2009 Think Tank Final Update

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Summary of legal developments in open source for Open Source Think Tank 2009. For more recent information on open source legal issues, you can read my blog at http://lawandlifesiliconvalley.com/blog/

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2009 Think Tank Final Update

  1. 1. Open Source Think Tank 2009: Legal Issues Mark Radcliffe DLA Piper USA LLP [email_address]
  2. 2. DLA Piper US LLP <ul><li>Largest Law Firm in the World </li></ul><ul><ul><li>3700 attorneys </li></ul></ul><ul><ul><li>28 countries/68 offices </li></ul></ul><ul><li>Strong Intellectual Property Practice (220 lawyers): </li></ul><ul><ul><li>80+ patent litigation lawyers in the U.S. </li></ul></ul><ul><ul><li>50+ lawyers registered with the PTO </li></ul></ul><ul><ul><li>45+ trademark/copyright lawyers </li></ul></ul><ul><ul><li>40+ technology and sourcing lawyers </li></ul></ul><ul><li>Strong Open Source Practice (5 partners): </li></ul><ul><ul><li>Assisted Sun with Open Solaris </li></ul></ul><ul><ul><li>GC of Open Source Initiative/Chair of Committee C for GPL Review </li></ul></ul><ul><ul><li>Represent many venture backed companies: SugarCRM, Cleversafe, rSmart, Socialtext, Hyperic </li></ul></ul><ul><ul><li>Represent many large companies: Sun, Zoran, Adobe, Sony Electronics, Palm </li></ul></ul>
  3. 3. Open Source: Growth Continues <ul><li>Gartner: </li></ul><ul><ul><li>85% of companies use Open Source Software and the remaining 15% intend to deploy it in the next 12 months </li></ul></ul><ul><ul><li>69% do not have an open source policy </li></ul></ul><ul><ul><li>Gartner Report from 2008: </li></ul></ul><ul><ul><ul><li>Open-source products in 2006: 13% of the $92.7 billion software market </li></ul></ul></ul><ul><ul><ul><li>Open source products in 2011: 27 % of the $169.2 billion software market </li></ul></ul></ul><ul><ul><ul><li>By 2012, 80 per cent of all commercial software will include elements of open-source technology </li></ul></ul></ul>
  4. 4. Venture Capital Investing <ul><ul><li>Despite a downturn in the amount of venture capital investments, it remains significant and is very similar to 1996/1997 </li></ul></ul><ul><ul><li>Silicon Valley continues to dominate the industry with 36% of Q4 deals and down 39% for the entire year </li></ul></ul><ul><ul><li>Q4 reflects a downturn in the number of deals and amount invested, but it is not clear if this decrease is a blip or a trend. </li></ul></ul><ul><ul><li>For Q4, software continues to be the largest sector with life science a close second. Cleantech is third for Q4, but is second for the year as a whole. The growth of cleantech is very interesting since the category did not exist four years ago. In Q4, venture capitalists invested in $5.4 Billion in 818 deals. </li></ul></ul><ul><ul><li>The lack of IPOs and fewer large M&A deals means that venture capitalists are investing in more later stage deals to keep companies alive for an exit </li></ul></ul>
  5. 5. 2008: Legal Year in Review <ul><li>First appellate decision on open source license: Jacobsen in the CAFC </li></ul><ul><ul><li>Important victory for open source </li></ul></ul><ul><ul><li>Remedy issue </li></ul></ul><ul><ul><ul><li>Copyright: injunctive relief/statutory damages </li></ul></ul></ul><ul><ul><ul><li>Contract: monetary damages </li></ul></ul></ul><ul><li>Novell awarded damages against SCO </li></ul><ul><li>First patent settlement in an open source case </li></ul><ul><ul><li>Red Hat settlement with Firestar </li></ul></ul><ul><ul><li>Complexity of dealing with an ecosystem </li></ul></ul><ul><li>Enforcement of GPL for Busybox continues </li></ul><ul><li>Litigation filed against Cisco by SFLC for violation of GPL on behalf of FSF (GNU C Library, GNU Coreutils, GNU Readline, GNU Parted, GNU Wget, GNU Compiler Collection, GNU Binutils, and GNU Debugger) </li></ul>
  6. 6. 2008: Legal Year in Review <ul><li>Open source litigation expands beyond Germany and US: IchessU case is settled in Isreal </li></ul><ul><li>SFLC publishes guide to legal issues </li></ul><ul><ul><li>“ A Legal Issues Primer for Open Source and Free Software Projects” </li></ul></ul><ul><ul><li>” A Practical Guide for GPL Compliance” </li></ul></ul><ul><li>ALI publishes “Principles of Software Licensing” with major risks to industry </li></ul><ul><ul><li>Non disclaimable warranty of non infringement </li></ul></ul><ul><ul><li>Non disclaimable warranty of “no hidden material defects” </li></ul></ul><ul><li>New version of Free Documentation License </li></ul>
  7. 7. 2009: Litigation to Watch <ul><li>Jacobsen: </li></ul><ul><ul><li>Injunction denied in District Court (insufficient evidence of harm) </li></ul></ul><ul><ul><li>Appeal has been docketed </li></ul></ul><ul><li>TomTom </li></ul><ul><ul><li>Does not appear to be a direct challenge to Linux </li></ul></ul><ul><ul><li>Many claims focused on GPS; other claims focused on common operating system features </li></ul></ul><ul><ul><li>Companies in discussion for some time </li></ul></ul><ul><ul><li>Jim Zemlin has it right: Calm Down: Hope for the Best/Plan for the Worst </li></ul></ul>
  8. 8. 2009: New Legal Issues <ul><li>Rise of hybrid products and potential for conflicting license obligations </li></ul><ul><li>Cost of failure to have an open source policy: litigation exposure because of increase in litigation as open source is more broadly used </li></ul><ul><li>Need to consider open source issues in corporate transactions from M&A to patent litigation settlement </li></ul><ul><li>Linux: Possible conflict between GPLv2 kernel and GPLv3 “tool chain” and scope of GCC Compiler exception (“Eligible Compilation Process”) </li></ul><ul><li>As governments and companies have adopted policies to favor the use of “open source” software: the control of this definition will be critical with the risk of different incompatible definitions </li></ul><ul><ul><li>Canadian Government RFI: “No Charge License Software”: FOSS/Shareware/”Free” proprietary software </li></ul></ul><ul><li>Contribution policies </li></ul>
  9. 9. Reasons for an Open Source Policy <ul><li>Role of a policy </li></ul><ul><ul><li>Manage risk </li></ul></ul><ul><ul><li>Ensure strategic flexibility </li></ul></ul><ul><li>Unusual OSS risks </li></ul><ul><ul><li>Automatic termination of GPL </li></ul></ul><ul><ul><li>Uncertain scope of GPL </li></ul></ul><ul><ul><li>Broad scope of patent termination in MPL </li></ul></ul><ul><ul><li>Forking of code </li></ul></ul><ul><li>Customers are demanding to know what is in your product </li></ul><ul><li>Compliance important for financings/M&A </li></ul><ul><li>IT staff turn over and difficulty of following up </li></ul><ul><li>SFLC becoming more aggressive (Cisco, Monsoon, Verizon) </li></ul><ul><ul><li>SFLC requiring an “Open Source Compliance Officer” as part of settlement </li></ul></ul>
  10. 10. Conclusions <ul><li>Death of pure “commercial” software companies: all software companies are hybrid commercial/open source </li></ul><ul><li>Consumer and vendors of software should have an open source strategy; many major companies such as IBM, Sun, HP, Wells Fargo and Charles Schwab already have such a strategy </li></ul><ul><li>Mistakes can be expensive because of more litigation </li></ul><ul><li>Open source issues spread throughout corporate life: </li></ul><ul><ul><li>IP strategy </li></ul></ul><ul><ul><li>M&A </li></ul></ul><ul><ul><li>Litigation settlements </li></ul></ul><ul><li>Many critical issues remain uncertain </li></ul><ul><ul><li>Who will control the definition of “open source” </li></ul></ul><ul><ul><li>What business models will be successful </li></ul></ul><ul><ul><li>Role of governments </li></ul></ul>

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