Electronic Design

Make 2010 The Year Of Clean Intellectual Property

In 2008, the open source community saw the year end with a headline-catching lawsuit when the Free Software Foundation filed against Cisco for General Public License (GPL) violations. Not to be outdone, 2009 also ended with a bang. Best Buy, Samsung, JVC, and eleven other consumer electronics companies were named in a copyright infringement lawsuit filed on December 14, 2009 by the Software Freedom Law Center (SFLC) on behalf of the Software Freedom Conservancy. The scope of this lawsuit is unprecedented as it includes 14 defendants.

The suit alleges that the defendants have distributed products containing the Software Freedom Conservancy’s product, BusyBox, in violation of the terms of its GPL Version 2 license (the GPL Version 2 superseded Version 1 in 1991, and is still widely used despite 2007’s Version 3). Specifically, the Software Freedom Conservancy alleges that the defendants have not made BusyBox’s source code available to downstream users.

BusyBox is a tool that combines many UNIX utilities into a single executable and is commonly incorporated into household electronic devices. The Software Freedom Conservancy is seeking damages, injunctive relief, and legal fees. BusyBox has been at the center of several other high-profile GPL violations; the SFLC has, in the past, settled on behalf of BusyBox with Extreme Networks, Monsoon Multimedia, Xterasys Corporation, High-Gain Antennas, and Verizon.

The Software Freedom Conservancy was not the only one to file a lawsuit for GPL violations as 2009 drew to a close. On December 2, 2009, Artifex Software Inc. filed a lawsuit against Palm, Inc. based on Palm’s alleged unauthorized copying and distribution of Artifex’s muPDF, a PDF interpreter that can be integrated with PDAs. The muPDF is licensed under the GPL or under Artifex’s standard commercial license for companies that are unwilling or unable to comply with the terms of the GPL. Artifex alleges that Palm has neither obtained a commercial license nor complied with the terms of the GPL.

These enforcement actions drive home the importance of taking inventory of what open source software is included in each product, what licensing obligations apply to each component, and compliance with these obligations. Open-source license compliance is particularly important given the growing ubiquity of embedded computer systems—the impugned products in the lawsuit against Best Buy, et al include Insignia Blu-ray disc players and Samsung LCD HDTVs.

If you’ve headed into 2010 with clean IP in mind, this article endeavours to demystify open source by explaining how it works and providing a primer on some of the most frequently used open source licenses and their obligations.

WHAT IS OPEN-SOURCE SOFTWARE?

Open source software (OSS) refers to software in which, among other things, the source code is made available to the public. This is important because the open-source community and various ecosystems can modify, improve, and incorporate the code into other works. With proprietary software, usually only the machine-readable compiled code is made available.

It is important to clarify the concept of free. OSS is often referred to as free. While most OSS is indeed free of charge, it should be noted that free does not necessarily mean free of charge but rather refers to the freedom to use, modify, and redistribute the source code so long as certain conditions are met. Conversely, a product that is free of charge is not necessarily open source.

Many assume that the open-source movement runs contrary to the concept of Intellectual Property (IP) rights. This, however, is a myth. The open-source movement is actually made possible by IP rights. In most jurisdictions, such as the United States and Canada, software is automatically protected by copyright as soon as an original work has been created. Copyright law grants copyright owners the exclusive right to reproduce, prepare other works based on the protected work, distribute, and publicly display the work. In general, open-source licenses use these exclusive rights to ensure that the code remains open and accessible so that successive developers can innovate around it. Anyone violating the conditions of the license may be held liable for copyright infringement.

There are many benefits to using OSS. Users can edit the code, fix programming bugs, and even tailor the program to fit their specific needs. OSS is also significantly less expensive than proprietary software. In Jacobsen v. Katzer, the United States Federal Court of Appeals even recognized the substantial benefits of distributing copyrighted works under public licenses. The Court noted that program creators may generate market share for their programs by providing certain components free of charge. Similarly, a programmer or company may increase its national or international reputation by incubating open-source projects. The Court also noted that improvement to a product can occur rapidly and free of charge from an expert not even known to the copyright holder.

WHAT ARE OPEN-SOURCE LICENSES?

The Open Source Initiative (OSI) is a public benefit corporation that refers to itself as the stewards of the open-source definition (OSD). The OSI is a community-recognized body for reviewing and approving licenses as OSD-conformant. A license must comply with the OSI’s ten distribution terms in order to be approved as open source.

The three major requirements include royalty-free redistribution, available source code, and the license must allow for modifications and derived works. Derived works are essentially works based upon the licensed work. The OSI’s website lists all of the approved open-source licenses.

You should also be aware that source code that is made available but is not approved by the OSI is still often referred to as open source. Merely making the source code available does not necessarily mean the licensor has permitted you to modify or redistribute the software. The OSI has criticized companies that have advertised their software as open source when the license was not approved by the OSI board. Such software might be more accurately described as source available software.

Open-source licenses ensure that others are generally free to use, modify, and redistribute the OSS. More generally, license agreements are a type of contract. There are, however, subtle differences in the interpretation of licenses and contracts that can have harsh implications for a party caught offside the license.

A license gives a person permission to use another’s IP in a way that would otherwise constitute infringement. A license will set out the conditions of use and if the user violates these conditions the license allows IP owners to exercise their property rights. This is an important distinction, because it is easier to obtain an injunction when one’s property rights have been violated, e.g., copyright infringement, than it is for a breach of contract. An injunction orders a party to refrain from the infringing activity and can halt business operations, whereas the ordinary remedy for a breach of contract is damages. In 2008, the United States Federal Court of Appeals in Jacobsen v. Katzer confirmed that if a license is limited in scope and the licensee acts outside the scope, the licensor can bring an action for copyright infringement.

WHY SHOULD I CARE ABOUT OPEN-SOURCE LICENSES?

In all likelihood your company has encountered OSS. OSS is becoming ubiquitous as companies that initially cast a wary eye on it have now realized its numerous benefits, including its ability to drive down development costs. It is now difficult to find commercial software that does not incorporate OSS in at least some areas.

While open source offers many benefits, it also heightens the probability of code contamination or unclean IP. Code contamination occurs when content is brought into a development project without regard for licensing or copyright obligations.

The value of a company and its product often depend on the cleanliness of their IP—not solely on its protection. Disregarding license obligations can have surprising and costly consequences for many stakeholders. In any merger and acquisition or funding deal, uncertainty over clean IP can:

  • Generate risk and threaten successful closure
  • Increase product time to market
  • Affect software IP valuation and overall business valuation
  • Result in litigation that can drag on for years, draining company resources
  • Produce negative press and public scrutiny

One of the most well known examples of an open-source surprise attack comes from Cisco and Linksys. Linksys routers used chipsets supplied by Broadcom, and Broadcom outsourced development of these chips to an overseas developer. In 2003, Cisco acquired Linksys for $500 million. After the acquisition, the Free Software Foundation (FSF), an organization that actively seeks companies that violate open-source licenses, determined that the chips contained copyrighted code under the GPL and that Cisco was distributing the product in violation of the license. Cisco agreed to remediate the situation by releasing the source code. As a result, the software Cisco believed to be proprietary when it conducted its business and IP valuation of Linksys was now freely available to the public. In 2008, the FSF sued Cisco for copyright infringement, claiming that Cisco never completed the compliance process. In 2009, Cisco paid an undisclosed amount to the FSF and settled.

WHAT ARE THE MAIN OBLIGATIONS OF OSS LICENSES?

Despite the many benefits of OSS, companies often shy away from it because they do not fully understand the obligations of various licenses. There is fear that using OSS will require a company to give away all of its software for free, but this is not accurate. This section will explain the primary obligations of some of the most frequently used open-source licenses. Open-source licenses can be diverse and can range from quite permissive to quite restrictive. Some of the most frequently used OSS licenses that will be reviewed are:

GNU General Public License (GPL) 2.0

GNU General Public License (GPL) 3.0

GNU Lesser General Public License (LGPL) 2.1

New BSD License  

Apache License 2.0

Mozilla Public License (MPL) 1.1

The matrix shows six of the most frequently used open-source licenses based on their salient obligations. Please note that this is not an exhaustive explanation and it should not be construed as legal advice. Please consult with an attorney.

LESSONS LEARNED

GPL violations and other open-source license violations occur on a regular basis, even if unbeknownst to the offender. The lawsuits in 2009 demonstrate that licensees cannot simply ignore their open-source licensing obligations. As seen in this article, licensors are willing to enforce the terms of the licenses in a court of law. The lawsuit against Best Buy, et al highlights the importance of understanding what OSS is, taking inventory of what OSS is included in each product, what licensing obligations apply, and compliance with these obligations. This process can be facilitated by IP audits, now made easier with automated source-code scanning tools that analyze and identify the presence of open source code, IP ownership, and what type of license applies.

It’s become common in many industries for products to contain hundreds and thousands of software components, so companies will increasingly seek assurances of clean IP.  The Cisco-FSF saga described above serves as a cautionary tale to acquirers, targets, and other stakeholders in the software food chain that IP audits should be conducted not only during the due diligence phase preceding a closing, but also throughout the product life cycle from conception.

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