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

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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.

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  • CA (NASDAQ: CA), the world's leading independent IT management software company, helps customers optimize IT for better business results. CA's Enterprise IT Management solutions for mainframe and distributed computing enable Lean IT—empowering organizations to more effectively govern, manage and secure their IT operations.    Founded in 1976, CA today is a global company with headquarters in the United States and 150 offices in more than 45 countries. CA serves more than 99% of Fortune 1000® companies, as well as government entities, educational institutions and thousands of other companies in diverse industries worldwide.
  • Jennifer Buchanan O’Neill is Vice President and Managing Assistant General Counsel at CA, Inc., where she leads the Product Development practice group and provides legal counsel on inbound and outbound technology licensing, product development and marketing, mergers and acquisitions, product-related litigation, and regulatory compliance. Ms. O’Neill previously served as Senior Counsel of Intellectual Property and Strategic Sourcing for CIGNA and as in-house counsel for a number of divisions of IBM Corporation.  Prior to her employment by IBM, she served as Deputy Assistant General Counsel of Finance and Operations for the United States Environmental Protection Agency, where her duties included negotiating the agency’s cooperative research and development agreements, copyright and publication contracts, and other licensing arrangements.  Ms. O’Neill clerked at the United States Court of Appeals for the Federal Circuit and the Fourth Judicial Circuit of Virginia.  She has a strong interest in open source licensing and has worked closely with that community in the establishment of best practices for the contribution, licensing and maintenance of code. She graduated from Duke Law School in 1993 and received a B.A. in political science and philosophy from Grove City College in 1990.
  • Outbound Licensing Strategies: Is Open Source the Right Model for Your Company?

    1. 1. Jennifer Buchanan O’Neill Vice President and Managing Assistant General Counsel, Product Development Outbound Licensing Strategies: Is Open Source the Right Model for Your Company? September 26, 2009
    2. 2. Notices and Disclaimers <ul><li>Copyright © 2009 Jennifer Buchanan O’Neill. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to their respective companies. </li></ul><ul><li>The information in this presentation could include typographical errors or technical inaccuracies, and the author assumes no responsibility for its accuracy or completeness.  The statements and opinions expressed herein are those of the author and are not necessarily those of CA, Inc. (“CA”).  Any reference in this publication to third-party products and websites is provided for convenience only and shall not serve as the author’s endorsement of such products or websites.  Your use of such products, websites, any information regarding such products or any materials provided with such products or on such websites shall be at your own risk. </li></ul><ul><li>To the extent permitted by applicable law, the content of this presentation is provided “AS IS” without warranty of any kind. In no event will the author or CA be liable for any loss or damage, direct or indirect, arising from or related to the use of this information, including, without limitation, lost profits, lost investment, business interruption, goodwill or lost data, even if expressly advised in advance of the possibility of such damages.   Neither the content herein nor any software product referenced serves as a substitute for your compliance with any laws (including but not limited to any act, statute, regulation, rule, directive, standard, policy, administrative order, executive order, and so on (collectively, “Laws”)  referenced herein or otherwise. You should consult with competent legal counsel regarding any such Laws. </li></ul>CA CONFIDENTIAL -- PREPARED IN ANTICIPATION OF LITIGATION
    3. 3. Overview <ul><li>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.    </li></ul>CA CONFIDENTIAL -- PREPARED IN ANTICIPATION OF LITIGATION
    4. 4. Key Points <ul><li>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. </li></ul><ul><li>A discussion of the pros and cons of open source vs. proprietary licensing and the associated business models. </li></ul><ul><li>An overview of the most common open source licenses and the ramifications of distributing software under each such license. </li></ul><ul><li>  A survey of the major open source communities and other venues for the publication of source code.  </li></ul>CA CONFIDENTIAL -- PREPARED IN ANTICIPATION OF LITIGATION
    5. 5. Open Source vs. Proprietary Licensing Models <ul><li>Traditional proprietary licensing </li></ul><ul><ul><li>Maintain control over content and use </li></ul></ul><ul><ul><li>Generally best able to provide fee-based maintenance and support </li></ul></ul><ul><ul><li>No external assistance with development costs </li></ul></ul><ul><ul><li>Competitors unlikely to standardize to approach </li></ul></ul><ul><li>Commercial services based on open source solutions </li></ul><ul><ul><li>Software features/functionality/quality controlled essentially by third-party licensors </li></ul></ul><ul><ul><li>Service margins can be extensive, plus arrangement limits software revenue recognition concerns </li></ul></ul>
    6. 6. Open Source vs. Proprietary Licensing Models (cont.) <ul><li>Entirety of source code is managed by open source community </li></ul><ul><ul><ul><li>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. </li></ul></ul></ul><ul><ul><ul><li>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. </li></ul></ul></ul><ul><ul><ul><li>Less control over development roadmap than licensing certain portions of component </li></ul></ul></ul>
    7. 7. Open Source vs. Proprietary Licensing Models (cont.) <ul><li>Licensing of certain source code to existing open source community in connection with existing open source project </li></ul><ul><ul><li>Reduce cost and speed development </li></ul></ul><ul><ul><li>Eliminate overhead of retrofitting fixes or improvements for every new release </li></ul></ul><ul><ul><li>Add new features to support product capabilities </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>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. </li></ul></ul>
    8. 8. Open Source vs. Proprietary Licensing Models (cont.) <ul><li>Contribution of code to industry alliances and standards bodies </li></ul><ul><ul><li>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. </li></ul></ul>
    9. 9. Common Open Source Licenses <ul><li>Berkeley Software Distribution (“BSD”)/MIT-style licenses </li></ul><ul><li>Apache Software License v.1.0, 1.1, 2.0 </li></ul><ul><li>Eclipse Public License (offshoot of IBM Public License and Common Public License) </li></ul><ul><li>Mozilla/Netscape Public License </li></ul><ul><li>Lesser General Public License </li></ul><ul><li>General Public License </li></ul><ul><li>Nonstandard open source licenses with unusual redistribution limitations/consideration </li></ul>
    10. 10. Venues for Publishing Source Code <ul><li>Company-owned and administered FTP Server or Internet site </li></ul><ul><ul><li>Essentially all work performed by company, with opportunity to seek contributions if desired. </li></ul></ul><ul><li>Initiating company-managed site on SourceForge or similar online venue </li></ul><ul><ul><li>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. </li></ul></ul><ul><li>Assignment/licensing to established open source community </li></ul><ul><ul><li>Check terms of Contributor License Agreement (or equivalent) and outbound license agreement for end-users </li></ul></ul>
    11. 11. Assigning vs. Licensing (cont.) <ul><ul><li>Be comfortable with community’s guidelines for confirming pedigree of all donations </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>Large-scale code donation also has PR benefits for a company that wants to secure more support from the open source community. </li></ul></ul><ul><ul><li>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 . </li></ul></ul>
    12. 12. Assigning vs. Licensing (cont.) <ul><ul><li>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). </li></ul></ul><ul><ul><li>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. </li></ul></ul>
    13. 13. Assigning vs. Licensing (cont.) <ul><ul><li>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. </li></ul></ul><ul><ul><li>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.   </li></ul></ul><ul><ul><li>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. </li></ul></ul>
    14. 14. Questions? <ul><li>About CA </li></ul><ul><li>CA (NASDAQ: CA), the world's leading independent IT management software company, helps customers optimize IT for better business results. CA's Enterprise IT Management solutions for mainframe and distributed computing enable Lean IT—empowering organizations to more effectively govern, manage and secure their IT operations.    Founded in 1976, CA today is a global company with headquarters in the United States and 150 offices in more than 45 countries. CA serves more than 99% of Fortune 1000® companies, as well as government entities, educational institutions and thousands of other companies in diverse industries worldwide. </li></ul>

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