open source software – licences and business models andrew katz moorcrofts llp...

Open Source Software – Licences and Business Models

Andrew KatzMoorcrofts LLP

andrew.katz@moorcrofts.comwww.moorcrofts.com

+44 1628 470003Twitter: andrewjskatz

Background

Andrew Katz – Partner, Moorcrofts LLP

Thames Valley, UK

IP Law – Software licensing, compliance

Corporate Law – due diligence on corporate transactions (M&A, VC investments)

Employment law – IP transfer for employees

Commercial Property – as software companies develop...

Open Source - Introduction

What is open source?

Freedom to tinker, freedom to distribute, freedom to share.

Also called “free software”

Free as in freedom – but also free as in no licence fees.

How does it work?

Source code used to create object code

Recipe used to create a cake

Cake = the software you run on the computer

With proprietary software, you only get the cake. You can't tinker with the recipe.

Free/open source software lets you have the recipe, and make your own cake.

In practice very few people actually tinker with the recipe – but they can, and others can take advantage of that tinkering.

Licensing

Author chooses to license under a licence granting open source freedoms

Some very easy to comply with “You can do anything you like with this software, as long

as you buy me a beer sometime if we meet”

Some more difficult to comply withGNU GPL says that you can only use GPL code if

modified/distributed code is also released under the GPL “copyleft”

Licensing

There are hundreds of different licences.

But the 6 most common licences cover about 90% of open source projects

About 55% use a copyleft licence

Open source in the Real World

Google – runs on open source and sponsors open source projects

Amazon – runs on open source infrastructure – developed an open source cloud strategy (EC2)

Apache – by far the most popular web server

Firefox – world's most popular browser

Android, Symbian – open source phone operating systems

Linux – >78% of the world's top 500 supercomputers

How does it make money?

80% of a typical IT project spend:Project consultancy/management ImplementationCustom coding IntegrationData migrationTraining and implementationMaintenance and support

Only 20% typically licence fees

Collaborative R&D

Avoids reinventing the wheel

Who makes money out of it?

Oracle/Sun - $7bn acquisition of Sun

IDC – projected $8bn open source revenues worldwide in 2013 – 22.4% compound annual growth rate

Red Hat – over $500mn revenue in 2008/9

Google – mkt cap $169bn

etc...

“Linux is a cancer that attaches itself in an

intellectual property sense to everything it touches”

Steve Ballmer, Microsoft, May 2001

“Linux potentially violates 238 patents”

Steve Ballmer, Microsoft, November 2004

?

We counted over a million lines of code that we

allege are infringed in the Linux kernel today.

Darl McBride September 11, 2003

Oracle vs. Google

Claimed patent infringement and copyright infringement in Android mobile phone operating system

What are the real risks?

Copyright infringement

Patent infringement

Copyright infringement

Two types of copyright user:End-usersSoftware companies/developers

Two types of infringement Inclusion of proprietary code in OSBreach of strict terms of OS licence

End users

Unlikely to suffer a claim anyway – will copyright owners sue potential customers, or the infringing distributors?

SCO only example case. Coders want to replace infringing code!

If breach is of open source code, end users will NOT get suedEven if the distributor is in breach, end user is protected

under GPLOpen source programmers want their software to be usedHow can damages be quantified?

Software Companies

Can ALWAYS remedy a breach of the GPL with payment of zero pounds

But compliance will require them to release source code of derived code, and make it available for no licence fee.

Patent Risk

More difficult to quantify, but no reason should be any different for an open source company than a proprietary company.

Big proprietary suppliers see patents as a lever to scare people away from open source.

In the UK and Europe, relatively fewer software patents than the US, therefore less risk – eg Microsoft has 945 patents potentially affecting the UK, 14,195 registered in the US.

Patent Risk

Even so, patents are a potential risk

Many open source companies have, or have access to, patent portfolios: IBMOpen Invention NetworkPatent Commons Project

the GPL, under which Linux is distributed,

violates the United States ConstitutionDarl McBride, CEO SCO, Open Letter, December

2003

Linus Torvalds (originator of the Linux

kernel):

"If Darl McBride was in charge, he'd probably make marriage

unconstitutional too, since clearly it de-emphasizes the commercial nature of normal

human interaction, and probably is a major impediment to the

commercial growth of prostitution."

Open Source SoftwareAndrew Katz

Moorcrofts LLPwww.moorcrofts.com

andrew.katz@moorcrofts.com+44 1628 470003

Twitter: andrewjskatz