Open Source Think Tank 2009: Legal Issues

Mark Radcliffe

DLA Piper USA LLP

Mark.radcliffe@dlapiper.com

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DLA Piper US LLP

• Largest Law Firm in the World

• 3700 attorneys

• 28 countries/68 offices

• Strong Intellectual Property Practice (220 lawyers):

• 80+ patent litigation lawyers in the U.S.

• 50+ lawyers registered with the PTO

• 45+ trademark/copyright lawyers

• 40+ technology and sourcing lawyers

• Strong Open Source Practice (5 partners):

• Assisted Sun with Open Solaris

• GC of Open Source Initiative/Chair of Committee C for GPL Review

• Represent many venture backed companies: SugarCRM, Cleversafe, rSmart, Socialtext, Hyperic

• Represent many large companies: Sun, Zoran, Adobe, Sony Electronics, Palm

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Open Source: Growth Continues

• Gartner:

• 85% of companies use Open Source Software and the remaining 15% intend to deploy it in the next 12 months

• 69% do not have an open source policy

• Gartner Report from 2008:• Open-source products in 2006: 13% of the $92.7 billion software market• Open source products in 2011: 27 % of the $169.2 billion software market• By 2012, 80 per cent of all commercial software will include elements of open-

source technology

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Venture Capital Investing

• Despite a downturn in the amount of venture capital investments, it remains significant and is very similar to 1996/1997

• Silicon Valley continues to dominate the industry with 36% of Q4 deals and down 39% for the entire year

• 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.

• 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.

• 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

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2008: Legal Year in Review

• First appellate decision on open source license: Jacobsen in the CAFC

• Important victory for open source

• Remedy issue• Copyright: injunctive relief/statutory damages• Contract: monetary damages

• Novell awarded damages against SCO

• First patent settlement in an open source case

• Red Hat settlement with Firestar

• Complexity of dealing with an ecosystem

• Enforcement of GPL for Busybox continues

• 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)

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2008: Legal Year in Review

• Open source litigation expands beyond Germany and US: IchessU case is settled in Isreal

• SFLC publishes guide to legal issues

• “A Legal Issues Primer for Open Source and Free Software Projects”

• ”A Practical Guide for GPL Compliance”

• ALI publishes “Principles of Software Licensing” with major risks to industry

• Non disclaimable warranty of non infringement

• Non disclaimable warranty of “no hidden material defects”

• New version of Free Documentation License

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2009: Litigation to Watch

• Jacobsen:

• Injunction denied in District Court (insufficient evidence of harm)

• Appeal has been docketed

• TomTom

• Does not appear to be a direct challenge to Linux

• Many claims focused on GPS; other claims focused on common operating system features

• Companies in discussion for some time

• Jim Zemlin has it right: Calm Down: Hope for the Best/Plan for the Worst

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2009: New Legal Issues

• Rise of hybrid products and potential for conflicting license obligations

• Cost of failure to have an open source policy: litigation exposure because of increase in litigation as open source is more broadly used

• Need to consider open source issues in corporate transactions from M&A to patent litigation settlement

• Linux: Possible conflict between GPLv2 kernel and GPLv3 “tool chain” and scope of GCC Compiler exception (“Eligible Compilation Process”)

• 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

• Canadian Government RFI: “No Charge License Software”: FOSS/Shareware/”Free” proprietary software

• Contribution policies

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Reasons for an Open Source Policy

• Role of a policy

• Manage risk

• Ensure strategic flexibility

• Unusual OSS risks

• Automatic termination of GPL

• Uncertain scope of GPL

• Broad scope of patent termination in MPL

• Forking of code

• Customers are demanding to know what is in your product

• Compliance important for financings/M&A

• IT staff turn over and difficulty of following up

• SFLC becoming more aggressive (Cisco, Monsoon, Verizon)

• SFLC requiring an “Open Source Compliance Officer” as part of settlement

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Conclusions

• Death of pure “commercial” software companies: all software companies are hybrid commercial/open source

• 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

• Mistakes can be expensive because of more litigation

• Open source issues spread throughout corporate life:

• IP strategy

• M&A

• Litigation settlements

• Many critical issues remain uncertain

• Who will control the definition of “open source”

• What business models will be successful

• Role of governments