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.
Monday, February 25, 2008
Thursday, February 14, 2008
SCO Rises From the Dead with $100M
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.
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.
Saturday, February 9, 2008
Open Source Think Tank: Legal Issues
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.
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
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.
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.
Friday, February 8, 2008
Open Source Think Tank: CIOs Speak
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.
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.
Monday, January 28, 2008
Nokia Acquires Trolltech, Continuing the Trend of Greater Involvment of Traditional Software Companies in Open Source
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.
"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.
Thursday, January 24, 2008
HP Launches New Websites to Manage Open Source Software
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.
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.
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