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Open Source Software: Defining It, And Using It To Grow Your Business

April 23, 2013 Webinar Presented byBarry Horwitz and Promet Source

Necessary Disclaimer I am a lawyer, but . . . This presentation is not legal advice Legal advice requires:

□ Specific factual circumstances

□ An attorney-client relationship.

There will be time for questions at the end, but my answers are not “legal advice.”*

*Fine Print: If you have specific issues, questions or problems in mind, we can set up a time to discuss them separately

Open Source Software - Overview What is open source software?

□ Subject to open source license.

What is an open source license?□ Licensor must grant certain rights

□ Right to use, modify and distribute

□ Right to access source code

“Open source” vs. “Free software”□ You can sell open source software.

□ Free” does not mean “no cost”; it means unencumbered.

Think “Free speech, not free beer.”

Open Source Software – Uses & Restrictions What can businesses do with it? Some

examples:□ Use existing software as a head start

□ Modify code for additional functionality

□ Greater adaptability

□ Lower cost

Restrictions:□ Must allow access to source code

□ Must allow further modifications

□ Must allow further redistribution

Intellectual Property Primer

Intangible property rights over “creations of the mind”; four types:

Trademark

Patent

Copyright

Trade Secret

Trademark Law

Legal Basis: Lanham Act, 15 U.S.C. §§ 1051 et Seq.

Use: “Mark” or designation to indicate source□ Indicates quality

□ Need not identify source

Rights accrue upon use in commerce

Registration provides additional benefits

Prevents others from using the same or any confusingly similar mark with similar or related goods or services.

Patent Law

Legal Basis: U.S. Constitution, Art. 1, § 8, Cl. 8

U.S. Patent Act, 35 U.S.C. §§ 1 et seq.

Use: Inventions, improvements.□ Machines, Devices

□ Chemical compositions

□ Methods Processes

Rights accrue when granted a patent by Patent Office

Must disclose to earn monopoly

Prevents others from using, making, selling, importing, or offering for sale

Copyright Law Legal Basis: U.S. Constitution, Art. 1, §

8, Cl. 8

U.S. Copyright Act, 17 U.S.C. §§ 1 et seq.

Use: Works of Authorship.□ Does not protect ideas

□ Fixed in tangible medium of expression

Rights accrue when expression is fixed

Registration provides additional benefits

Prevents others from making copies, distributing, making derivative works and, in some cases, performance

Trade Secret Law

Legal Basis: Uniform Trade Secrets Act (enacted state by state). E.g. 765 ILCS 1065/1 et seq.

Use: Protect confidential information□ Information must derive economic benefit from

secrecy

□ Owner must take steps to protect confidentiality

Rights accrue as confidential information accumulates, so long as secrecy maintained

Registration provides additional benefits

Prevents others from wrongful using or disclosing

Independent derivation okay

Software: Types of IP

Software is most clearly subject to Copyright Literary work

More recently, patent protection

Could also be trade secret

Software Copyright Primer

17 U.S.C. § 101 defines a computer program as: A set of statements or instructions to be

used directly or indirectly in a computer in order to bring about a certain result.

Software copyright owners have exclusive right to:

Reproduce the work

Distribute the work

Create derivative copies of the work

Software: Licenses

You do not buy software; you license it.

License: grants the right to use. Permission.

Proprietary licenses withhold rights. Limit number of computers. Cannot distribute Cannot make derivative works

What is open source?

Open Source Definition

Open Source Definition – Criteria of License

□ 1. Free Redistribution – no restrictions on selling or giving away software. “License shall not require royalty or other fee for such sale.”

□ 2. Source Code - program must include source code, or include publicized means of obtaining source code for reasonable reproduction cost. Must allow distribution in source code

□ Derivative Works - must allow modifications and derivative works, and must allow them to be distributed under the same terms

□ No Discrimination – must not discriminate against any person or group or persons, or against any field of endeavor

□ Automatic Distribution of License – rights attached to license apply to all redistributions

Open Source Definition (Cont.)

Open Source Definition – Criteria of License

□ 3. Derivative Works - must allow modifications and derivative works, and must allow them to be distributed under the same terms

□ 4. No Discrimination – must not discriminate against any person or group or persons, or against any field of endeavor

□ 5. Automatic Distribution of License – rights attached to license apply to all redistributions

□ Other requirements…

Open Source License – The GPL

Basic rights include access to the source code and right to make derivative works

Key element: Reciprocity. Changes to the software must be

released under the same license

Purpose: Increase the amount of publicly

available software Ensure compatibility

Drawback: Linking – cannot be combined with proprietary software

Open Source Software - Advantages No Vendor Lock-in

Proprietary software can require additional monthly fee.

E.g. Security/Anti-spyware programs Leads to longer useful life of

software Can’t Be Orphaned by Vendor End-of-

Lifing Proprietary software - vendor stops

making new versions. E.g. Internet Explorer for Mac.

Lower Risk of Incompatibilities Proprietary software licenses can

preclude a fix; open source licenses allow anyone to create compatibility

Lower Cost Than Building From Scratch

Open Source Software – Advantages (Cont.) Allows for Larger User Base

Proprietary licenses can assert limitations on number of users.

E.g., downloading music Control of Software Remains With User,

Not Vendor Ability to Integrate with Open

Standards Greater adaptability Increased Innovation

Avoid competing with proprietary modified version of your own work

Peer Review Greater reliability Greater security

Open Source Software – Risks

Must adhere to copyright attribution and notice requirements

Must adhere to requirement to include source code

Linking can render proprietary source code subject to open source license

GPL and similar licenses have not been construed by American courts

Open source software can still be covered by software patents

Open Source Software For Startups The advantages discussed above

particularly apply to startups seeking to offer Software as a Service.

Facebook and Google collectively required millions of hours worth of coding.

Startups cannot afford to invest that much time

Goal: create and sell a mobile application that, for example, allows users to find a reasonably-priced parking space in downtown Chicago. Map functionality Payment processing functionality Account profile User Interface

Open Source Software For Startups The advantages discussed above

particularly apply to startups seeking to offer Software as a Service.

Startups cannot afford to invest millions of hours of coding in a new service

Goal: create and sell a mobile application that, for example, allows users to find a reasonably-priced parking space in downtown Chicago. Map functionality Payment processing functionality Account profile User Interface

Can You Generate Revenue With Open Source Software?

If software is a mobile application, that application can be sold in an app store.

YOU CAN SELL (license) OPEN SOURCE SOFTWARE, e.g. GPL, or from Drupal repository

“Sales” are really licenses. Can charge as much as you want! Purchasers (licensees) subject to the same license

Source code must be made available to licensees□ Need not give away code not distributed (internal

use)□ Viewing a website is not distribution, so need not

give away code to website visitors

Can You Generate Revenue With Open Source Software? (Cont.) Can I sell modules written by others?

□ No. That person retains copyright of their modules!

What does it mean to retain copyright even though subject to GPL?□ Right to control distribution; sell copies of YOUR

work□ What you give up: must make source code

available and others can modify your work

However, you can provide other services based on modules written by others, like:□ Support□ Training□ Customization□ Integration

Sample Solutions of Open Source vs. Proprietary Software

Grinnell College Campus Tour

FAQs Difference between GPL2 and GPL3?

Protects right to tinker: prevents “tivoization”

“Distribute” changed to “convey”

Stronger protection against patent threats Conveying software requires

licensing patents necessary to exercise GPL rights

If GPL3 licensee sues for patent infringement their license is terminated

Offers new ways to provide source code

Clarifies compatibility

FAQs (Cont.)

Difference GPL and other licenses (MIT, BSD)

No reciprocity

People can modify software licensed under BSD and then turn it proprietary

Fail to mention patents

FAQs (Cont.)

If I write a new module that does something never done before, have I created intellectual property?

You’ve created a module. The module can give rise to intellectual property rights. Patent Copyright Trade Secret

FAQs – Developers What should I put in my contract to

allow myself to re-use my code for similar projects?

IP Ownership Clause – retain copyright for all source code written.

If I develop GPL code for one client, can I sell it to another client if I do not make any changes?

Yes! You own the copyright, and your “sale” to the first client is merely a license for him to use it.

FAQs – Developers What should I put in my contract to

allow myself to re-use my code for similar projects?

IP Ownership Clause – retain copyright for all source code written.

If I develop GPL code for one client, can I sell it to another client if I do not make any changes?

Yes! You own the copyright, and your “sale” to the first client is merely a license for him to use it.

FAQs – Hiring Developers

If I want to hire a developer, what can I put in my contract to prevent them from selling the code to my competitors?

Insist that developer grant an exclusive license .

(But that will not prevent developer from modifying code further and having the ability to sell further modified code to competitors)

Summary & Wrap-Up

Numerous advantages to using open source software to offer new functionality within a business, or start a new business Need not start from scratch Lower cost “Future Proof”

Main drawbacks include adhering to all rules and requirements of license – requirements of copyright notice, attribution and making source code publicly available

Questions?

Contact information

Barry Horwitz, Greenberg Traurig, LLP horwitzb@gtlaw.com 312-456-1037

Andy Kucharski, Promet Source andy@promethost.com 773-525-8255