IP and Commercialization Seminar Series

Management and Issues for Software - Licensing in, ownership, open source, EULA’s and other issues related to the

development, use, distribution and licensing out of software.

Preparing for the New RealityFall

• Sept. 23 Fundamentals of IP

• Oct. 21 Patents and Patenting Process

• Nov. 11Technology

Commercialization and UR• Dec. 9

How to Find Inventions, Good Inventions and

How to find Prior Art

Spring• Jan. 20

Assessing Market Opportunity of New Tech• Feb. 10

Working with Third Parties• Mar. 17

Risk Assessment for Tech Investments• April 14

Software and Open Source Software

12:00-1:00 Wilson Commons, 2nd Floor Gowen Room Lunch Provided

We made it!

SW Utopia v. SW RealityIn a perfect world with infinite budgets and

infinite development time, you would write from scratch all the code for each program.

In the real world of limited budgets and tight deadlines, you will need to use others code

and software. How you manage that process is critically important.

Basic questions when managing software.

Where did the code come from?Employees?Contractors?Licensors (which includes open source)

What do you intend to do with the software?Internal UseDistribution

What are the consequences?Obligations, transfer of rights, etc.

Software Development

UREmployee

sContractor

s

Commercial Software

Open Source Software

End UsersExternal

End UsersInternal

Need to manage the software from developer to end user!

PreexistingProprietary Software

Existing Code

New Code

Employee Developed SW• New Code – Obtaining Title

• Employee Agreement – Obtain ownership of all IP (CP, Patent, etc.) in work product.

• Work for Hire (Copyright Only!)

• Incorporated Code • Commercial Code – Obtain license• Open Source – Understand license

terms• Preexisting Proprietary – Could be

from prior employer, can you obtain rights?

Contractor Developed SW• New Code – Obtaining Title

• SW Agreement – Obtain ownership of all IP (CP, Patent, etc.) in work product.

• Work for Hire (Copyright Only!)• If can’t own, license sufficient rights

• Incorporated Code • Commercial Code – Obtain license• Open Source – Understand license

terms• Pre-existing contractor code – Obtain

license!

Best Practices with SW Contractor Agreements

• Require notice and approval of all 3rd party software incorporated into deliverables.

• Obtain license to any background IP (both theirs and any they can sublicense) incorporated into deliverables.

• Obtain warranty against incorporation of unapproved 3rd party code.

• Obtain warranty for removal of unapproved 3rd party code and repair with approved code.

Issues with 3rd Party SW• Can you obtain necessary rights for internal

use?

• Can you obtain necessary rights for distribution if required?

• Who is responsible for bug fixes, updates, integration, customization, tech support?

• What are the costs, how long will they be performed, are you entitled to regular updates, forward and backward compatibility?

3rd Party SW Issues Cont.• Who owns customizations, is there

exclusivity (even for a set time)?

• Who is responsible for IP infringement, can you get a meaningful indemnity?

• What if the SW supplier fails, can you obtain access to the source code to continue to maintain the SW? (Use of SW escrow)

The Other 3rd Party Software – Open Source

Open source software may be free of cost, but open source is

not free of obligations!

Key Idea

OS is just like any other software –

It is made available under terms dictating user obligations which must be reviewed to determine:1. Whether they meet your business requirements,2. Whether you are able to comply with them, and

3. Whether they require review/approval under university policies.

The interactions of each use and each license are unique, this analysis must be done for

every case!

Key Ideas

• Open Source is subject to licensing terms.Can UR meet the obligations today and in the

future?Can UR get the customer to agree to the

obligations?

• Open Source can require the transfer of intellectual property rights.

Transfer can be in many formsActual Transfer (obligations to provide new

code)Grant of IP (patent, copyright) licenseForbearance of rights (covenants not to sue)

• Open Source can create issues for continuity of supply and services

OS comes without warranties or indemnitiesOS comes without representations of ownership

What is Open Source Software?

• Typically called open source, freeware or shareware.

• Source code distributed and available to any and all at no cost but subject to obligations (licensing

terms).• All users are also free to run, modify, and redistribute the code subject to the license

terms.• Aggregation of effort by different programmers to

a software program.Theory – multiple minds create better software.

Different programmers apply their efforts to modify, support and enhance the program.

Open Source Initiative

• Distribution without charge

• Availability of source code

• Permission to make derivative works

• Integrity of author’s source code

• No discrimination against users/groups

• No discrimination against fields of use

• Distribution of original license with product

• License is not product specific

• No restriction of accompanying

software• License is technology

neutral

Open Source Software Is Subject to Licensing

Terms• OSS is free to obtain and use, but is always subject to conditions (licensing terms)

• User receives software under a license that permits use and/or distribution with

conditionsWithout the license, copyright may prevent

most uses, modifications, and further distribution

License terms dictate “open source” conditions

What Are Typical Open Source Licensing Terms?

• User generally given right to use, copy, modify, and distribute software, subject to conditions

Distribution less of an issue for internal use (but what counts as distribution is often very unclear)

• Distributor cannot charge money for licenseCan charge for other services or products

• Distributor must allow users to copy, modify, and redistribute the software subject to the open source conditions

• In some cases, distributor must make source code of software (original and modifications) available to users and others

What Are Normal Open Source Licensing Terms? -

Continued“Viral” licenses – Bringing other software into contact with some open source

software turns other software into open source software

“Not all open source licenses are “viral”

And finally, courts are starting to enforce OS licenses and various parties are looking to benefit from finding infringement of open

source.

Open Source Licenses are Often Unclear• Often they are not written by legal professionals.

• Often they have no choice of law, so the same license could be interpreted very differently in different jurisdictions

• Terminology is often undefined.Distribution – Does passing to a different employee count as distribution?Does passing to a consultant count as distribution?Does transferring internally between different corporate

entities count as distribution? I Integration- Dynamically or statically linked? Any incorporation?• License may be promoting a particular agenda.

Anarchist licenses – No commercial use permittedPacifist licenses – No military use permitted

Possible Risks from Open Source• No warranty of title

The provider may not actually own or have the right to distribute the software.

Source of software is not known.• No confidence that free of patent

infringementNo intellectual property indemnities

• No recourse if problems arise:LegalTechnical

What Are the Potential Problems?

Liability for infringementPatent

CopyrightDamagesInjunction

Non-IP assertionsTurn proprietary software into open source software

(“viral” licenses)Unintentional Licensing of IP (Patent licenses)

Ability to pull code/replace functionalitySome licenses terminate when licensee asserts

patent

Assessing Risk When Considering OS

LESS RISK MORE RISK

All Internal

Use

(example, testing)

TYPEOF USE

Internal Use to Provide Service

to Customer

Distribute in Product to Customer

CRITICALITYOF USE

Small feature, easily

separable, alternatives

readily available

Important Feature, well integrated,

alternatives available but time

consuming to implement

Basic Function required for

operation, highly integrated.

Alternatives very difficult and time

consuming

Example of using and OS and possible consequences

• A UR employee downloads open source software

• The employee attaches UR code or code from another source to the open source software

• UR uses resulting softwareInternal use only (no distribution)

Risk is likely lower, distribution often triggers most onerous requirements

Distribution to customersRisk is higher, likely obligations to share at least

improvements if not all other integrated software. Exposure is higher to IP infringement claims. Risks of disruption are higher

due to lack of technical support or immediacy of technical support.

Open Source Licenses

Several varieties of licenses“Viral”Non-Viral

Some open source software may be distributed under multiple licenses

Terms of alternative licenses may be advantageous, select the one best for your circumstances

Types of Open Source Licenses

ViralGNU GPL, Lesser GPL

IBMMozilla

Apache (1.1 is non-viral, all others viral)

Non-ViralBSDMIT

W3C (WorldWideWeb Consortium)

“Viral” Open Source Software

Imparts “open source” status on other software that “comes into contact” with it.An important issue is the interpretation of a “derivative work” under copyright law, and interpretation varies by jurisdiction.

Risk – “proprietary” software becomes “open source” software

OS Licenses – An Example - ZLibThis software is provided 'as-is', without any express or implied warranty. In no eventwill the authors be held liable for any damages arising from the use of this software.Permission is granted to anyone to use this software for any purpose, including commercialapplications, and to alter it and redistribute it freely, subject to the followingrestrictions:1. The origin of this software must not be misrepresented; you must not claim thatyou wrote the original software. If you use this software in a product, an acknowledgmentin the product documentation would be appreciated but is not required.2. Altered source versions must be plainly marked as such, and must not be misrepresentedas being the original software.3. This notice may not be removed or altered from any source distribution.

A Common OS License: GNU GPL – Viral

What software is virally infected?Incorporated into GPL software

“Derivative Work under Copyright Law” (GPL Section 0)

“Modified” GPL files (GPL Section 2)

“Conventional Wisdom”Dynamic linked files, are not infected.

Static linked files are infected.

GNU GPL has different VersionsVersion 2:

If the appropriate steps are taken and the linking is performed correctly, it is possible to distribute products having OS licensed under

Version 2.

Version 3:As a practical matter, it is difficult to distribute products having OS licensed under Version 3. (However it can be possible to use OS under

version 3 for internal purposes or internally to provide services to UR customers in some

circumstances)

A Common OS License: GNU GPL – Viral - Continued

Risks/Benefits of Open SourceBenefits

CostSpeedRisks

Failure to comply with licenseVirally infect other UR software

Infringe 3rd party intellectual propertyInability to sell resulting software

Costs saved in development may be costs spent in compliance and profits lost in sales.

OS Best Practices

Documentation of all licensing terms at time of down-load.

Softcopy – Good

Hardcopy – Better

No hyper-links!

Have an Archive where the license can be retrieved for review and compliance (The same software with the OS can be in many later generations of products)

Documentation of exact code down-loaded (unmodified)

Archive exact version of open source software Softcopy- Yes!

Hardcopy (if reasonable)

No hyper-links!

Other Forms of Open Source - Cloud Computing

Cloud Computing is a form of Shareware – Free (often) to use the service but includes licensing terms and obligations.

Companies offering Cloud Computing include Google, Amazon, MS, etc.

Use of Cloud Computing should be treated just like the use of any other open source software and is subject to the same UR requirements.

Compliance• A key part of any SW management plan is

compliance with all licensing terms.• That includes all licensing terms, both

open source and commercial license terms.

• Compliance includes internal behavior (both management and internal end users) but to the extent possible, behavior of 3rd party end users.

Compliance with all licensing terms

(Open Source and Commercial SW)Understand all terms and required actions.

Obligations to include notices/disclaimers/licenses in code,

documentation or as specifiedBuild compliance as much as possible into the

actual software.Draft software to minimize compliance issues

and negative consequences. (Particularly consequences of viral open source terms)

Flow through of licensing terms to final product

Make all downstream software engineers aware of presence of open source software

and licensing terms.

Make launch team aware of presence of open source software and licensing terms.

Comply with all notices and other requirements of all licenses, and monitor

compliance.

Other Related SW IssuesThe End User License Agreement

(EULA)

• How do you get the end user to read the EULA and agree to the terms?

• Common forms are shrink wrap, click wrap, other forms of obtaining agreement.

Other Related SW IssuesRoyalty Triggering Events

• What triggers the payment of a royalty?• Manufacture, use, sale, ???

• Can you comply with the royalty trigger?

• Have you considered the entire life cycle of a product and how that may or may not trigger another royalty payment?

URVentures Intellectual Property and Commercializing

Technology Lecture Series

September 2014 – April 2015

Sponsored by Dean for Research OfficeArts, Sciences & Engineering

THANK YOU!