Licensing SoftwareLicensing Software

Belgrade Belgrade –– Nov 2010Nov 2010

Simon Simon DaviesDavies

Partner, D Young LLPPartner, D Young LLP

srd@dyoung.co.uksrd@dyoung.co.uk

Introduction to LicensingIntroduction to Licensing

�� Most agreements relating to software Most agreements relating to software do not transfer ownership, rather grant do not transfer ownership, rather grant permissions under copyrightpermissions under copyright

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permissions under copyrightpermissions under copyright�� licensinglicensing

�� full range of contract optionsfull range of contract options

�� in contrast to simple purchase (which is usually in contrast to simple purchase (which is usually governed by general legal rights and principles)governed by general legal rights and principles)

Forms of LicenseForms of License

�� License can be considered from following License can be considered from following perspectivesperspectives

�� inward (acquiring rights)inward (acquiring rights)

outward (bestowing rights)outward (bestowing rights)

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�� outward (bestowing rights)outward (bestowing rights)

�� Possible chain of license agreementsPossible chain of license agreements

�� Software licensed inwardly then outwardlySoftware licensed inwardly then outwardly

�� Inwardly licensee is not end userInwardly licensee is not end user

�� Sometimes software is newly createdSometimes software is newly created

�� Development licenseDevelopment license

�� Won’t consider other (rarer) situationsWon’t consider other (rarer) situations

Main Aspects of License Main Aspects of License AgmtAgmt

�� Rights Granted Rights Granted –– Key factorKey factor

�� limited by party, number of users, type of use (e.g. limited by party, number of users, type of use (e.g. home use), field of use, geography, etchome use), field of use, geography, etc

usually binary code (open source discussed later)usually binary code (open source discussed later)

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�� usually binary code (open source discussed later)usually binary code (open source discussed later)

�� no no decompilationdecompilation

�� compensation (payment)compensation (payment)

�� Warranties + IndemnitiesWarranties + Indemnities

�� Other Other IPRsIPRs –– e.g. confidentiality, patentse.g. confidentiality, patents

�� General legal provisionsGeneral legal provisions

End User License End User License AgmtAgmt (EULA)(EULA)

�� Common for desktop software, Windows etcCommon for desktop software, Windows etc�� no reno re--distribution rightsdistribution rights

�� except possibly in relation to certain materialsexcept possibly in relation to certain materials

�� Generally nonGenerally non--negotiable (and rarely read)negotiable (and rarely read)

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�� Generally nonGenerally non--negotiable (and rarely read)negotiable (and rarely read)

�� Key distinguishing featuresKey distinguishing features�� home/business usehome/business use

�� single/multiple machinessingle/multiple machines

�� limited indemnity/warrantylimited indemnity/warranty

�� no/limited supportno/limited support

�� will generally apply to program updateswill generally apply to program updates

Business UsersBusiness Users

�� Wide range of types of agreementWide range of types of agreement

�� Internal useInternal use�� some standard EULAsome standard EULA

�� may incorporate mass pricing, additional rights, etcmay incorporate mass pricing, additional rights, etc

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�� may incorporate mass pricing, additional rights, etcmay incorporate mass pricing, additional rights, etc

�� server code server code –– often negotiate agreementsoften negotiate agreements

�� bespoke code developmentbespoke code development

�� RedistributionRedistribution�� have to match inward/outward licensinghave to match inward/outward licensing

Business Users Business Users –– Licensed UserLicensed User

�� Who runs codeWho runs code�� employeesemployees

�� customers customers –– e.g. webe.g. web--site codesite code

�� (sub)contractors(sub)contractors

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�� (sub)contractors(sub)contractors

�� possible outsourcingpossible outsourcing

�� significant change significant change –– outside direct controloutside direct control

�� cloud computingcloud computing

�� subsidiaries subsidiaries –– related companiesrelated companies

Business Users Business Users –– License ScopeLicense Scope

�� Rights grantedRights granted�� UseUse

�� (Internal) duplication (?)(Internal) duplication (?)

�� Redistribution (?)Redistribution (?)

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�� Redistribution (?)Redistribution (?)

�� Modification (?)Modification (?)�� impact on support, warranty, etcimpact on support, warranty, etc

�� License restrictionsLicense restrictions�� by number of usersby number of users

�� by machine/processors/processor powerby machine/processors/processor power�� what happens if license exceeded?what happens if license exceeded?

�� by geography, field of use, etcby geography, field of use, etc

Business Users Business Users -- SupportSupport

�� SupportSupport�� bug fixes, virus protection, compatibility with other bug fixes, virus protection, compatibility with other systems systems –– e.g. OS upgrades, additional functionalitye.g. OS upgrades, additional functionality

�� defined severity levels and response handlingdefined severity levels and response handling

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�� often incorporated into ongoing license and/or often incorporated into ongoing license and/or maintenance chargemaintenance charge

�� may include new releasesmay include new releases�� might have to pay extra for new versionsmight have to pay extra for new versions

�� obligation on licensee to install updatesobligation on licensee to install updates

�� obligation on supplier for term of supportobligation on supplier for term of support

�� ability to use third party (escrow?)ability to use third party (escrow?)

Business Users Business Users -- TerminationTermination

�� Who has right to terminateWho has right to terminate

�� Conditions of terminationConditions of termination�� breach onlybreach only

sensible conclusionsensible conclusion

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�� sensible conclusionsensible conclusion

�� What survives termination?What survives termination?�� right to use softwareright to use software

�� payment obligationspayment obligations

�� confidentiality restrictionsconfidentiality restrictions

Warranty + IndemnificationWarranty + Indemnification

�� Does it work properly?Does it work properly?�� EULA often limited to media OKEULA often limited to media OK

�� Business Business -- in accordance with documentationin accordance with documentation

Infringement of 3Infringement of 3rdrd party IPR?party IPR?

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�� Infringement of 3Infringement of 3rdrd party IPR?party IPR?�� should at least cover copyrightshould at least cover copyright

�� may also cover patentsmay also cover patents

�� often significant limitationsoften significant limitations�� e.g. to purchase pricee.g. to purchase price

�� notification requirements by licensornotification requirements by licensor

Redistribution AgreementsRedistribution Agreements

�� Wide range of potential license termsWide range of potential license terms�� some purely redistribution in unmodified formsome purely redistribution in unmodified form

�� some to incorporate into own product codesome to incorporate into own product code

�� payment obligationspayment obligations

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�� payment obligationspayment obligations

�� Is you end user license agreement compatible Is you end user license agreement compatible with redistribution agreementwith redistribution agreement�� scope of licensescope of license

�� support (who provides)support (who provides)

�� warranty/indemnitieswarranty/indemnities

�� paymentspayments

Redistribution AgreementsRedistribution Agreements

�� Wide range of potential license termsWide range of potential license terms�� some purely redistribution in unmodified formsome purely redistribution in unmodified form

�� some to incorporate into own product codesome to incorporate into own product code

�� payment obligationspayment obligations

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�� payment obligationspayment obligations

�� Is you end user license agreement compatible Is you end user license agreement compatible with redistribution agreementwith redistribution agreement�� scope of licensescope of license

�� support (who provides)support (who provides)

�� warranty/indemnitieswarranty/indemnities

�� paymentspayments

Open SourceOpen Source

�� Programs such as Linux, Programs such as Linux, FirefoxFirefox, etc, etc

�� Two defining aspects from legal perspectiveTwo defining aspects from legal perspective

�� source code availablesource code available

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�� rere--distribution rightsdistribution rights

�� Arguably both of these are only of marginal Arguably both of these are only of marginal benefit to end userbenefit to end user

�� the majority of normal human beings are not going to the majority of normal human beings are not going to edit Linux or reedit Linux or re--distribute distribute itit

�� Model relies upon copyright licenseModel relies upon copyright license

OSI Open Source Definition (1) OSI Open Source Definition (1)

�� (1) Free redistribution (1) Free redistribution –– no requirement for fee no requirement for fee if sold or given away as component of an if sold or given away as component of an aggregate distributionaggregate distribution

�� (2) Source code (2) Source code –– must include source code with must include source code with

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�� (2) Source code (2) Source code –– must include source code with must include source code with product (or make readily available, e.g. over product (or make readily available, e.g. over Internet)Internet)

�� (3) Derived Works (3) Derived Works –– must allow modifications, must allow modifications, which can be distributed under same termswhich can be distributed under same terms

�� (4) Integrity (4) Integrity –– original plus patch filesoriginal plus patch files

OSI Open Source Definition (2) OSI Open Source Definition (2)

�� (5) No discrimination against people(5) No discrimination against people

�� (6) No discrimination against field of use(6) No discrimination against field of use

�� (7) No addition license(7) No addition license

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�� (7) No addition license(7) No addition license

�� (8) License not product(8) License not product--specificspecific

�� (9) License not restrict other software (9) License not restrict other software ––e.g. cannot require that other software in e.g. cannot require that other software in distribution is open sourcedistribution is open source

�� (10) License is technology neutral(10) License is technology neutral

Open Open Source Source –– End UsersEnd Users

�� Free or cheap codeFree or cheap code

�� but may have to pay extra for servicebut may have to pay extra for service

�� Freedom in use of codeFreedom in use of code

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�� Freedom in use of codeFreedom in use of code

�� e.g. can modify, correct bugs, etce.g. can modify, correct bugs, etc

�� No lockNo lock--in to single supplierin to single supplier

�� (from legal perspective at least)(from legal perspective at least)

Open Open Source Source –– devtdevt (1) (1)

�� Free or cheap code, readily availableFree or cheap code, readily available

�� cheaper and quicker than incheaper and quicker than in--house development or house development or obtaining third party proprietary codeobtaining third party proprietary code

Access to source code allows easier product Access to source code allows easier product

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�� Access to source code allows easier product Access to source code allows easier product verification, integration and modificationverification, integration and modification

�� can treat in effect as own codecan treat in effect as own code

�� No lockNo lock--in to single supplierin to single supplier

Open Open Source Source –– devtdevt (2)(2)

�� Licensing terms for inwardly licensed code Licensing terms for inwardly licensed code may or may not be appropriate for may or may not be appropriate for outgoing codeoutgoing code

dependent on business modeldependent on business model

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�� dependent on business modeldependent on business model

�� Outward OS license may be attractiveOutward OS license may be attractive�� little or no downstream responsibility or costlittle or no downstream responsibility or cost

�� quick to marketquick to market

�� can support other products (HW/SW)can support other products (HW/SW)

Open Source Open Source –– the risks (1)the risks (1)

�� (Non)(Non)--Ownership of codeOwnership of code�� licensor may not have relevant rights, leading licensor may not have relevant rights, leading to possible third party exposure, e.g. SCO v to possible third party exposure, e.g. SCO v IBM litigationIBM litigation

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IBM litigationIBM litigation

�� no indemnityno indemnity

�� potential poor practice regarding IPpotential poor practice regarding IP

�� availability of source code can assist in third availability of source code can assist in third party attacksparty attacks

�� Lack of support (sometimes)Lack of support (sometimes)

Open Source Open Source –– the risks (2)the risks (2)

�� Use of OS code may restrict own product Use of OS code may restrict own product licensing licensing �� e.g “viral” nature of GPLe.g “viral” nature of GPL

potential conflict with business modelpotential conflict with business model

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�� potential conflict with business modelpotential conflict with business model

�� potential conflict with other license agmts; potential conflict with other license agmts; e.g. source code confidentialitye.g. source code confidentiality

�� More difficult to drive value from OS codeMore difficult to drive value from OS code�� business models still being exploredbusiness models still being explored

Main Types of OS license Main Types of OS license -- BSDBSD

�� BSD licenseBSD license�� generally most permissivegenerally most permissive

�� “redistribution and use in source and binary “redistribution and use in source and binary forms, with or without modification, are forms, with or without modification, are

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forms, with or without modification, are forms, with or without modification, are permitted”permitted”

�� subject to main conditions: (a) “as is” (no subject to main conditions: (a) “as is” (no warranty/disclaimer), and (b) propagate warranty/disclaimer), and (b) propagate licenselicense

�� similar to MIT licensesimilar to MIT license

Main Types of OS license Main Types of OS license ––BSDBSD––likelike

�� Many other licenses have similar broad Many other licenses have similar broad terms to BSD including:terms to BSD including:

�� MITMIT

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�� MITMIT

�� Apache Apache -- sort of BSD plus acknowledgementsort of BSD plus acknowledgement

�� W3C W3C –– sort of BSD plus details of any sort of BSD plus details of any modificationmodification

Company OS licensesCompany OS licenses

�� Tend to be much longerTend to be much longer

�� written by lawyerswritten by lawyers

�� trying to protect alternative revenue streamstrying to protect alternative revenue streams

patent issuespatent issues

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�� patent issuespatent issues

�� often potentially interested in third party often potentially interested in third party modicationsmodicationsto their original codeto their original code

�� main terms often similar to main terms often similar to MozillaMozilla (Netscape)(Netscape)

�� Versions by IBM, Sun, Nokia, Versions by IBM, Sun, Nokia, etcetc

Apple OS licenseApple OS license

�� Can use, distribute original codeCan use, distribute original code

�� patent license to original codepatent license to original code

�� limitations on outward licenselimitations on outward license

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�� limitations on outward licenselimitations on outward license

�� Can modify codeCan modify code

�� must make available source code of must make available source code of modificationsmodifications

�� not necessarily covered by patent license not necessarily covered by patent license

Computer Associates OS licenseComputer Associates OS license

�� “CA believes in open source. We believe “CA believes in open source. We believe that the OS devt approach can take that the OS devt approach can take appropriate sw programs to appropriate sw programs to

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appropriate sw programs to appropriate sw programs to unprecedented levels of quality, growth unprecedented levels of quality, growth and innovation.”and innovation.”

�� must include change listing with filemust include change listing with file

�� must notify of any required third party IPRmust notify of any required third party IPR

GNU Public License (GPL) (1)GNU Public License (GPL) (1)

�� Most significant OS licenseMost significant OS license�� applies to 50% plus of OS products, including applies to 50% plus of OS products, including Linux (“GNU/Linux”)Linux (“GNU/Linux”)

v2 from 1991v2 from 1991

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�� v2 from 1991v2 from 1991

�� strong motivation behind license to promote strong motivation behind license to promote and ensure “free” software (“copyleft”)and ensure “free” software (“copyleft”)

�� half license, half philosophical treatisehalf license, half philosophical treatise

�� “any free program is threatened constantly by “any free program is threatened constantly by software patents”software patents”

GPL (2)GPL (2)

�� GPL allows modifications, copying, etcGPL allows modifications, copying, etc

�� “Viral” effect “Viral” effect –– GPL must also apply to any GPL must also apply to any code distributed that includes original GPL code distributed that includes original GPL

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code distributed that includes original GPL code distributed that includes original GPL codecode

�� separate license to handle libraries (LGPL)separate license to handle libraries (LGPL)

�� only triggered by distributiononly triggered by distribution

�� includes requirement to make available source includes requirement to make available source codecode

Working (or Not working) with Working (or Not working) with GPLGPL

�� DON’T include GPL (or other code) in any DON’T include GPL (or other code) in any product files without careful consideration product files without careful consideration and legal consultationand legal consultation

also applies to GPL product tools, e.g. also applies to GPL product tools, e.g.

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�� also applies to GPL product tools, e.g. also applies to GPL product tools, e.g. compiler, that might leave code in productcompiler, that might leave code in product

�� otherwise may have to release source code of otherwise may have to release source code of product, and provide product for freeproduct, and provide product for free

�� NB current litigation in US for violation of NB current litigation in US for violation of GPLGPL

GPL version 3 (1)GPL version 3 (1)

�� “Over the following 15 years [since GPL v2)], some “Over the following 15 years [since GPL v2)], some members of the … [OS] community came to believe that members of the … [OS] community came to believe that some software and hardware vendors were finding some software and hardware vendors were finding loopholes in the GPL, allowing GPLloopholes in the GPL, allowing GPL--licensed software to licensed software to be exploited in ways that were contrary to the intentions be exploited in ways that were contrary to the intentions of the programmers. These concerns included of the programmers. These concerns included tivoizationtivoization

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be exploited in ways that were contrary to the intentions be exploited in ways that were contrary to the intentions of the programmers. These concerns included of the programmers. These concerns included tivoizationtivoization(the inclusion of GPL(the inclusion of GPL--licensed software in hardware that licensed software in hardware that will refuse to run modified versions of it); the use of will refuse to run modified versions of it); the use of unpublished, modified versions of GPL software behind unpublished, modified versions of GPL software behind web interfaces; and patent deals between web interfaces; and patent deals between MicrosoftMicrosoft and and Linux and Unix distributors that may represent an Linux and Unix distributors that may represent an attempt to use patents as a weapon against competition attempt to use patents as a weapon against competition from Linux.” (Wikipedia)from Linux.” (Wikipedia)

GPL version 3 (2)GPL version 3 (2)

�� Announced 29 June 2007 after long Announced 29 June 2007 after long consultation programconsultation program

�� Does not apply Does not apply retrospectivelyretrospectively

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�� Does not apply Does not apply retrospectivelyretrospectively

�� in fact, incompatible with GPL2, since both in fact, incompatible with GPL2, since both demand that they apply to any overall productdemand that they apply to any overall product

�� but can have separate v2 and v3 programs in but can have separate v2 and v3 programs in same distributionsame distribution

TivoizationTivoization

�� Tivo systemsTivo systems�� based on GPL code; modifications made based on GPL code; modifications made available on Webavailable on Web

but box would only run Tivo code (no further but box would only run Tivo code (no further

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�� but box would only run Tivo code (no further but box would only run Tivo code (no further modifications permitted)modifications permitted)

�� GPL v3GPL v3�� s6 s6 -- “User Product” “User Product” –– intended for household intended for household use. MUST provide “Installation Information” use. MUST provide “Installation Information” to support the use of modified codeto support the use of modified code

The EndThe End

�� ThankThank--youyou

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�� Simon Davies srd@dyoung.co.ukSimon Davies srd@dyoung.co.uk