, college, or other legal, governmental, or other entity.

The Settlement Agreement in Section 5.1 grants Red Hat a perpetual, irrevocable license under the subject patents for any and all purposes and to engage in any and all activities without restriction.

The license to the Red Hat Community Members in Section 5.2 is more limited (it applies only to Red Hat Licensed Products), but very broad: a perpetual, irrevocable license under the subject patents to engage in any and all activities related to the Red Hat Licensed Products. They further define it to include, without limitation, to include make, have made, use, have used, sell, have sold, offer for sale, have offered for sale, provide or have provided, distribute or have distributed, import or have imported any Red Hat Licensed Product or services related to any Red Hat Licensed Product. Neither the grant in Section 5. 1 nor 5.2 permits the right to sublicense (just a reminder that the GPL, under which much of Red Hat's products are distributed, also does not permit sublicensing).

However, Section 5.3 provides the Red Hat and Red Hat Community Members the right to grant sublicenses to the patents to the same extent of the license for Red Hat Community Members in Section 5.2.

These license grants are limited in Section 5.4 with respect to certain Red Hat Derivative Works or Red Hat Combination Products: they do not apply to situations in which the infringement by the Red Hat Combination Product or the Red Hat Derivative Product are not caused by the use or reference to the underlying Red Hat Product. These limitation was probably very important for the patent owner to avoid the license being used "to launder" third party software by combining it with Red Hat Software.

The Settlement Agreement provides very broad protection for the Red Hat Community and reflects the issues which a company settling patent litigation must address.

The Settlement Agreement also includes covenants not to sue which will be the subject of another post.

Microsoft & Open Source: The Battleship Microsoft Continues its Turn Towards Engagement with Open Source

2008-07-15T09:36:00.000-07:00

EWeek had an interesting interview with Steve Ballmer that covered Microsoft's view of open source along with other topics after the Microsoft Worldwide Partner Conference. http://www.eweek.com/c/a/Enterprise-Apps/Microsofts-Ballmer-Opens-Up-to-Partners/?sp=0&kc=EWKNLLIN071508STR3. Although Ballmer denies that Microsoft will be "open sourcing" any of its core products, he emphasizes that Microsoft wants to encourage opens source development on its platform (see below):

However Microsoft will support and interoperate with open-source software in various ways, Ballmer said. "Will we interoperate with products that come from like Linux, from the open-source world? Yes, we will," he said. "Will we encourage people who want to do open-source development to do it on top of Windows? Yes, we're proud that the best PHP system in the world is actually the one that runs on Windows today, not the one that runs on Linux.

"So we're going to encourage open-source innovation on our platforms, and around our platforms. And, you know, we see interesting things where bits and pieces of technology, commercial companies are now starting to provide it in an open-source form or to digest in an open-source form. And we're open to that as well. But our fundamental business model will remain kind of commercial software, advertising, enterprise licensing, etc."

As this interview indicates, Microsoft is continuing to move towards engagement rather than confrontation with the open source community. However, remember that Microsoft is a big organization with a very strong culture to which these changes are very difficult. This change will take time and we should expect relapses in their engagement with the open source community. And this change should not be mistaken for adoption of the open source philosophy, rather it is a recognition of reality. Microsoft recognized that the world has changed and they need to deal with the world as it is, not as they wish it to be.

This change does provide an opportunity for open source companies.

Red Hat Settlement and the Open Source Ecosystem

2008-06-13T15:26:00.000-07:00

The recent settlement by Red Hat of its patent litigation with Firestar Software, Inc. demonstrates the differences how the cooperative nature of the open source industry requires a different approach to settlement of patent infringement litigation. Open source companies operate in an ecosystem of third party licensors, individual contributors, corporate contributors and users. Red Hat is in the middle of such an ecosystem, with relationships both to its upstream and downstream members. Any settlement of patent infringement litigation in the open source market needs to recognize the importance of protecting the entire ecosystem.

Although the terms of the settlement agreement are not yet public, the outline indicates that Red Hat understands this new reality. http://www.press.redhat.com/2008/06/11/red-hat-puts-patent-issue-to-rest/

The settlement has three significant characteristics which differentiate its terms from traditional patent settlement agreements:

1. The settlement covers all software licensed under the Red Hat brand, whether developed by Red Hat or third parties. This provision reflects the complexity of Red Hat's products.

2. Although the settlement focuses on Red Hat branded products, the open source industry, unlike the traditional software industry, permits third parties to create derivative works and combinations with other products. Red Hat reports that the settlement agreement covers derivative works of Red Hat branded products and combinations including Red Hat branded products. The scope of this protection will be very important and the actual terms of the settlement will be important.

3. Traditionally, patent settlement agreements cover the company and its downstream distributors and users. However, Red Hat has recognized that this traditional approach would not meet the needs of its community and negotiated a settlement that included the upstream members of its ecosystem. The settlement agreement also covers predecessor products of the Red Hat branded product.

Unfortunately, patent litigation is likely to become more common in the future. This settlement agreement is likely to studied carefully by those who draft future settlements.

ALI Legal Recommendations Could Create New Liability for Open Source Licensors

2008-06-08T14:02:00.000-07:00

The American Law Institute ("ALI") has recently published the first draft of the ALI Principles of the Law of Software Contracts ("Principles") http://www.ali.org/index.cfm?fuseaction=projects.proj_ip&projectid=9 <http://www.ali.org/index.cfm?fuseaction=projects.proj_ip&projectid=9> . The ALI was founded in 1923 and has a membership consisting of judges, practicing lawyers, and legal scholars from the United States as well as some foreign countries, selected on the basis of professional achievement and demonstrated interest in the improvement of the law. ALI is a very prestigious non profit institution whose purpose is to: "publishes various Restatements of the Law, model codes, and legal studies to promote the clarification and simplification of the law and its better adaptation to social needs, to secure the better administration of justice, and to encourage and carry on scholarly and scientific legal work."

These Principles have great potential to clarify the difficult issues of software licensing and, when adopted, will have a significant effect on software licensing. The Principles have been developed by a committee of law professors with limited input from an advisory committee. The Principles are now available for public comment and I want to encourage the community to provide comments on the Tentative Draft (see below).

I, as general counsel of OSI, and Karen Copenhaver, as general counsel of the Linux Foundation have written a letter expressing our concern that several of the proposed terms represent very dramatic changes from existing law which are likely to have a very negative effect on the open source software industry. Although a number of provisions in the Principles will be of interest to the open source community, I want to focus on two recommendations which could have a significant negative impact on open source licensors and contributors.

The Principles recommend the creation of two new "non disclaimable" warranties which would result in significant problems for the open source community. The warranties are the (1) warranty of non infringement of intellectual property rights (such as patents or copyrights) if the contributor knew or should have known of the infringement and the contributor holds himself out by occupation as having knowledge or skill peculiar to the software and (2) warranty of no hidden material defects. Current law (and all OSI approved licenses) permit the contributor (and any licensor) of open source software to completely disclaim all warranties i.e. promises about performance or non infringement which could result in liability to a contributor or a licensor(so called AS IS provisions).

Despite some discussion in the Summary Overview of Section 3 suggesting that these warranties would not apply to open source licensors, the actual language of the first warranty, Section 3.01, would apply it to most open source software licensors and contributors. The relevant section follows:

§3.01 Indemnification Against Infringement

a. Except as provided in (c) or as excluded or modified under (d), a transferor that deals in software of the kind transferred or holds itself out by occupation as having knowledge or skill peculiar to the software must defend at its own expense any action brought by a third party against the transferee that is based on a claim under the laws of the United States or a State thereof by way of infringement or the like if the transferor knew or should have known of the infringement at the time of transfer. The transferor must pay those costs and damages finally awarded against the transferee in any such action that are specifically attributable to such claim or those costs and damages agreed to in a monetary settlement of such action.

The exceptions to the obligation are modest: the obligations would not apply if the licensee uses the software outside the scope of the license or the software was developed based on specifications provided by the licensee. The ability to disclaim this warranty is not permitted under the Principles for the following category of software: "Standard Form Transfer of Generally Available Software" (a defined term in the Principles) . The Principles state that open source software is included in this category. Given the view expressed in the Section Overview, we hope that the provision can be clarified to make the warranty disclaimable for open source licensors.

The second warranty, Section 3.05, would apply to all open source software licensors and contributors and appears to present a more difficult problem. The relevant section follows:

§3.05 Other Implied Quality Warranties

a. Unless modified or excluded, implied warranties may arise from course of dealing or usage of trade.

b. The transferor warrants to any party in the normal chain of distribution and to the end user that the software contains no material hidden defects of which the transferor was aware at the time of the transfer. This warranty may not be excluded. In addition, this warranty does not displace an action for misrepresentation or its remedies.

“Disclosure of a material hidden defect occurs when a reasonable transferee would understand the existence and basic nature of a defect. Disclosure ordinarily should involve a direct communication to the transferee, if feasible. A mere posting of defects on the transferor’s website generally should be insufficient.” From Comment b, following § 3.05.

These recommendations also raise similar concerns for commercial licensors. OSI and the Linux Foundation will be soliciting comments on the Principles and expect to have a mechanism to receive those comments by the end of June and will post how to provide comments on our sites. We look forward to hearing from you.

2008 Open Source Think Tank: The Future of Open Source

2008-05-27T23:56:00.000-07:00

Olliance Group, the leading consulting firm for open source companies, has published the Summary Report from the 2008 Open Source Think Tank in Febuary of this year. http://thinktank.olliancegroup.com/images/stories/2008%20think%20tank%20summary%20report.pdf. The Think Tank is sponsored by Olliance Group and DLA Piper and is an opportunity for 120 leading members of the open source community to come together and discuss the future of open source software. The attendees include CEOs of Open Source Software companies, CIOs of large companies, venture capitalists, attorneys and other luminaries.

The Summary Report focuses on three major themes:

1. Open source software companies are recognized as a viable strategy for building a software business. The past skepticism has been washed away by the increase in venture capital financing for open source companies http://lawandlifesiliconvalley.blogspot.com/2008/04/venture-capital-investments-in-open.html and the significant acquisitions of open source companies last year, including the acquisition of Zimbra by Yahoo and MySQL by Sun Microsystems, Inc.

2. Open source software vendors have matured sufficiently so that client expectations are that open source vendors should maintain the same standards as traditional commercial software vendors. Open source vendors, like commercial software vendors, must ensure that they address the entire product lifecycle, from support and maintenance to integration and work with third party products.

3. Open source software vendors need to mature and deal with the confusion and, sometimes fear, about the the risk of using open source software. The attendees expressed concern about the dichotomy between the ubiquity of open source software and the lack of recognition of companies of such widespread use.

Please read the Summary Report and we hope to see you next year at the 2009 Think Tank.

Venture Capital Funding for Open Source Shows Significant Increase in First Quarter

2008-05-20T22:54:00.000-07:00

The Venture Capital Journal noted in its April issue that investments in open source software increased dramatically in the first quarter of 2008 to $112 million from $200 to 250 million each year. The VCJ attributes this increase to the demise of the traditional multi year enterprise software licensing model as well as the recent very successful exits by open source companies such as MySQL and Xensource. One of the most significant advantages of the open source business model is the reduction of the cost of sales and marketing. For example, Amit Pandey, CEO of Terracotta, which provides infrastructure software for enterprise Java, notes that his download rate has risen 1000% since they shifted to an open source model; he estimates that a traditional software company would have had to spend $4-5 million dollars to achieve the same effect. Yet the article concludes in controversy: several VCs believe that early stage open source investments are no longer of interest because all of the good deals have been done yet other venture capitalists, such as Larry Augustin, believe that many new early stage open source companies are attractive and will get funded this year.

My experience is consistent with Larry’s view. I am seeing an increase in companies which have started with an open source business model as well as many companies which are shifting either in whole or in part to an open source business model. However, entrepreneurs need to be careful not to believe that “open source” is funding “pixie dust”.

This reality was emphasized in a recent SD Forum presentation on Successful Open Source Venture Investing. The venture capitalists, Kevin Efrusy from Accel and Prashant Shah of Hummer Winblad, are very experienced in open source investments. They emphasized that “open source” was not magic: companies must fit the same financial criteria as other software investments. Both venture capitalists noted that the open source business model does provide significant advantages in swift and inexpensive adoption by end users. Yet the company needs to take advantage of these “free downloads’ by finding a way to monetize them. The most popular model for venture backed companies is “dual” licensing in which proprietary additions are made available in a commercial offering which also includes the “free” open source software. However, the typical open source company uses a variety business models: dual licensing, advertising, maintenance services and professional services (including customization and installation). In fact, many of the older open source companies started with a service only model, providing only maintenance and professional services. David Lilly, the founder and CEO of Groundwork Open Source, described how the company shifted their business model by reducing service based revenues from 80% to 30%. The open source business model continues to have significant advantages over traditional software business models, but open source companies must still meet the traditional economic criteria for venture backed software companies.

OSBC: Aligning Intellectual Property Strategy and Open Source Strategy

2008-04-23T09:45:00.000-07:00

Recently, at the OSBC, I spoke on how to align your intellectual property strategy to your open source business strategy. This issue can be very simple if you are joining or contributing to an existing project, because you will be bound to use the license of the project. However, if you have more flexibility, you need to consider a number of elements: (1) the sources of revenue (2) the type of product (3) business model (4) type of project (5) channels (6) type of community and (7) competitors. Once you have answered these questions, you then need to review your intellectual property options, such as such as patent, trademark, trade secret, copyright, licenses and domain names to implement your open source business strategy.

For example, a new web infrastructure software company might decide to adopt a dual licensing model and to adopt a license which is relatively compatible in order to interact effectively with other open source software used on the web. The company has decided that its most important intellectual property will be patents and trademarks. The license options include MPL, CDDL, CPAL or if integration is less important, GPLv2, GPLv3 and AGPL.

The materials also describe some of the mistakes that open source companies have made. If you are interested in the presentation it is posted on the OSBC website. http://akamai.infoworld.com/event/osbc/08/docs/GC-Radcliffe.pdf

HBS Open Source Case: Salvation or Suicide

2008-04-20T23:45:00.000-07:00

Harvard Business School recently published a case on whether a software game company, KMS, which makes a device which permits amateurs to sound like professional musicians should adopt an open source business model. http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=R0804XThe case demonstrates the increased recognition of the strategic importance of decisions about the adoption of the open source software business model. Unfortunately, the case does not reflect the developments in business models for commercial open source software. The case focuses on an open source business model based primarily on providing technical services. Yet most commercial open source companies have adopted a dual distribution model. Moreover, as Marten Mickos noted in his 2007 keynote at OSBC, commercial open source companies have thirteen ways to make money, with four of them which he identifies as “scalable”. In addition, the analysis in the case if confused because KMS’ product includes hardware as well as software. Such hardware could give KMS a substantial advantage against competitors trying to provide an open source version of the product. In my experience, virtually all decisions about the adoption of open source business model deal solely with software products. Consequently, I think that the case would have been more powerful (and more realistic) to focus on case in which the product was solely software.

The Case Commentaries are very interesting. Jonathan Schwartz of Sun Microsystems, Inc. makes the critical point that KMS needs to determine its business goals before the company can make a meaningful decision about adopting an open source business model. He draws a contrast between Apple and Nokia in the handset market: Apple is trying to define what a handset should be and they sold 4 million iPhone handsets last year. On the other hand, Nokia is trying to be the largest handset maker in the world, has adopted an open platform and sold 400 million handsets last year.

Gary Pisano of Harvard Business School was also very insightful about the necessary elements for success in converting to an open source business model: ensuring that your software architecture is “modular” and creating a developer community. The creation of a developer community is a significant challenge for a new product and quite different from the skills required for developing and distributing proprietary software. He also notes that natural advantages conferred on KMS by its role as the creator of the “platform”. Finally, he focuses on the new reality for all “proprietary” software vendors: they need to be prepared for competitors who adopt an open source model.

Eric Levin makes good points about the importance of being able to control the brand and the strategic life cycle, but concludes that KMS has alternatives to adopting an open source business model such as adding personalization. However, I think that this alternative is an illusion and it seems to contradict his prior points.

The final Case Commentary by Michael Bevilacqua focuses on legal issues and, from his view, the significant additional risk of intellectual property infringement in an open source business model. I don’t agree with his conclusions. First, most “proprietary software” includes significant amounts of open source code which would carry risks similar to a pure open source business model. Second, he notes the increased risk of patent infringement in open source software. I disagree that the risk of patent infringement is greater in open source companies than in proprietary software companies. Most proprietary software companies do not undertake patent searches prior to writing software, so both types of companies are equally at risk of infringing a third party’s patents. However, the open source business model does entail legal risks: the scope of many important open source licenses (such as the GPL) are unclear because they use terms, such as derivative works, which are poorly defined in copyright law when applied to software and the licenses have never been interpreted by courts. In addition, the remedies available under open source licenses, whether injunctive relief or only monetary damages, are not clear. Consequently, many companies limit the use of open source software based on the open source license under which it is provided.

It is great that Harvard Business School has acknowledged the strategic importance of decisions about the open source business model, but we hope that their next case is more focused.

Open Source as the Borg: Resistance is Futile

2008-04-04T16:07:00.000-07:00

The recent report by Gartner, the State of Open Source 2008 (http://www.gartner.com/; report G00156659), as summarized on their site provides some very interesting conclusions:

1. By 2013, a majority of Linux deployments will have no real software TCO advantage over other operating systems.

2. By 2012, 90% of enterprises will use open source either direct or embedded.

3. By 2011, open source will dominate software infrastructure for cloud-based providers.

4. By 2012, software as a service (SaaS) will eclipse open source as the preferred enterprise IT cost cutting method.

I agree with Gartner that open source will continue to penetrate more companies, but I think that it will occur much more rapidly than suggested by Gartner. And they are absolutely correct that use of open source is "elusive". We find that virtually all of our clients use open source even if they are not aware of it. Gartner captures the reality of open source use in their statement that: "Users who reject open source for technical, legal or business reasons might find themselves unintentionally using open source despite their opposition."

I don't agree with their conclusion about Linux and SaaS. I agree with the skepticism expressed by Mark Taylor http://news.zdnet.co.uk/software/0,1000000121,39379900,00.htm. My experience is that the use of Linux continues to grow rapidly and it is likely to take an even more important role in mobile devices. The statement about SaaS confuses a business model with a method of developing software. Many open source companies use SaaS as a distribution model and it does not make them less "open source." http://lawandlifesiliconvalley.blogspot.com/2008/03/open-source-overview-from-osbc.html

The report once again emphasizes how open source is becoming part of the mainstream. A decade can make a big difference: "Microsoft: Resistance is Futile" http://www.news.com/2009-1023-229218.html.

Venture Capital Investments in Open Source Accelerate

2008-04-03T09:44:00.000-07:00

A recent 451 Group report notes that venture capital investments in open source companies are at an all time high this quarter. http://blogs.the451group.com/opensource/2008/04/01/vc-funding-for-open-source-hits-an-all-time-high/. They raised $203.75m, up from $100.40m in the same quarter of 2007. He expresses caution that few of the deals were seed or Series A and that much of the funding was raised by some mature companies, such as SugarCRM.

This increase in funding for open source experience is consistant with what I am seeing in Silicon Valley where I work with about 40 startups (not all open source). Most software venture deals have an open source component to them and venture capitalists are very interested in new open source projects. I know of at least four new open source companies that are seeking funding, several are based on existing projects. So I disagree with Matt that the relatively smaller number of seed and Series A deals are a cause for concern. Seed deals in particular are difficult to find (several of the companies that I mentioned above have bootstrapped or used friends and family money, so they are basically invisible). In addition, I know of four foreign open source companies that are coming to the US because of the size of the market and the depth of the venture capital market. I think that 2008 will be another record year for open source funding.

Rapid GPLv3 Adoption Continues

2008-04-02T14:45:00.000-07:00

The most recent report from Palamida indicates that open source companies are continuing to adopt GPLv3 at a rapid pace: over 2000 projects have adopted GPLv3. http://gpl3.blogspot.com/2008/03/gpl-project-watch-list-for-week-of-0328.html.

Palamida notes that: At this rate the GPL v3 is being adopted by 1000 projects every 4-5 months, and if the trend continues, the license will be used by 5000 projects by the end of the year. 5k will be a very substantial amount of projects under the GPL v3, which may influence larger projects to move over the the GPL v3 as well.

Open Source Overview from OSBC

2008-03-29T09:11:00.000-07:00

The slides from the presentation by the NorthBridge Capital Partners from OSBC has some interesting information. The most interesting finding is that the subscription business model is likely to become much more important in the future. This finding certainly reflects my experience. Most of my open source clients are adopting a subscription model because of its attractiveness to potential customers. http://acquia.com/northbridgesurvey. They also stated that SAAS (among cloud computing, software appliances and virtual infrastructure) is likely to have the greatest effect on software delivery and business models. If SAAS continues to be important it may drive the adoption of the Affero GPL (with its focus on "network use") instead of the GPLv3 (just a reminder that the Affero GPL is simply the GPLv3 with a network use provision added). http://lawandlifesiliconvalley.blogspot.com/2007/11/free-software-foundation-announces.html

The survey confirms the Gartner report that open source will continue to expand rapidly. http://lawandlifesiliconvalley.blogspot.com/2007/09/open-source-paradigm-shift.html According to the survey, more than half (55 percent) of the respondants believe that open source software will increase to 25% to 50% percent of software used as compared with proprietary software. The respondants believed that over the next five years open source software would have the greatest effect in the Web publishing and content management system (CMS) markets, but the least effect in security tools.

http://www.slideshare.net/jwhatcott/annual-future-of-open-source-survey-results-2008/

Open Source Growing at an Exponential Rate

2008-03-22T00:35:00.000-07:00

Although many of those of us in the open source community believe that open source is growing rapidly, a new study validates these conclusions: the study released March 14 by SAP Research concludes that open source software is growing at an exponential rate in "additions to open source projects, the total project size (measured in source lines of code), the number of new open source projects, and the total number of open source projects". They also noted that the total amount of source code and the total number of projects double about every 14 months. http://www.riehle.org/2008/03/14/the-total-growth-of-open-source/. The report is based on information from the http://www.ohloh.net/ service.

The consequences of such growth are dramatic. As we noted at the Open Source Think Tank, open source software is becoming standard and the comparison for users is now between functionality and price rather than "closed" and "open" source software. In fact, this report suggests that "open source" may cease to be a different type of software, it will simply become another way (and probably the dominant way) of developing and distributing software.

What Questions Should the Open Source Community Ask Brad Smith, General Counsel, of Microsoft

2008-03-19T13:49:00.000-07:00

Stephen Walli brought to my attention that the open source community will have the chance to ask questions of Brad Smith, the General Counsel of Microsoft, who will be giving the keynote presentation at OSBC next week. Stephen has some interesting thoughts about how the open source community should take advantage of this opportunity. http://stephesblog.blogs.com/my_weblog/2008/03/brad-smith-keyn.html.

He also mentioned that a website has been set up to suggest questions to the panel. http://www.initmarketing.com/questions. I encourage you to participate!

Advice for Startups: Working with Large Corporations as Partners and Investors

2008-03-19T13:35:00.000-07:00

I recently participated in a webinar with Bob Ackerman of Allegis Capital, Mark Klopp of BellMason Group (formerly head of Eastman Chemical's venture capital program) and Claudia Fan Munce of IBM (Managing Director of their venture program). I was included because of my experience in working with startups as well as corporate investors (I run DLA Piper's Corporate Venture practice). The webinar addressed the issues of dealing with corporations as partners and as investors.

Large corporations are the major customers and the most common exit strategy for venture-backed startups. The webinar was a very valuable summary of how to deal with corporations as partners and potential investors. For example, Bob Ackerman described how IronPort was able to obtain a dominant position in the French market by partnering with Societe Generale.

As I noted in the discussion, startups need to be careful about being too reliant on large corporations for critical functions: large corporations may decide that a market is no longer attractive and leave them and the startup may be left in a very difficult position. For example, we worked with one startup who was making lead/acid batteries and relied upon a corporate partner to manufacture the batteries. Lead/acid batteries are difficult to manufacture and require careful attention to environmental issues. They are not popular neighbors, so the corporate partner was very important to the startup. Working with our client, we negotiated a six month notice period prior to termination of the manufacturing agreement. About a year later, the corporate partner unexpectedly declared that they were leaving the manufacturing business and told the startup that they were shutting down the factory in thirty days. We reminded them of the six month notice period and were able to find an alternative manufacturer.

Startups also need to understand the different expectations of large corporations: large corporations value predictability and planning. Startups, on the other hand, change their products and strategies. This mismatch of business cultures and expectations needs to be recognized and managed.

And corporate investors are very different from traditional venture capital investors. Corporate investors are frequently very concerned about the potential sale of their portfolio companies to "competitors", a term which can vary over time. Startups and traditional venture capital investors are focused on economic returns. Consequently, startups need to be careful that their corporate investors do not control the potential sale of the startup such as by owning a majority of a series of preferred stock which has a protective provision providing approval rights over the sale of the company.

If you are interested in learning more you can get more information on obtaining a CD of the webinar at: http://events.dowjones.com/webinars/20080314.html

Thinking Legal for Open Source Success: Trademarks & Licenses

2008-03-13T22:02:00.000-07:00

I have been reading the dueling posts between Matthew Aslett, Tim Bowden and Ian Skerrett about the relative value of licenses and trademarks to the success of an open source company. http://blogs.the451group.com/opensource/2008/03/07/further-thoughts-on-the-impact-of-licensing-choice/They are particularly interesting to me because I have been putting together my material for my presentation at OSBC: Implementing Your Open Source Business Strategy through Your Legal Strategy. http://www.infoworld.com/event/osbc/08/osbc_agenda.html.

I think that any such discussion needs to first clarify the business model of the company: a dual licensing model has very different legal strategy from a services based model. You also need to consider the context of the business: the nature of the software (applications v. infrastructure), competitors, ownership of intellectual property rights and channels. For example, Tim discusses the difficulty of Linux distributors who are competing with the same code base. http://ianskerrett.wordpress.com/2008/03/03/successful-trademarks-are-more-important-than-os-licenses/. Yet Linux companies have a very significant problem: they do not control the intellectual property rights in the code base. These rights are distributed among the thousands of contributors. This situation is quite different from a company such as MySQL, Zimbra or SugarCRM who own the intellectual property rights in their code base. MySQL, Zimbra and SugarCRM can offer their products under a commercial license as well as the open source license (the "dual license" model) and even change the licenses (SugarCRM shifted from the Sugar Public License to GPLv3). Consequently, some of the discussions are comparing apples to oranges because new companies have much more flexibility in developing a legal strategy than companies working with an existing project.

If you are starting a company and will control the intellectual property rights in the code base, you will be able to use licenses, trade secrets, trademarks and patents as part of your legal strategy. However, if you are using an existing project licensed under the GPL, you will be limited in your license choice and you will not be able to use trade secrets and your patents will be of limited value because they may be licensed under GPLv2 (they are licensed under GPLv3 if you have modified the code).

License choice can be very important: I was speaking with a senior executive of JBoss and he was convinced that the choice of LGPL significantly limited their success because it is such a difficult license to understand (I personally view the LGPL as harder to interpret than the GPL). However, I don't think that the selection of GPL is a silver bullet for a company. http://blog.mapforge.com.au/index.php/2008/02/27/when-open-source-doesnt-add-up/. Zimbra was using the Zimbra Public License, a version of the Mozilla Public License. Sleepycat was using its own special license (a form of BSD).

If your business model requires that your software integrate with third party software, the GPL is a poor choice. Many third party software vendors will be reluctant to integrate their software with the code if they need to license their software under the GPL. In that case, BSD or the MPL (a weak copyleft license) will be a better choice.

However, trademarks are very important in the open source software industry. In fact, they may be the major asset of a company that is using a common code base such as Linux. Trademarks take on a special importance because open source software is frequently distributed outside of traditional channels.

Unfortunately, the question of the importance of license vs. trademark cannot be answered in general. Like many questions in business (and the law) context is critical. If you are interested in more discussion about this question, join me at OSBC!

Affero General Public License Approved by OSI

2008-03-13T18:22:00.000-07:00

The Affero General Public License ("AGPL") has been approved by the OSI. The AGPL is an important option for companies whose software can be used to provide a service. It includes a "network use" provision which requires that the source code be made available to "users" of the service. For a more information about the AGPL, you can read my earlier post. http://lawandlifesiliconvalley.blogspot.com/2007/11/free-software-foundation-announces.html

Thanks to Funambol for submitting the license to the OSI and following up. http://www.funambol.com/blog/capo/. OSI approval is important for adoption in many large organizations which use OSI approval as a basis to approve the use of software distributed under such a license. I am particularly pleased that OSI adopted AGPL because Fabrizio Capobianco at Funambol and I have a bet about whether GPLv3 or AGPL will be the dominant license in five years. He can no longer complain that it is not a level playing field! So consider AGPL, but remember I have money riding on your adoption of GPLv3.

Jacobsen Redux: Remedies for Breach

2008-02-25T20:32:00.000-08:00

As I mentioned in my post on Jacobsen v. Katzer http://lawandlifesiliconvalley.blogspot.com/2007/08/new-open-source-legal-decision-jacobsen.html, the issue of remedies for the breach of open source licenses is a difficult one. A recent decision in the Northern District of California, Netbula, LLC v. Storage Technology Corporation ("STC"), is a reminder of these difficulties. Netbula tried to convince the court that STC's alleged violation of the license agreement should be copyright infringement as well as breach of contract. As I noted in that post, most licensors prefer copyright infringement remedies:

Generally, the remedy for contract violations under US law is damages, not "injunctive relief" (which means that the court order a party to cease their violation). On the other hand, copyright infringement generally includes a presumption that injunctive relief is appropriate. Thus, the question of whether the violation of a license is a contract violiation or copyright infringement (it can be both) is very important, because licensors would prefer to obtain an injunction prohibiting the breach of the license. The question turns on a nuanced legal issue of whether the term in the license is a "restriction on the scope" of the license or a covenant. In the first case, the failure to comply with the provision means that the licensee is outside the scope of the license and thus is a copyright infringer (as well as liable for breach of the contract). On the other hand, if the term is merely a covenant, then the failure to comply with it is a breach of contract. The most celebrated case dealing with this issue involved the Java license between Sun and Microsoft in which the court found that the obligation on Microsoft to meet the Java compatability tests was a covenant, not a restriction on the scope of the license and the court denied Sun an injunction on those grounds (Sun got an injunction for unfair competition).

The Netbula decision demonstrates the difficulty of proving that a license obligation is a "condition". Briefly, STC licensed Netbula's SDK for development and runtime version for distribution. Netbula alleges that STC used the SDK for more users than was permitted and on operating systems that were not permitted. The license grant is as follows: " a non-exclusive, perpetual, irrevocable license for Storagetek's employees, consultants and subsidiaries for up to ONE user(s) for each of the licenses purchased, to use the PowerRPC SDK Product under Windows NT and 95/98 platforms; each user can only use the software on one computer." The court found that the limitation on users was not a condition, but only a covenant. Consequently, the remedies for breach of the license would be damages and the breach was not copyright infringement. On the other hand, the court found that the restriction on the use of the SDK for certain operating sytems was a condition and its breach would be copyright infringement. However, Netbula did not prove that STC had used the SDK on the non permitted operating system.

Netbula also alleges that STC did not pay the royalties for all of the copies which it distributed. The license provided for payment of a fixed amount for 1000 copies. The court found that this obligation is covenant, not a condition.

This case demonstrates the difficulties in making these distinctions. The case demonstrates the reluctance of the courts to find a "limitation" on the license and provide a licensor with copyright infringement remedies. This case is important for open source licensors: even though the Jacobsen case was probably wrongly decided, this issue is a difficult one. The appeal of the Jacobsen case has the potential for disaster for open source licensors: if the CAFC decides the issue incorrectly and uses sweeping language (as opposed to narrowly focusing on the provisions of the Artistic License), open source licensors will be in a considerably weaker position in pursuing licensees who are in breach.

SCO Rises From the Dead with $100M

2008-02-14T14:57:00.000-08:00

The Wall Street Journal reported today that the SCO Group Inc. ("SCO") raised $100M to go private and exit bankruptcy. The funding came from the private equity firm Stephen Norris Capital Partners and partners in the Middle East. The Journal reports that Stephen Norris Capital Partners and their partners will have a controlling interest in SCO. http://online.wsj.com/article/SB120301098306668879.html?mod=rss_whats_news_technology

The announcement is puzzling because SCO's principal assets were its UNIX rights (the scope of which are unclear). Yet, a court decision in August rejected all of SCO's claims to enforce copyrights in Linux that it claimed to own. The court rejected both SCO's contract claims for breach of the UNIX license agreements against existing UNIX licensees, such as IBM, and for copyright infringement of UNIX copyright by users of Linux (the court found that Novell owned the copyright in UNIX software and had not assigned it to SCO. In my 25 years of practice, the SCO decision was one of three most dramatic failures of an intellectual property strategy. The decision also made clear that SCO knew about these problems when they launched their litigation against IBM because they tried to get Novell to confirm the transfer of the copyrights. Apparently, we have not heard the end of this story.

Open Source Think Tank: Legal Issues

2008-02-09T10:51:00.000-08:00

This morning we are discussing legal issues at the Open Source Think Tank (for more information, please see http://thinktank.olliancegroup.com/). I started by providing an overview of legal developments from 2007 based on my earlier post. http://lawandlifesiliconvalley.blogspot.com/2007/12/2007-top-ten-free-and-open-source-legal.html. I will summarize my predictions for 2008 in posting later this weekend.

We also had a "Brain Storming" session on the topic of "What are the three major licenses for commercial adoption?" The discussion groups noted that the use of licenses depends on the community, the business strategy and status of the project. For projects that are just launching and want to ensure that all of the developments are contributed back to the community, the GPLv2 is frequently the best choice since many projects use it and it is a clear signal that you intend to be live by the rules of the open source community. However, a project that is more mature could choose GPLv3 which resolves many of the ambiguities of GPLv2, but it is new and not completely understood. A company that is interested in widespread adoption and is not concerned about ensuring that contributions are returned to the community would choose either BSD or Apache. One group noted that Apache License is particularly attractive because of Apache's strong reputation for excellent code. One surprising statement was that the GPLv2 continues to be a problem for some companies: the representative of a major company recently released a project under a dual distribution model, the company was told by their "commercial" licensees that they would drop the software if the GPLv2 was chosen as the "open source" license in the dual distribution. This statement was particularly surprising since these licensees would receive the software under the commercial license.

We all agreed that legal issues will continue to be important for the industry and we are likely to continue see important legal developments this year.

Open Source Think Tank: The Long Tail for Open Source by Chris Anderson

2008-02-09T10:42:00.000-08:00

After tasting some great wine (I recommend Pine Ridge Stags Leap 2005 Cabernet Sauvignon and the tour at Pine Ridge was very interesting even for those who have taken many wine tours http://www.pineridgewinery.com/index.cfm?fuseaction=category_detail&category_id_int=12541), we had the keynote from Chris Anderson, Editor in Chief of Wired magazine and author of The Long Tail.http://www.thelongtail.com/

Chris discussed how the concepts of the Long Tail applied to open source. He noted that the lower cost of development, lower cost of distribution and the lower cost of search which are characteristic of open source software fit the Long Tail model. He summarized the opportunity with a quote from Joe Kraus (founder of JotSpot): "Millions of markets of dozens."

Chris then predicted that the next wave of open source software will involve open source hardware. He has been working on these issues as part of his DIY Drones project. He noted some of the problems in applying open source concepts from bits to atoms. He identified that each of the six layers of open source hardware pose separate problems: mechanical drawing, parts list, schematics, PCB layouts, firmware and software. The problems range from rights owned by third parties to the protectability of items such as a parts list. His project is currently using Creative Commons license but he is not sure if it meets all of his needs.

We are able to continue the discussion at the dinner at Silverado Country Club where we capitalized on the wine tours by sharing bottles from different wineries.

Open Source Think Tank: CIOs Speak

2008-02-08T11:09:00.000-08:00

We are in Napa at the Open Source Think Tank (for more information, please see http://thinktank.olliancegroup.com/) and we have had two very interesting panels with CIOs telling us about their adoption and management of open source. They had a very consistent message: open source is everywhere and growing. But open source companies need to act more like traditional software companies: they need to have better support services and more professional sales. They also made clear that the future is "mixed" environment with a combination of third party proprietary software, third party open source software and internally developed software. These statements are consistant with Gartner's recent prediction that 80% of proprietary software will include open source software by 2012. http://blogs.cnet.com/8301-13505_1-9863802-16.html. In the words of Gartner: By 2012, 80 percent of all commercial software will include elements of open-source technology. Many open-source technologies are mature, stable and well supported. They provide significant opportunities for vendors and users to lower their total cost of ownership and increase returns on investment. Open source companies need to be prepared to work in the mixed environment and to find ways for the end user to get support that they need for the entire stack.

In discussing the advantages of open source adoption, they went beyond the traditional focus on price to note that open source adoption also helps build community within the organization and saves time. They also provided some advice for selling to large enterprises: focus on the "use case". As the representative of a major bank noted "Chaos breaks out after the third power point slide" so make sure that your use case appears on slide two. More to come.

Nokia Acquires Trolltech, Continuing the Trend of Greater Involvment of Traditional Software Companies in Open Source

2008-01-28T06:32:00.000-08:00

Nokia announced that it will be acquiring Trolltech. This acquisition continues a trend of traditional software companies becoming active in using open source software and business models. For example, Citrix acquired Xensource and Yahoo acquired Zimbra. Consistant with this trend, Nokia provided the following explanation:

"The technology landscape evolves and, for Nokia, software plays a major role in our growth strategy for devices, PCs and the integration with the Internet. We continue to focus on areas where we can differentiate and add more value. Common cross-platform layers on top of our software platforms attract innovation and enable Web 2.0 technologies in the mobile space," said Kai Oistamo, Executive Vice President, Devices, Nokia. "Trolltech's deep understanding of open source software and its strong technology assets will enable both Nokia and others to innovate on our device platforms while reducing time-to-market. This acquisition will also further increase the competitiveness of S60 and Series 40."

http://money.cnn.com/news/newsfeeds/articles/prnewswire/UKM00728012008-1.htm

Traditional software companies understand that open source is a very powerful force in the software industry, a view confirmed by several recent reports on the penetration of open source software. Dennis Byron, the anaylst, summarized these reports very effectively in his post http://www.ebizq.net/topics/open_source/features/8842.html?page=1. He notes that according IDC open source software revenue in 2006 was $1.8 billion (about 1% of all software revenue), but has a growth rate three times the growth rate of traditional software. He also provides a very useful discussion of the difficulty of measuring the growth of open source software.

These reports are consistant with Gartner's report last year: Gartner declared open-source software "the biggest disruptor the software industry [Gartner] has ever seen and [Gartner] postulated it will eventually result in cheaper software and new business models." They stated that open-source products accounted for a 13 percent share of the $92.7 billion software market in 2006, but should account for 27 percent of the market in 2011 when revenue is expected to be $169.2 billion, according to Gartner research. http://lawandlifesiliconvalley.blogspot.com/2007/09/open-source-paradigm-shift.html. IDC has estimated that open source revenues will increase to $5.8 billion in 2011, which represents an annual growth rate of 26 percent from 2006 to 2011.

Byron's conclusion is that open source and closed source models are converging and that over time software users will be more concerned about functionality and price rather than "open source" or proprietary. http://www.ebizq.net/topics/open_source/features/8842.html?page=5. This conclusion is consistent with the results from our 2007 Open Source Think Tank http://thinktank.olliancegroup.com/index.php?option=com_content&task=view&id=34&Itemid=61 (We will be holding our Third Annual Open Source Think Tank next week and you may find out more about this invitation only event athttp://lawandlifesiliconvalley.blogspot.com/2008/01/thinking-forward-on-commercial-open.html)

Open source has entered the mainstream and needs to be part of the strategy of all software companies.

HP Launches New Websites to Manage Open Source Software

2008-01-24T10:35:00.000-08:00

HP announced the launch of two websites to assist companies in managing open source software:

http://www.fossology.org/: This site provides a tool that HP developed internally to assist in the management of FOSS. The tool was designed to "quickly and accurately describe how a given open source project was licensed." It is designed to analyze all of the source code for a given project and uses license declarations and "tell tale" phrases to identify which software licenses are being used.

http://www.fossbazaar.org/: This community site provides access to information on FOSS and how to manage it. FOSSBazaar is designed to be a site share information and best practices on managing open source software, with issues ranging from license management to vulnerabilities in FOSS projects. HP has posted significant material on FOSS Governance in the "Getting Started" folder.https://fossbazaar.org/?q=topics/gettingStarted

The site is unique because it provides a single location to discuss information which is currently spread across multiple sites. I think that the site will be very valuable to the FOSS community, but only if they use it. In fact, I have contributed information on intellectual property to the site: https://fossbazaar.org/?q=topics/ipIssues.

The availability of this tool as well as the more familiar Black Duck and Palamida tools mean that the use of FOSS will be receiving increasing levels of scrutiny. We have already seen much greater scrutiny of these issues both at funding for venture capital backed startups and in mergers and acquisitions. In fact, several large companies have established specific, separate due diligence procedures focused solely on open source use. Since more than 95% of venture backed startups exit through acquisition, the management of FOSS use should be a priority for technology startups. Moreover, with the increasing use of litigation by some projects, http://lawandlifesiliconvalley.blogspot.com/2007/12/busybox-files-lawsuit-against-verizon.html the management of FOSS use needs to become a priority for all companies using software (which is essentially all companies)

I recommend that you take the sites for a spin.

Buying an Open Source Company

2008-01-21T19:22:00.000-08:00

451 Group has recently published a report on why companies would buy an "open source" company. Although I have not read the report, I have been impressed by the quality of their work in the past. Ironically, the report came out on the day of announcement of the Sun acquisition of MySQL. Such acquisitions will be attractive to the open source companies for the same reasons that it was attractive to MySQL: the ability of a large company like Sun to provide the strong service component which is critical for smaller software companies (and particularly open source software companies) to be successful in selling to the enterprise. http://lawandlifesiliconvalley.blogspot.com/2008/01/sun-microsystems-buys-mysql-for-1.html

Matthew Aslett summarizes the report in his posting. http://blogs.the451group.com/opensource/2008/01/18/why-buy-an-open-source-company/. The 451 Group identifies the following drivers for open source M&A:

Entrance into new markets
Portfolio expansion
Consolidation play
Business overhaul
Technology play
Project acquisition
Technology transfer
Carve out

I agree with Martin Schneider that for many traditional software companies "Business Overhaul" is the most compelling reason for an open source acquisition. They need to learn more about the open source business model. However, I think that it is important to place open source acquisitions in the broader context of the consolidation going on generally in the software industry. http://www.networkworld.com/news/2007/111307-hp-ceo-consolidation-openworld.html. The factors driving this general consolidation will also drive open source acquisitions.

Sun Microsystems Buys MySQL for $1 Billion

2008-01-16T09:49:00.000-08:00

Sun announced today that they are purchasing the open source database vendor, MySQL AB, in a deal valued at around $1 billion. The transaction is scheduled to close late in the third quarter or early in the fourth quarter of Sun's fiscal 2008. According to The Street: "Sun will pay approximately $800 million in cash for all of MySQL's stock and assume about $200 million in options." http://www.thestreet.com/s/sun-to-buy-mysql/newsanalysis/techsoftware/10398964.html?puc=_googlen?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA

Sun's CEO, Jonathan Schwartz, described the acquisition as based on MySQL's unique position: MySQL's database is the "M" in the LAMP stack which is favored by web companies, yet MySQL is having difficulties selling to more traditional companies, because CIOs want traditional "big company" commercial support. MySQL has stated that "more than 100 million copies of MySQL's open source database software have been downloaded and distributed and an additional 50,000 copies are downloaded daily." Sun gains the advantage of MySQL's customer base while supplying the commercial support that MySQL needs to sell into more traditional enterprises. http://blogs.sun.com/jonathan/ Jonathan's post is particularly interesting for the vision behind the acquistion:

So why is this important for the internet? Until now, no platform vendor has assembled all the core elements of a completely open source operating system for the internet. No company has been able to deliver a comprehensive alternative to the leading proprietary OS. With this acquisition, we will have done just that - positioned Sun at the center of the web, as the definitive provider of high performance platforms for the web economy.

Jonathan's post also provides details about how Sun will integrate MySQL into its offerings.

And he announced that Sun will be funding additional developments at universities through global research fellowships designed to advance the state of engineering on the internet. The announcement of this academic initiative follows Sun's announcement in December that Sun will be establishing an "award program" to support innnovation and advance open source development relating to its products. http://lawandlifesiliconvalley.blogspot.com/2007/12/paying-developers-new-way-to-develop.html

2008 is starting with a bang for open source.

Thinking Forward on Commercial Open Source: Third Annual Open Source Think Tank

2008-01-11T08:17:00.000-08:00

Commercial open source software is at an exciting cross roads. In the last year, its importance has been acknowledged by Gartner which declared open-source software "the biggest disruptor the software industry [Gartner] has ever seen and [Gartner] postulated it will eventually result in cheaper software and new business models." http://lawandlifesiliconvalley.blogspot.com/2007/09/open-source-paradigm-shift.html. The first revision of the General Public License in 15 years was completed. http://lawandlifesiliconvalley.blogspot.com/2007/07/general-public-license-version-3-legal.html. The cloud over Linux created by SCO's litigation, almost forgotten, came to a dramatic end in one of the most spectacular melt downs in the history of intellectual property litigation. And many traditional software companies, such as Adobe and Yahoo, have become involved in open source software. http://netscape.com.com/Year-in-review-New-players-enliven-open-source/2009-7344_3-6223153.html

However, success brings new challenges. We will be discussing those challenges again at the Third Annual Open Source Think Tank on February 7 to 9 at the Silverado resort in Napa Valley which is an invitation only gathering for leading global experts to get together and work collaboratively on the issues facing commercial open source. The Think Tank will focus on the continuing evolution of commercial open source companies, customer adoption trends, impact of software-as-a-service, implications of industry consolidation, and legal developments. The keynote speaker will be Chris Anderson of author of the Long Tail and editor in chief of Wired. For a preview of his thoughts, you can read his interview on Matt Asay's blog: http://blogs.cnet.com/8301-13505_1-9845106-16.html?part=rss&subj=news&tag=2547-1040_3-0-5.

The Open Source Think Tank is unlike a traditional conference; all the attendees who participate are expected to contribute in the brainstorming and workshop format and to take advantage of the CIO panels. If you are interested, you can apply to participate at https://thinktank.olliancegroup.com/

Like last year, we will publish a report of the results of the http://thinktank.olliancegroup.com/

2007 Top Ten Free and Open Source Legal Issues

2007-12-19T15:38:00.000-08:00

The year 2007 has been the most active year for legal developments in the history of free and open source (“FOSS”). In fact, you would have been hard pressed in past years to enumerate even five important legal developments. However 2007 permits the creation of a traditional “top ten” list. My list of the top ten FOSS legal developments in 2007 follows:

1. Publication of GPLv3. The GPLv2 continues to be the most widely used FOSS license, yet the law relating to software has developed significantly since the publication of the original publication of the GPLv2 in 1991. The first revision of the GPLv2 had a number of drafts over an 18 month period. However the new GPLv3 license is much more comprehensive than GPLv2 and addresses the new issues which have arisen in software law in the last 15 years.

2. SCO’s Attack on Linux Collapses. SCO filed lawsuits claiming that Linux infringed SCO’s copyrights in UNIX. These suits suffered a fatal blow when the court in the Novell litigation found that SCO did not own the copyrights in UNIX. The ownership of the copyrights is essential to prosecute cases for copyright infringement. The melt down of SCO’s strategy was complete when it filed for bankruptcy soon after this loss.

3. First Legal Opinion on Enforcing a FOSS License. In August, the district court in San Francisco surprised many lawyers by ruling that the remedies for breach of the Artistic License were in contract, not copyright. Most lawyers believe that the failure to comply with the major terms of an open source license means that the licensee is a copyright infringer and, thus, can obtain “injunctive relief" (which means that the court orders a party to cease their violation). On the other hand, if the remedy is limited to contract remedies, then the standard remedy would be limited to monetary damages. Such damages are of limited value to open source licensors. The district court decision has been appealed.

4. First US Lawsuit to Enforce GPLv2. The Software Freedom Law Center filed the first lawsuit to enforce the GPL for the BusyBox software in August. Subsequently, it filed three other lawsuits. Although the first three lawsuits were against small companies, the most recent lawsuit was against Verizon. These lawsuits represent a new approach for the SFLC which, in the past, has preferred negotiation to litigation. SFLC has settled two of the lawsuits. Each of the settlements has required that the defendants pay damages, another new development. These suits may be the first of many.

5. First Patent Infringement Lawsuit by Patent Trolls against FOSS Vendors. IP Innovation LLC (and Technology Licensing Corporation) filed suit against Red Hat and Novell in what may be the first volley in a patent war against a FOSS vendor. Acacia is a well known patent troll which has been buying patents for some time and works through multiple subsidiaries. The FOSS industry provides a tempting target because of its rapid growth. These suits could slow the expansion of FOSS because many potential licensees express concern about potential liability for infringement of third party rights by FOSS.

6. First Patent Lawsuit by a Commercial Competitor against a FOSS Vendor. Network Appliances, Inc. (“NetApps”) sued Sun Microsystems, Inc. (“Sun”) for patent infringement by Sun’s ZFS file system in its Solaris operating system. The ZFS file system posed a challenge to NetApps products because it permits the connection of less expensive storage devices to the operating system.

7. Microsoft Obtains Approval of Two Licenses by OSI. Microsoft Corporation continues its schizophrenic approach to FOSS by simultaneously asserting that the Linux operating system violates Microsoft’s patents and submitting two licenses for approval by OSI. In October, the OSI Board approved the Microsoft Public License (Ms-PL) and the Microsoft Reciprocal License (Ms-RL) as consistent with the Open Source Definition.

8. German Court Finds that Skype Violates GPLv2 The enforcement of the GPLv2 in Germany continues with a Munich court finding that Skype had violated GPLv2 by not including the source code with the binary version of the software (instead, Skype had included a “flyer” with a URL describing where to find the source code version). The suit was brought by Harald Welte, who has been the plaintiff in virtually all of the German enforcement actions for GPLv2. Harald runs gpl-violations.org, an organization which he founded to track down and prosecute violators of the GPL.

9. New License Options. Two of the most controversial issues in FOSS licensing, network use and attribution, were addressed in new licenses adopted this year. A “network use” provision imposes a requirement that when a program makes functions available through a computer network, the user may obtain the source code of the program. Essentially, it extends the trigger requiring providing a copy of the source code from “distribution” of the object code (as required under the GPLv2) to include making the functions available over a computer network. An “attribution” provision requires that certain phrases or images referring to the developing company be included in the program. This provision was very controversial on the License Discuss email list for OSI. The Free Software Foundation published the Affero General Public License in the fall which expanded the scope of the GPLv3 to include a “network use” provision. A limited form of attribution was included in the GPLv3. And OSI approved the Common Public Attribution License which included both the “network use” and “attribution” provisions.

10. Creation of Linux Foundation. The Open Source Development Labs and the Free Standards Group merged to form the Linux Foundation. The FOSS industry is unusual because of the extent to which it depends on non profit entities for guidance. These entities include the OSI, Free Software Foundation, Mozilla Foundation, Apache Foundation and Eclipse Foundation. This merger provides a much stronger platform to promote Linux and open standards.

BusyBox Settles Second GPL Suit

2007-12-17T23:36:00.000-08:00

The Software Freedom Law Center ("SFLC") has settled a second BusyBox sofware lawsuit. The settlement for Xterasys is confidential, but appears to be virtually identical to the settlement for Monsoon Media. Dan Ravicher, the SFLC attorney for BusyBox, stated:

As a result of the settlement, Xterasys has agreed to cease all binary distribution of BusyBox until SFLC confirms it has published complete corresponding source code on its Web site. Once SFLC verifies that the complete source code is available, Xterasys' full rights to distribute BusyBox under the GPL will be reinstated.

Additionally, Xterasys has agreed to appoint an internal Open Source Compliance Officer to monitor and ensure GPL compliance, and to notify previous recipients of BusyBox from Xterasys of their rights to the software under the GPL. Xterasys will also pay an undisclosed amount of financial consideration to the plaintiffs.

The settlement suggests that SFLC has adopted a template for settlement. The lessons for FOSS management are the same as I suggested in my post about Monsoon Media. http://lawandlifesiliconvalley.blogspot.com/2007/11/monsoon-media-lessons-for-foss.html

1. You need to respond quickly and appropriately to any complaints about non compliance with open source licenses.

2. You should have a FOSS Use Policy to avoid these problems.

3. Your FOSS Use Policy should include a procedure for responding to these types of complaints.

4. Non-compliance, even “innocent” non-compliance, is getting more expensive.

If you don’t take these steps voluntarily, they may be imposed on you and you will have your own Open Source Compliance Officer.

Paying Developers: A New Way to Develop Community

2007-12-10T09:48:00.000-08:00

In Bangalore at FOSS.IN, Simon Phipps, Sun Microsystem's open source guru, announced on Friday that Sun will be establishing an "award program" to support innnovation and advance open source development relating to its products. He describes the program as providing a "substantial prize purse". The fund will be divided into six chunks of about $175,000 each — war chests to ignite original ideas in six streams or communities working on Sun-created open environments: OpenSolaris, GlassFish, NetBeans, OpenJDK, OpenOffice and OpenSparc. http://www.hindu.com/2007/12/08/stories/2007120854141800.htm

This announcement deals with one of the most fundamental questions in the FOSS industry: will the future of FOSS be constrained by the limited number of programmers who are willing to work for free? This issue translates into the more immediate question for FOSS companies of how to motivate FOSS developers to become part of their community given the proliferation of FOSS companies and projects. Many industry commentators have emphasized that developing a robust community is critical to the success of a company depending on an open source business model. This announcement may mark the rise of a new approach to community development.

BusyBox Files Lawsuit against Verizon to Enforce the General Public License

2007-12-09T22:34:00.000-08:00

On Thursday, BusyBox, through the Software Freedom Law Center ("SFLC") filed a new lawsuit to enforce the General Public License ("GPL"). The lawsuit claims that Verizon used BusyBox software in one of its routers without complying with the GPL. This lawsuit is the fourth filed by the SFLC in the last two months and confirms that the trend that I mentioned in my earlier post http://lawandlifesiliconvalley.blogspot.com/2007/11/software-freedom-law-center-files.html. SFLC appears to be taking a much more aggressive approach by filing lawsuits within weeks of the original demand letter. In this case, SFLC states that they gave notice to Verizon on November 16 and filed suit on December 5. The allegations in this suit are similar to the earlier complaints. However, this lawsuit is the first against a company of substantial size.

Companies should review their use of BusyBox software which is the basis for these claims and should be prepared to respond quickly to demand letters from the SFLC.

Software Freedom Law Center Files Second Round of Enforcement Actions for BusyBox Software

2007-11-25T23:08:00.000-08:00

The Software Freedom Law Center ("SFLC") has filed a second round of lawsuits to enforce the General Public License ("GPL") for BusyBox software last week. The suits were filed against two different companies: High Gain Antennas, LLC ("High Gain") and Xterasys Corporation ("Xterasys"). As in the Monsoon Media case, the suits are based on the failure to make the source code of the BusyBox software available as required under the GPL.

As I mentioned in my earlier post, the SFLC is much more willing to bring a lawsuit than in the past http://lawandlifesiliconvalley.blogspot.com/2007/11/monsoon-media-lessons-for-foss.html. In past years, SFLC stated that they were involved in up to 50 enforcement actions a year, but never filed a lawsuit. In some cases, they also appear to be moving very rapidly to file such lawsuits: the suit against High Gain was filed on November 20 after an unsatisfactory response from High Gain on November 19 (however, according to the complaint, High Gain had received notice of the requirement to provide source code in August 2006 from a third party, but the source of this notice is not made clear). On the other hand, the initial notice by the SFLC to Xterasys was on May 23, 2007 and Xterasys responded on the same day. The last contact was on May 24, 2007 when SFLC reminded Xterasys to keep them informed of the results of the investigation. However, Xterasys did not further communicate with SFLC.

SLFC consistently takes the position that the failure to comply with all of the terms of the GPL "terminates" the permission in the license and the licensee becomes a copyright infringer. However as in Jacobsen, a court might decide that the failure to provide the source code is a breach of contract (which has a different set of remedies, generally limited to monetary damages) rather than copyright infringement http://lawandlifesiliconvalley.blogspot.com/2007/08/new-open-source-legal-decision-jacobsen.html. Please note that the SFLC and the Free Software Foundation have consistently taken the position that the GPL is not a contract, but I believe that this position is difficult to defend. In any case, I believe that the Jacobsen decision is wrong and the GPL is a very different license from the Artistic License. Yet this question of remedies remains open and depends on the exact terms of the license.

The clear lesson from these suits is to respond quickly if SLFC contacts your company and try to resolve the issue promptly.

Free Software Foundation Announces Final Affero General Public License

2007-11-20T17:44:00.000-08:00

One of the most contentious issues during the drafting of the General Public License Version 3 was whether to add an obligation to make source code available for software licensed under GPLv3 if it was provided over a network. The GPLv2 only required source code to be provided upon the "distribution" of the program (although the Affero project, with the permission of the Free Software Foundation, developed a version of GPLv2 which included a requirement to make the source code available to any user of a network, rather than just upon distribution). With the rise of service providers such as Google, open source software was being modified and used, but the modifications were not being made available to the community.

Ultimately, the FSF decided not to include such a requirement in GPLv3 but provide this option through an alternative license, the Affero GPL. It also made the GPLv3 "compatible" with the Affero GPL in Section 13 of the GPLv3. This compatability is "hardwired" rather than a natural result of changes to the GPLv3 which permitted compatability with Apache. And the compatability is "one way": GPLv3 licensed code can be linked with or combined with works licensed under the Affero GPL, but works licensed under the Affero GPL cannot be licensed under the GPLv3.

The final version of the Affero GPL is not surprising. It includes the "network use" language which requires that the Corresponding Source of the Affero GPL licensed code (as well as any GPLv3 licensed code which is incorporated into it) be made available to any network user. The critical provision is as follows:

13. Remote Network Interaction; Use with the GNU General Public License.
Notwithstanding any other provision of this License, if you modify the
Program, your modified version must prominently offer all users
interacting with it remotely through a computer network (if your version
supports such interaction) an opportunity to receive the Corresponding
Source of your version by providing access to the Corresponding Source
from a network server at no charge, through some standard or customary
means of facilitating copying of software. This Corresponding Source
shall include the Corresponding Source for any work covered by version 3
of the GNU General Public License that is incorporated pursuant to the
following paragraph.

Notwithstanding any other provision of this License, you have permission
to link or combine any covered work with a work licensed under version 3
of the GNU General Public License into a single combined work, and to
convey the resulting work. The terms of this License will continue to
apply to the part which is the covered work, but the work with which it is
combined will remain governed by version 3 of the GNU General Public
License.

The Affero GPL is an important option for companies or projects that are concerned that they will be used to provide services, but the service providers will not provide their modifications to the community. This issue can be important for a company: I worked with Socialtext to develop the Common Public Attribution License which included a network use provision and a very explicit attribution provision. This option may become more popular as more software is provided as a service. I still believe that the GPLv3 will continue to be much more widely used than the Affero GPL. In fact, I have a small bet with Fabrizio Capobianco, CEO of Funambol, that GPLv3 will continue to beat out Affero GPL over the next five years, so keep adopting GPLv3!

Oracle Announces 1,500 Customers for Its Unbreakable Linux

2007-11-15T08:19:00.000-08:00

One of the concerns about the open source business model has been the risk that third parties provide support for a company's product and deprive the company of a significant revenue stream. This concern was crystallized by the Oracle announcement last year that they would support the Red Hat version of Linux at half of Red Hat's price. However, after six months, Oracle had announced only 26 customers. Many companies sighed with relief. However, Oracle recently announced that they had 1500 customers. For more information, see the story: http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9046978. Oracle has acquired some significant clients such as Yahoo, Activision and IHOP. Yet some of these clients are clearly "testing" the service and working with both companies. It will be very interesting to see the numbers after two years (particularly renewals). Yet the Oracle/Red Hat competition may be less relevant for products other than Linux because Linux has a large community of developers which can be hired by Oracle or others who want to provide support services. No such community exists for many open source products. Consequently, this announcement is interesting for the Linux community but may have little relevance outside of the Linux market.

New Guide to GPLv3

2007-11-08T23:45:00.000-08:00

The Free Software Foundation's Compliance Lab has published a new guide to the GPLv3
http://www.fsf.org/licensing/licenses/quick-guide-gplv3.html. This Guide is designed for developers who are not familiar with GPLv3. If you have read the GPLv3 or the FAQs, you will not need this summary. However, if you are new to the GPLv3 and need a narrative summary of major terms and the purpose behind them, this guide will be quite useful.

I have four suggestions:

1. The discussion of Tivoization should clarify that this provision is limited to "User Products." The summary appears to make the requirement apply to all products.

2. A discussion of the limits of permitted modifications under Section 7 would be useful;

3. The application of attribution through the Appropriate Legal Notices section is complicated and an explanation would be useful; and

4. A cross reference to the relevant provisions in the GPLv3 would be helpful.

Monsoon Media: Lessons for FOSS Management

2007-11-08T23:32:00.000-08:00

I have been traveling so I have not been able to comment on the recent Monsoon Media settlement (if you are in London and like Indian food, I highly recommend Quilon at 41 Buckingham Gate, SW1). The recent settlement in the Monsoon Media case has several important lessons for managing FOSS software. Everyone, including Monsoon Media, appears to agree that they violated the GPLv2 by not making the source code of the BusyBox software available as required under the GPLv2. It is less clear why Monsoon Media did not respond to the requests of the BusyBox authors and the SFLC to come into compliance. According to the complaint, they simply admitted that they were not distributing source code of BusyBox as required by the GPLv2. Although the settlement of the case means that we will not have a court’s view on the enforceability of the GPLv2 and the appropriate remedy for breach, it is not surprising.

The settlement was described as follows: As a result of the plaintiffs agreeing to dismiss the lawsuit and reinstate Monsoon Multimedia's rights to distribute BusyBox under the GPL, Monsoon Multimedia has agreed to appoint an Open Source Compliance Officer within its organization to monitor and ensure GPL compliance, to publish the source code for the version of BusyBox it previously distributed on its Web site, and to undertake substantial efforts to notify previous recipients of BusyBox from Monsoon Multimedia of their rights to the software under the GPL. The settlement also includes an undisclosed amount of financial consideration paid by Monsoon Multimedia to the plaintiffs.

As I mentioned in an earlier post, this complaint was the first suit filed about the enforceability of the GPLv2 in the United States. In the past, the SFLC has sought compliance rather than damages http://emoglen.law.columbia.edu/publications/lu-13.html. However, in this case, Dan Ravicher of the SFLC noted (despite Monsoon Media’s public statements about coming into compliance): "Simply coming into compliance now is not sufficient to settle the matter, because that would mean anyone can violate the license until caught, because the only punishment would be to come into compliance." This statement suggests a new more aggressive approach on financially penalizing violators of the GPLv2.

The case also recognizes an often overlooked problem for GPLv2 licensees: if you are out of compliance with the GPLv2, you do not have a license and, thus, are likely to be liable for both copyright infringement and breach of license. This “termination” can be particularly problematic if you have significant amounts of product already distributed and, thus, “unlicensed”.

The dispute moved very swiftly: according to the complaint, Monsoon Media was first informed of their violation on August 28, 2007 (and admitted to their failure to supply source code on September 5, 2007), contacted again by the SFLC on September 11, 2007 and the suit was filed on September 20, 2007.

The lessons from this suit are as follows:

1. You need to respond quickly and appropriately to any complaints about non compliance with open source licenses.

2. You should have a FOSS Use Policy to avoid these problems.

3. Your FOSS Use Policy should include a procedure for responding to these types of complaints.

4. Non-compliance, even “innocent” non-compliance, is getting more expensive.

If you don’t take these steps voluntarily, they may be imposed on you and you will have your own Open Source Compliance Officer.

Ballmer Announced that Microsoft Could Acquire Companies based on Open Source Products: Don't Break Out the Champagne

2007-10-19T09:06:00.000-07:00

Yesterday, during an onstage interview at the San Francisco Web 2.0 Summit, Ballmer stated: "Microsoft will continue to invest in buying technology, products and market share. We'll buy 20 companies a year consistently for the next five years for anywhere between 50 million and 1 billion bucks. We will buy smaller companies. We will buy smaller companies that make some use of open source software. We don't want to discourage people who would talk with us just because they do some open source." This statement is change from Ballmer's long held hostility and dismissive attitude towards FOSS companies. Based on my experience in selling companies to Microsoft, it is a big change. The last time I sold a company to Microsoft (several years ago now), they initially wanted to remove all open source components in the product although they eventually settled for leaving in some open source components because of the difficulty of rewriting them. However, the FOSS community should not break out the champagne: Ballmer is simply acknowledging the reality that virtually all companies, certainly Web 2.0 companies, are built on FOSS. The statement is the business equivalent of stating that Microsoft will buy companies that are subject to the law of gravity.

Yet in an odd way it is consistant with Ballmer's recent demands that Linux users pay Microsoft royalties. I was discussing these statements with Karen Copenhaver, counsel for the Linux Foundation and one of the most thoughtful lawyers in the open source market, at the SFLC seminar last week and she made the point that Ballmer's statements about Linux are an acknowledgement that Linux is a real competitor to Microsoft. This acknowledgement is also consistant with Microsoft's other moves to engage more broadly with the FOSS community such as their recent successful application to the OSI to approve some of their licenses.

However, the FOSS community should celebrate Microsoft's acknowledgement, however indirect, that FOSS is a real competitor.

Patent Troll Fires First Volley at Open Source

2007-10-12T07:20:00.000-07:00

The recent lawsuit in the Eastern District of Texas by IP Innovation LLC (and Technology Licensing Corporation) against Red Hat and Novell may be the first volley in a patent war against open source software. Acacia is a well known patent troll which has been buying patents for some time and works through multiple subsidiaries. http://trolltracker.blogspot.com/2007/10/acacia-targets-linux-in-new-lawsuit.html. Acacia describes itself as follows: The Acacia Technologies group develops, acquires, and licenses patented technologies. Acacia controls 81 patent portfolios covering technologies used in a wide variety of industries including audio/video enhancement & synchronization, broadcast data retrieval, computer memory cache coherency, credit card fraud protection, database management, data encryption & product activation, digital media transmission (DMT®), digital video production, dynamic manufacturing modeling, enhanced Internet navigation, image resolution enhancement, interactive data sharing, interactive television, laptop docking station connectivity, microprocessor enhancement, multi-dimensional bar codes, resource scheduling, spreadsheet automation, and user activated Internet advertising.

Although I and many attorneys in the open source industry have long been concerned about patent challenges to open source companies, this case appears to be the first by patent trolls against an open source licensor. The open source industry provides a tempting target because of its rapid growth. This morning, Eben Moglen at the Software Freedow Law Center Seminar on FOSS issues noted that Brad Bunnell of Microsoft joined Acacia on October 1 . According to news reports, Brad spent sixteen years at Microsoft at a number of positions which included General Manager, Intellectual Property Licensing. http://biz.yahoo.com/bw/071001/20071001005590.html?.v=1

Eben raises the intriguing question about whether these incidents are related. Given the time that it takes to prepare a patent lawsuit, Brad's hiring probably did not effect the filing of this lawsuit. However the hiring may indicate the addition of a new business line for Acacia: suits against open source companies. Steve Ballmer's recent comments about Red Hat's obligation to pay Microsoft for alleged use of its patents makes this lawsuit and the timing of the move interesting.

The seminar was a very helpful overview of the FOSS industry and the next set of legal challenges now that GPLv3 has been published and SCO has been defeated. In the afternoon, the Software Freedom Law Center provided an overview of the legal issues facing FOSS development from establishing contribution policies to entities for projects to patent issues for FOSS projects. The Software Freedom Law Center will be making some final edits and be posting it on their website in the next ten days. You should check their website: http://www.softwarefreedom.org/.

Open Source: Paradigm Shift

2007-09-27T06:07:00.000-07:00

For some time, I have been referring to the open source business model as a "paradigm shift" in the way software is developed and distributed. I use the term "paradigm shift" reluctantly because it has been so overused. However, I think that it is the best term for this change and I use paradigm shift in its original sense of a fundamental change in the industry. I am delighted to report that I now have confirmation of this view from Gartner's recent report: Gartner declared open-source software "the biggest disruptor the software industry [Gartner] has ever seen and [Gartner] postulated it will eventually result in cheaper software and new business models." They stated that open-source products accounted for a 13 percent share of the $92.7 billion software market in 2006, but should account for 27 percent of the market in 2011 when revenue is expected to be $169.2 billion, according to Gartner research. http://www.eweek.com/article2/0,1895,2186932,00.asp

The Software Freedom Law Center Files First Enforcement Action for General Public License

2007-09-20T16:24:00.001-07:00

On September 20, the Software Freedom Law Center has filed the first lawsuit to enforce the General Public License version 2 in the United States ("GPLv2"). The GPLv2 continues to be the most widely used open source license: more than 65% of the projects on SourceForge use it.

The plaintiffs, Erik Andersen and Rob Landley, sued Monsoon Multimedia, Inc. for copyright infringement of the BusyBox software in the Southern District of New York. The complaint can be found at http://www.softwarefreedom.org/news/2007/sep/20/busybox/complaint.pdf. The plaintiffs allege that Monsoon Multimedia distributed their program as part of their firmware, but did not make the source code available.

This case is very important because it will establish what type of remedies (either contract or copyright) are available to licensors for breach of the GPLv2. The Free Software Foundation has consistantly taken the position that the GPLv2 is a copyright license rather than a contract and that the failure to comply with its terms results in copyright infringement.

I don't agree with the view that the GPLv2 is not a contract (see below for the significance of this distinction), because the GPLv2 includes many provisions such as a disclaimer of warranty which are characteristic of "contracts" for the sale of goods under Article 2 of the Uniform Commercial Code. This distinction could be important as illustrated in the recent decision in Jacobsen (see above) which provided that the remedy for the breach of the Artistic License was in contract (i.e. monetary damages) and not copyright infringement. The major difference in remedies is that contract remedies are generally monetary damages, but copyright remedies are generally injunctive relief (the court orders a party to do something) as well as monetary damages. Clearly, open source licensors would prefer to obtain injunctive relief to require the licensee to comply with the terms of the license.

However, the court's decision on remedies will not turn solely on whether the GPLv2 is a copyright license or a contract: even if the court finds that the GPLv2 is a "contract", it could also find that the breach of the GPLv2 results in copyright infringement (see the Jacobsen case blog for an explanation of this issue). The GPLv2 is very different from the Artistic License so the reasoning in the Jacobsen case may not apply. However, courts are very influenced by the decisions of other courts in new areas which is why the wrong decision in the Jacobsen case is so important.

Stay tuned, this case will be very important for the future of open source software.

Open Source Legal Webinar: An Open Source Overview after the Release of General Public License Version 3

2007-08-24T09:23:00.000-07:00

I recently did a webinar for Gathering 2.0 on open source legal issues with a particular emphasis on GPLv3. Gathering 2.0 is an interesting website which is building a community for people who manage intangible assets (like patents, copyrights and trademarks) for companies. I have known the founder, Suzanne Harrison, for over 15 years and she has great experience in this area. Since intangible assets have become such a large part of a company's assets it is critical that they be managed just like other assets. IBM has been doing a great job for many years, extracting over $1 billion per year by licensing its patent portfolio. In the interest of transparency, I should note that Gathering 2.0 is a client.

If you are interested in listening to the webinar (and seeing the slides), please follow these instructions:

1. Go to http://www.gathering2.com/

2. To access the slides, you must register and basic membership is free.

Note: The audible-only portion is available without registration ( on the homepage, just click the "Recording" link in the webinar block below and to the right of my picture).

3. Once you register and login, go back to the homepage, click the "Download Slides" link in the webinar block which is the block below and to the right of my picture.

New Open Source Legal Decision: Jacobsen & Katzer and How Model Train Software Will Have an Important Effect on Open Source Licensing

2007-08-22T09:14:00.000-07:00

One of the frustrations of lawyers serving the open source industry is that they have few cases which interpret open source licenses. As Eben Moglen has pointed out, such cases are few because licensees need the license be in effect to avoid copyright infringement. However, with the increasing use of open source software, many lawyers believe that issues such as the scope of the license are likely to come before courts. The first example of these disputes arose in a decision published on August 17, 2007 in San Francisco regarding the Artistic License. Unfortunately, this case was wrongly decided and if allowed to stand may deprive open source licensors of the ability to get a court order (an injunction) to stop violation of the terms of their license, an important remedy for breach of such licenses.

Although you would expect that the first of these cases would focus on one of the wide range of commercial software being made available under open source licenses and probably deal with the most widely used license, the GPL. You would be wrong. The first case involves model railroad software and the rarely used Artistic License. The facts of the case are complicated, but can be gleaned from the pleadings at
http://jmri.sourceforge.net/k/docket/index.html (the decision is available there too). The plaintiff alleged a number of causes of action, but the most important was the alleged breach of the Artistic License (and copyright infringement for acting beyond the scope of the license) due to the removal of all of the original copyright notices to the original authors and the substitution of Katzen's company's name.

The decision makes two important points: (1) the Artistic License is a contract and (2) the failure to include the copyright notices was not a "restriction" on the scope of the license. The first point is important because the Free Software Foundation and some lawyers have taken the position that open source licenses are not contracts. They have good reasons for wishing to avoid some contract formalities, but this position has complicated discussions about the enforceability and remedies for open source licenses. This decision does not settle the issue for the GPL because it does not apply to the GPL and it is only a District Court decision, (lawyers really prefer to have an appellate decision, such as from the Ninth Circuit or the Supreme Court) but it does suggest how courts would approach the issue.

The second point is very important because it deals with remedies. Generally, the remedy for contract violations under US law is damages, not "injunctive relief" (which means that the court order a party to cease their violation). On the other hand, copyright infringement generally includes a presumption that injunctive relief is appropriate. Thus, the question of whether the violation of a license is a contract violiation or copyright infringement (it can be both) is very important, because licensors would prefer to obtain an injunction prohibiting the breach of the license. The question turns on a nuanced legal issue of whether the term in the license is a "restriction on the scope" of the license or a covenant. In the first case, the failure to comply with the provision means that the licensee is outside the scope of the license and thus is a copyright infringer (as well as liable for breach of the contract). On the other hand, if the term is merely a covenant, then the failure to comply with it is a breach of contract. The most celebrated case dealing with this issue involved the Java license between Sun and Microsoft in which the court found that the obligation on Microsoft to meet the Java compatability tests was a covenant, not a restriction on the scope of the license and the court denied Sun an injunction on those grounds (Sun got an injunction for unfair competition).

However, in this case, the court found that the condition to include a proper notice was not a restriction on the scope of the license and, thus, Katzen was not liable for copyright infringement. The court then denied the injunction. The court did not provide an analysis of why it reached this conclusion. I believe that this decision is simply wrong. The use of the term "condition" in the Artistic License should mean that the terms imposed are restrictions on the scope of the license. In fact, the judge in the Sun case even noted that restrictions are provisions which use language such as "subject to" or "conditional". This decision, if upheld, will remove an important (and expected) remedy from open source licensors. Just to be clear, the decision at present deals only with the Artistic License and the provisions dealing with this issue in other licenses may be interpreted differently. However, the decision is unfortunate and I recommend that the open source community support Jacobsen in having this decision reconsidered. Thanks to Roberta Cairney for bringing this decision to my attention; she has been in the forefront of many important copyright issues.

New Open Source License: Common Public Attribution License

2007-07-26T09:22:00.000-07:00

I am proud to announce that the Socialtext Common Public Attribution License was approved by the OSI board on Wednesday morning. It will be the only OSI approved license that includes a provision enabling attribution and "filling" the ASP hole. The license is designed as a template for use by other companies and Socialtext and I believe that this license will fill an important need for open source companies.

The attribution provision was quite controversial and the license went through many drafts in order to satisfy those concerns. Many open source application companies have felt the need for an attribution notice: more than fifteen have adopted the MPL + attribution first used by SugarCRM, so the approval of this license is quite important to them. The participants on License Discuss at OSI were very opposed to the initial proposal on attribution. However, we and Socialtext worked with the members of License Discuss, the OSI Board as well as other members of the community to modify the provisions to meet these concerns. The real hero of the story is Ross Mayfield, CEO of Socialtext, whose patience and persistence during the eight month process were critical to its success. http://www.socialtext.com/node/267.

The license is based on the Mozilla Public License Version 1.1 but Sections 14 and 15 have been added to provide for limited attribution for the Original Developer and cover use of software over a computer network. The attribution provision in Section 14 permits an attribution notice with the following information: copyright notice, short phrase (10 words), graphic image and URL. The network use provision in Section 15 is based on the "external deployment" approach (rather than the Affero approach) and requires that a company that makes the software available over a network (such as providing service as an ASP) provide the source code to persons who use such application over the network.

I realize that I may be biased, but I encourage companies to consider using the CPAL.

Open Source: Japan

2007-07-26T09:12:00.001-07:00

If I ever had any doubts about the international interest in Open Source, they were laid to rest last week. I was visiting clients in Tokyo (missed the typhoon, but was there for the earthquakes) and asked a friend if the Licensing Executive Society of Japan would be interested in a presentation on the new General Public License Version 3. Even though they only had a week's advance notice, they had 30 lawyers show up for the two hour presentation. Given lawyer's hectic schedules, such a turn out on such short notice indicates a strong interest. We had a wide variety of participants ranging from inhouse counsel at major companies to private lawyers to law professors. It was a very interesting and enlightening experience.

Adoption of General Public License Version 3: Keeping Track

2007-07-08T22:48:00.000-07:00

One of the major questions in the open source community is whether projects will adopt the General Public License Version 3. Although I have stated in my previous post that the GPLv3 has significant advantages over GPLv2, inertia is tough to overcome. We have no prior history on this question because, in the past, projects did not have a choice between different versions of the General Public License. One challenge in answering this question is tracking these conversions because the information is very dispersed. Fortunately, Palamida, the software management firm, is now tracking these conversions on their website: http://gpl3.palamida.com/.

They count 116 conversions in the first week after the release of GPLv3. However, because this first week included July 4th, it may not be representative. Thanks to Palamida for making it easier to track these changes.

General Public License Version 3: A Legal View

2007-07-02T19:03:00.000-07:00

The final version of the General Public License Version 3 (“GPLv3) published on June 29th is a significant improvement over General Public License Version 2 (“GPLv2”) and deserves to have broad acceptance. In fairness to GPLv2, the GPLv2 was drafted in 1991: both the law relating to software and the manner in which software is developed and distributed has changed significantly since 1991. I was actively involved in the process as the Chair of Committee C, the committee representing users, and it is very satisfying that the hard work of the Free Software Foundation, Committee C and the other committees has reached such a successful conclusion (even though not all of our suggestions were accepted).

The process of drafting the GPLv3 has been a remarkably open one: the Free Software Foundation used four committees representing different constituencies from vendors to users to developers to focus comments while at the same time permitting anyone to comment on the drafts through their website. I have been practicing for over 25 years and in my experience this approach is unique. The result has been a significant improvement from the initial drafts and the FSF deserves credit for listening to constituencies beyond the free software community.

My perspective is formed by my legal practice: as noted in my biography, I work primarily with corporate clients from global corporations to Silicon Valley startups. I believe that the option of using the GPLv3 will be valuable to both corporations and developers. Because corporations are the largest users of software, their understanding and comfort with the terms of free and open source software (“FOSS”) licenses is important to the continuing success of FOSS.

The final version includes clarifications of existing issues in the GPLv2 as well as provisions dealing with new issues. The major differences between GPLv2 and GPLv3 are as follows:

1. Clarifying the Scope of GPLv3. The scope of the GPL license is one of the most critical issues for both vendor and users. The GPLv2 relied on United States copyright law for many of its critical definitions. Although the GPLv3 continues to use copyright as the basis for defining the scope of the license it is no longer based solely on United States copyright law. The GPLv3 has also clarified several important issues: for example, does “making the software available” (such as through an ASP) trigger the “copyleft” obligations of the GPLv3 (which include making source code available to licensees)? The GPLv3 clearly states no. Similarly, running the program and making modifications that licensee does not share do not trigger these obligations. Another important change is the deletion of the use of “collective work” in GPLv2: this term is defined in US copyright law as “a work, such as a periodical issue, anthology, or encyclopedia, in which a number of contributions, constituting separate and independent works in themselves, are assembled into a collective whole.” This definition is difficult to apply to software and this ambiguity was a major source of concern about the interpretation of GPLv2.

2. Patents. The GPLv2 did not deal directly with patent licenses because software patents were very rare when it was drafted in 1991. However, software patents have become very common in the software industry in the United States and, thus, the lack of a patent license in GPLv2 created serious ambiguities about its scope. Although the FSF had taken a position that the GPLv2 provided an “implied” patent license, the position was controversial. The GPLv3 grants a direct patent license by companies who contribute (rather than merely distribute) the work. The GPLv3 also includes other provisions relating to patents to prevent another transaction similar to the Microsoft/Novell deal.

3. Expanded Compatibility. The inability to use FOSS programs together which are licensed under different FOSS licenses remains one of the major challenges to the success of FOSS. One of the major disadvantages of GPLv2 is that the software licensed under GPLv2 cannot be used with software licensed under most other major FOSS licenses. GPLv3 is specifically designed to broaden the number of licenses with which it is compatible. Most importantly, works licensed under the Apache Public License (“APL”) can be licensed under GPLv3 (although GPLv3 licensed software may not be licensed under the APL). GPLv3 licensed software can also be used with software licensed under the Affero General Public License which closes the “ASP hole” (see Section 9).

4. Broadened Scope of Works. The GPLv2 was limited to only programs. Although Sun Microsystems, Inc. was able to use the GPLv2 to license the RTL code for its SPARC chip, the GPLv2 was not designed for use with other types of works. The GPLv3 is much broader: it applies to any “copyrightable work” which ranges from software to documentation to music. It also expressly applies to “mask works” (which are the legal protection for the three dimensional design of semiconductors).

5. Termination. The GPLv2 terminated automatically upon failure to comply with its terms and continued use of the program was copyright infringement. GPLv2 did not address how to reinstate the rights under the license after coming back into compliance. This provision was particularly troubling as GPLv2 licensed software was used in consumer products such as television sets and computers which are sold in millions of units: even an inadvertent breach could result in massive liability for copyright infringement. The GPLv3 directly addresses this issue in Section 8. Although it continues to provide for automatic termination, it now includes a procedure for reinstatement.

6. Modification of Software for Consumer Products. This provision has received little comment, but could have an enormous impact. It requires that any consumer product which uses software licensed under the GPLv3 must “open up” the software. Frequently referred to as the “anti-Tivo” provision, it applies to products which are normally used for personal, family or household purposes as well as anything designed or sold for incorporation into a dwelling. Such consumer products range from the expected, such as televisions and stereos, to the surprising such as automobiles and home security systems. Section 6 requires that the vendor provide the source code as well as “Installation Information” for such software. Installation Information includes methods, procedures, authorization keys and other information required to install and execute modified versions of the software. The only exception is for software for which neither the vendor nor a third party can install modified software. This exception is likely to be very limited. The provision also provides the vendor with options relating to warranties and connection to a network in dealing with such modified software.

7. Limitations on Digital Rights Management. The GPLv3 reflects the FSF’s hostility to DRM. Section 5 prohibits the use of software licensed under the GPLv3 to implement DRM (referred to as “effective technological measures” to conform to the provisions of the relevant WIPO treaty). In addition, it requires a user of GPLv3 licensed software to waive his rights under the Digital Millennium Copyright Act and similar laws arising from the WIPO treaty to protect such works by using “anti-circumvention” technology.

8. Use of Contractors. One of the major changes in the software business since 1991 has been the increase in outsourcing of software development, either by independent contractors or outsourcing firms. Under the GPLv2 the transfer of a copy of the software to the independent consultant or outsourcing firm was a “distribution” and, thus, theoretically could permit the independent contractor or outsourcing firm to further distribute the software in both source code and object code form. GPLv3 resolves this issue in Section 2 by permitting a company to provide copies of the work to a third party to make modifications solely for the company.

9. Application Service Provider (“ASP). One of the significant issues in drafting the GPLv3 was the treatment of a new method of making software functions available: companies that do not “distribute” software, but rather make it available as a service (called an Application Service Provider). Since no distribution occurs, these companies do not have to comply with the “copyleft” provisions of the GPL such as making their source code available to their licensees. This problem was referred to as the “ASP hole.” This issue was not addressed in GPLv2 because this method of distribution did not exist in 1991. After considering several approaches, the FSF chose to provide an alternative license for those who wished to address this issue: the Affero General Public License (“AGPL”). The AGPL includes a provision requiring that companies providing services over a network make the source code available to users of the services (just as if the companies had distributed a copy of the software under the GPLv3) based on the well known “Affero” modification to the GPLv2. The GPLv3 also permits AGPL licensed software to “link” to GPLv3 licensed software, but does not permit the AGPL licensed software to be distributed under the GPLv3.

10. Additional Terms. The GPLv2 did not permit any modification of its terms which led to incompatibility with other FOSS licenses and potential problems in countries other than the United States where the wording of disclaimers and limitation of liability required to eliminate warranties and limit liability may differ from the United States. In Section 7, the GPLv3 permits limited modifications in these terms which will help solve these problems. In addition to making the GPLv3 compatible with the APL and permitting modified disclaimers of warranties and limitations, the provision permits adding limited attribution information (an approach which is being used by about twenty companies but using the Mozilla Public License as the basis) and various provisions to protect the use of trademarks and personal names.

I believe that the GPLv3 is a very valuable addition to FOSS licenses and solves many of the challenges faced by GPLv2. Companies distributing FOSS should consider it and companies using FOSS should be prepared, in most cases, to accept it.