Outbound Licensing Strategies: Is Open Source the Right Model for Your Company?

Outbound Licensing Strategies: Is Open Source the Right Model for Your Company?

September 26, 2009

Jennifer Buchanan O’Neill

Vice President and Managing Assistant General Counsel, Product Development

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CA CONFIDENTIAL -- PREPARED IN ANTICIPATION OF LITIGATION

Overview

In the past, companies that invested heavily in software development had the objective of either licensing that software commercially, or enhancing their internal IT environments. There is now a third option: releasing that code under an open source license in order to encourage industry-wide adoption of its functionality, gain valuable input from external experts, and better integrate that software with other common components.


Key Points

Today, we’ll analyze the benefits and disadvantages of distributing software through standard proprietary licensing mechanism, donating or contributing it to an established open source community, and maintaining the software through an independently hosted open source project.A discussion of the pros and cons of open source vs. proprietary licensing and the associated business models.An overview of the most common open source licenses and the ramifications of distributing software under each such license. A survey of the major open source communities and other venues for the publication of source code.


Open Source vs. Proprietary Licensing Models

Traditional proprietary licensing– Maintain control over content and use– Generally best able to provide fee-based maintenance

and support– No external assistance with development costs– Competitors unlikely to standardize to approach

Commercial services based on open source solutions– Software features/functionality/quality controlled

essentially by third-party licensors– Service margins can be extensive, plus arrangement

limits software revenue recognition concerns

Open Source vs. Proprietary Licensing Models (cont.)

Entirety of source code is managed by open source community Code otherwise no longer provides sufficient competitive

differentiation as a proprietary solution. Company could reduce future development costs while still enhancing the product due to shared development efforts and commoditization.

Contribution may be initiated to increase market acceptance for an aspect of the contributor’s technology, user or programming interfaces, etc. In both cases, ideally the company continues to leverage the open source project as part or all of its own solutions in order to reap the benefits.

Less control over development roadmap than licensing certain portions of component


Licensing of certain source code to existing open source community in connection with existing open source project– Reduce cost and speed development – Eliminate overhead of retrofitting fixes or improvements for every

new release– Add new features to support product capabilities– If the company does not intend to use the open source code in the

future, then it is less likely that it will reap social benefits from making the contribution to the open source community and, in fact, may be viewed as attempting to manipulate the community.

– Try to build broad community consensus in support of project; demonstrate that it is unique and provides significant value-add to currently available open source code.


Contribution of code to industry alliances and standards bodies– The acceptance and potential growth of an open

source community is substantially improved by adherence to important industry standards, especially if these standards are emerging or the contribution is or could be positioned as a reference implementation created cooperatively with the industry standards organization that promotes the industry standard.

Common Open Source Licenses

Berkeley Software Distribution (“BSD”)/MIT-style licenses

Apache Software License v.1.0, 1.1, 2.0 Eclipse Public License (offshoot of IBM Public

License and Common Public License) Mozilla/Netscape Public License Lesser General Public License General Public License Nonstandard open source licenses with unusual

redistribution limitations/consideration

Venues for Publishing Source Code

Company-owned and administered FTP Server or Internet site– Essentially all work performed by company, with opportunity to

seek contributions if desired.

Initiating company-managed site on SourceForge or similar online venue– Company may elect to remain involved by having its employees

make contributions, serve as committers, manage the web site, etc., but the involvement of greater resources means higher costs and more time commitment.

Assignment/licensing to established open source community– Check terms of Contributor License Agreement (or equivalent)

and outbound license agreement for end-users

Assigning vs. Licensing (cont.)

– Be comfortable with community’s guidelines for confirming pedigree of all donations

– Assignment of the entire code base may benefit the company by virtue of wide acceptance, which might increase the acceptance of the company’s product look and feel or programming interfaces.

– Large-scale code donation also has PR benefits for a company that wants to secure more support from the open source community.

– When a company assigns ownership of its code to an open source community, it gives up certain IP rights, including, for example, copyright ownership and license rights under relevant patents. Thus, the company cannot stop others (including its competitors) from distributing, modifying or creating derivative works of the code base, even if those acts are inconsistent with the direction proposed

by the company for the open source project.


– Assigning the code base means that (a) the source code for the whole of the component will be publicly available and (b) the code is available to the company for its own use *only* under the open source license, because it has not retained copyright ownership and now holds the status of a licensee. Thus, if the company wishes to incorporate the donated code into a proprietary product, it must now comply itself with the terms of the open source license in that distribution (including those that govern any modifications made by the company).

– If an end-user violates the terms of the open source license, the assignee copyright owner – now the open source community – may be the only party who can effectively enforce compliance with its terms.


– In a licensing structure, the company retains the rights of a copyright owner and can continue to make proprietary use of the code, developing and modifying it further at will without having to make such modifications available.

– Many OSLs includes a royalty-free patent license granted by each contributor to each recipient of the program. The “Licensed Patents” are typically those patent claims that are necessarily infringed by using or selling the contribution or the work to which it was contributed.

– But, those same OSLs now usually contain clauses that protect the program from patent litigation allegations by recipients. Specifically, a recipient loses all patent licenses granted under the OSL if it institutes patent litigation against anyone alleging the program infringes its patent rights.

Questions?

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