Last year, 2011, was one of the most active years in legal developments in FOSS. This activity reflects the increase in FOSS use: Laura Wurster of Gartner, noted in the Harvard Business Review blog that open source has hit a “strategic tipping point” this year with companies increasingly focused on using “open source” software for competitive rather than cost reasons http://lawandlifesiliconvalley.com/blog/?p=619.
Continuing the tradition of looking back over top ten legal developments in FOSS, http://lawandlifesiliconvalley.com/blog/?s=top+10+2008&x=40&y=6, my selection of the top ten issues for 2011 are as follows:
1. Android Patent Litigation. One of the most widely reported legal developments in FOSS has been the patent wars surrounding the Android operating system. Over 40 patent cases are pending between a wide variety of parties, including Motorola Mobility, Inc., HTC, Samsung Electronics, Inc. and Apple Computer, Inc. This year saw several decisions in these suits. In Australia, Apple won a trial court decision which enjoined the distribution of Samsung’s Android tablets based on a claim that the Samsung tablet violated Apple’s design patents. However, after a series of appeals, Australia’s High Court overturned the injunction and Samsung can now distribute its tablets. Apple was more successful in Germany where it was successful in obtaining an injunction based on Apple’s design patents which prevents the distribution of Samsung’s Galaxy Tab 10.1 (however, Samsung has released a revised version named the Galaxy Tab 10.1N). Apple was not successful in obtaining an injunction against distribution of Samsung’s Galaxy Tab in the United States, although the judge stated that Apple’s design patents might be infringed. More recently, on December 19, the ITC ruled that HTC’s Android phones violated two claims of an Apple utility patent and issued an “exclusion order” for HTC Android phones which would take effect on April 19, 2012. HTC has announced that it will provide a workaround. Google has been handicapped by its lack of patents to assert in defense of Android (it started with only 600 patents, but is aggressively buying new patents and has agreed to purchase Motorola Mobility, Inc., primarily for its patent portfolio).
2. Oracle v. Google. A separate but related case is Oracle’s suit against Google for the alleged infringement of Oracle’s copyrights in the Java software (which it acquired from Sun Microsystems, Inc.) and certain Oracle patents by Android. Oracle is asserting that the Android operating system infringes the copyrights in “twelve code files and 37 specifications for application programming interface packages”. The decision on this claim could have a significant impact well beyond this case: most software lawyers have viewed APIs (and their specifications) as either having no copyright protection or very limited copyright protection. These views govern the interpretation of both FOSS and proprietary licenses. The court described APIs as follows:
Conceptually, an API is what allows software programs to communicate with one another. It is a set of definitions governing how the services of a particular program can be called upon, including what types of input the program must be given and what kind of output will be returned. APIs make it possible for programs (and programmers) to use the services of a given program without knowing how the service is performed. APIs also insulate programs from one another, making it possible to change the way a given program performs a service without disrupting other programs that use the service.
If Oracle prevails and the court finds that APIs are copyrightable, lawyers will need to rethink how they interpret both FOSS and proprietary licenses. The issue could be particularly important in determining whether interactions between software programs licensed under GPLv2 or GPLv3 create, respectively, “derivative works” or a “modified version” and, thus, impose the license terms of GPLv2 or GPLv3 on the software modules with which they interact. The first significant decision in the case rejected Google’s attempt to eliminate the claims through summary judgment (Google won only on a single minor point). http://www.scribd.com/doc/65143317/Oracle-v-Google-Denial-of-Google-s-Summary-Judgment-Motion. However, this decision is not surprising because summary judgment is generally used for settled issues of law; the copyright issues in this case are on the cutting edge of the law.
3. Perfect 10 v. Google. Although this case was not strictly about open source software, it established a critical principle for remedies for copyright infringement. These remedies also apply to enforcement of copyright licenses in certain situations. For decades prior to this decision, the presumption was that the remedy for copyright infringement was always “injunctive relief”. Injunctive relief means that a court orders an “infringer” to comply with the terms of the license. The Perfect 10 decision in the Ninth Circuit Court of Appeals made clear that “injunctive relief” is no longer a remedy which is always available for copyright infringement. Instead, the court stated that : We therefore conclude that the propriety of injunctive relief in cases arising under the Copyright Act must be evaluated on a case-by-case basis in accord with traditional equitable principles and without the aid of presumptions or a “thumb on the scale” in favor of issuing such relief.
Injunctive relief is an unusual remedy for breach of license agreements, because under Anglo Saxon law, the standard remedy for breach of contract is monetary payment. However, a remedy of monetary damages has little value for breach of open source licenses because the open source software is generally distributed at no cost. The Perfect 10 decision undercuts the value of the Jacobsen decision to the open source community. In Jacobsen, the Court of Appeals of the Federal Circuit decision found that injunctive relief was available for open source licenses if the relevant obligations were drafted to make them a “restriction” on the scope of the license rather than just a contractual obligation (a “covenant”) http://lawandlifesiliconvalley.com/blog/?p=65. However, the other standard copyright law remedies such as attorneys fees, actual damages and, potentially, statutory damages remain available. However, injunctive relief, the most valuable of remedies, may be more difficult to obtain to enforce open source licenses.
4. Publication of Software Package Data Exchange (“SPDX”) Specification. The management of open source software in the supply chain has been a continuing problem. However, the open source community has been working to find a solution to this problem. The work has been guided by the SPDX Group (the SPDX Group is a working group of the Linux Foundation and is associated with FOSSBazaar) which has developed the SPDX specification as a standard format for describing the components, licenses and copyrights associated with a software package. For example, SPDX Group has identified seven versions of the General Public License version 2, the most commonly used open source license. If widely adopted, SPDX will be critical to effectively manage open source software as it becomes more widely used in the supply chain. As noted in the Harvard Business Review blog by Gartner Group, the ubiquity of the use of open source software has not been matched by effective management of its use http://blogs.hbr.org/cs/2011/03/open_source_software_hits_a_st.html.
5. Revision of Mozilla Public License. The Mozilla Public License is one of the most popular open source licenses. After eighteen months of work, Mozilla has announced a new version. The Mozilla Public License version 2 (“MPLv2”) is a much simpler, shorter and more usable license. The new license has adopted approaches (and sometimes the terms themselves) from other open source licenses: the patent license provision was adopted from the Apache license and the termination provision from the General Public License version 3. In addition, Mozilla has made the MPLv2 compatible with the Apache license. And MPLv2 has also included a provision to make the license “compatible” with other licenses. For example, MPLv2 permits distribution of code under the MPLv2 with other modules licensed under GPL variants (GPLv2, GPLv3, APGL and LPGL) if such modules are part of a “Larger Work” (unless the notice in the software states that the software is “Incompatible with Secondary Licenses”). However, these differences mean that the transition to the MPLv2 for existing projects will require careful thought.
6. Cybits Decision in Germany. This decision makes clear that companies cannot alter the terms of software licensed under GPLv2. AVM is a manufacturer of FRITZ!Box router, a digital subscriber line DSL terminal, which uses the Linux Kernel as a part of their production firmware (which is licensed under GPLv2). Cybits, a software producer, distributes the Internet filtering software “Surf-Sitter DSL”, which is intended to protect children. The Surf-Sitter application downloads FRITZ!Box software to the user’s computer, modifies it and then reinstalls it back on the FRITZ!Box.
AVM claimed that Cybits did not have the right to modify the part of the FRITZ!Box firmware which was licensed under GPLv2. The court rejected AVM´s claims that Cybits should not be permitted to alter the firmware of AVM and denied that Cybits had infringed AVM´s copyright by distributing Surf-Sitter. The court found that the firmware is a collective work, which contains modules licensed under GPLv2. Cybits or any third party may modify the GPLv2 licensed software. Thus, AVM is not able to control any modifications to the GPL licensed components of the FRITZ!Box firmware.
7. Project Harmony Publishes Standardized Contributor Agreements. Many commentators have complained about the problems raised by the number of licenses approved as “open source”, a problem frequently referred to as “license proliferation”. Yet a similar problem is lurking in the development of open source software: the contribution agreements which govern the rights provided by contributors to a project. Project Harmony was a community effort to resolve this problem in advance by developing a set of standard agreements which can be adopted by open source projects http://www.harmonyagreements.org/about.html.
Many open source projects use the “license” for the project as a contribution agreement, but a variety of separate open source contribution agreements have developed over time, from the Apache Contributor Agreement to the Joomla Contributor Agreement http://community.joomla.org/images/JCA_General_Draft.pdf. Although many open source projects can use their standard open source license (i.e. GPLv2 for Linux or Mozilla Public License for the Mozilla browser) as the “contribution agreement”, this approach “locks in” the open source project to that license. If the open source project wishes to change the license (such as the change of OpenOffice project from GPLv2 to Apache), this approach would require that each contributor agree to the change. A good example of the potential for problems with this approach is the Open Street Map Project (“OSM Project”). The OSM Project has been struggling with shifting from a Creative Commons license to a more appropriate Open Database License http://wiki.openstreetmap.org/wiki/Open_Data_License_FAQ. After three years, the transition is still not complete. Finally, the OSM Foundation has given up on obtaining agreement from the remaining contributors and will probably delete contributions from contributors that have not agreed to shift to the new license http://en.wikipedia.org/wiki/Open_street_map#Licensing. In addition, open source licenses do not deal with a number of other issues which should be addressed by contribution agreements, such as contributions by minors and changes of license. Project Harmony also makes it easier for corporations to contribute to open source projects by avoiding the complexities of managing the differing terms of these new contribution agreements. The Project Harmony standard contribution agreements permit projects to make a choice between a license or assignment approach and, then, select among several options to change licenses in the future (without obtaining permission from each contributor.
8. Dispute over Koha Trademark. The importance of the protection of trademarks to open source projects was illustrated by the recent dispute over the Koha trademark between Horowhenua Library Trust (“HLT”) and a commercial company, PTFS, http://koha-community.org/update-2/. HLT manages the Koha open source project. PTFS filed for trademark protection for Koha in New Zealand after it had acquired a company which used the trademark and the trademark was, then, registered by the New Zealand government. Upon registration of the Koha trademark, HLT complained and appealed for help. Subsequently, PTFS agreed not to enforce the trademark and even to transfer the trademark to HLT http://patentbuff.com/2011/11/koha-alls-well-that-ends-well_28.html?spref=tw.
9. The Meaning of Open Source. The power of the community to police the misuse of “open” was demonstrated by Nokia’s attempt to claim that the Symbian mobile operating system was “open” for business http://www.groklaw.net/article.php?story=20110402143136766. However, the Symbian license is not consistent with the Open Source Definition. The copyright license in the Symbian license is as follows:
Subject to the terms and conditions of this Agreement, Nokia hereby grants to You a personal, non-exclusive, non-transferable, irrevocable (except as set forth in Clause 7.1 and 7.2 below), royalty-free and worldwide license under Copyrights licensable by Nokia to: i) reproduce and modify Source Code Components; ii) reproduce Binary Components and Documentation; iii) use and reproduce Utility Software, and iv) publicly display, distribute and make available (a) the Source Code Components to third parties that have acquired a valid source code license from Nokia; and (b) Utility Software, Binary Components and Source Code Components in binary form to third parties, (c) Documentation in unmodified form in all cases i)-iv) solely as part of the Symbian Platform or for use with the Symbian Platform, under the terms and conditions of this Agreement.
The agreement requires a separate license for source code from Nokia and limits the use to the “Symbian Platform.” Nokia was forced to “correct” their original statement to “open for business” rather open source http://symbian.nokia.com/blog/2011/04/04/not-open-source-just-open-for-business.
10. Open Hardware License. The open hardware movement received a boost when CERN published an Open Hardware License (“CERN OHL”). The CERN OHL is drafted as a documentation license which is careful to distinguish between documentation and software (which is not licensed under the CERN OHL) http://www.ohwr.org/documents/88. The license is “copyleft” and, thus, similar to GPLv2 because it requires that all modifications be made available under the terms of the CERN OHL. However, the license to patents, particularly important for hardware products, is ambiguous. This license is likely to the first of a number of open hardware licenses, but, hopefully, the open hardware movement will keep the number low and avoid “license proliferation” which has been such a problem for open source software.
The recent Android Builder’s Summit in San Francisco demonstrated the breadth of products using Android and the dynamic nature of the operating system. In her keynote, Christy Wyatt of Motorola described the challenges of managing the launch of 700 products based on Android in countries around the world. She was followed by Mark Charlebois (Director of Open Source Strategy at Qualcomm Innovation Center) and he predicted that their Android releases would grow from 241 in 2010 to more than 365 in 2011.
Karim Yaghmour of Opersys provided a great overview of Android and its critical subsystems http://www.opersys.com/blog/abs-march2011. However, his presentation brought home the challenges of managing Android: he mentioned in passing that he was unhappy with the performance of the Android Toolbox, the component which Google substituted for BusyBox for Toolbox. He regularly substitutes BusyBox for Toolbox (one Android site had more than 25,000 downloads of BusyBox). BusyBox is described as follows;
a software application that provides many standard Unix tools, much like the larger (but more capable) GNU Core Utilities. BusyBox is designed to be a small executable for use with the Linux kernel, which makes it ideal for use with embedded devices. It has been self-dubbed “The Swiss Army Knife of Embedded Linux”.
According to Black Duck, Android Toolbox is a collection of 66 files, 52 are under the Apache 2.0 license and 14 are under BSD. Both the Apache 2.0 and BSD licenses are very permissive. However, BusyBox is licensed under the GPLv2, a copyleft license, which has very different and much more significant obligations, particularly the obligation to make the source code available either with the object code or through a written promise. More importantly, the license to BusyBox is the most actively enforced license in open source. The Software Freedom Conservancy and the Software Freedom Law Center have filed at least seven lawsuits (with many other disputes settled with ligitation) to enforce the GPLv2 license on BusyBox. Last year, they won $90,000 in damages from Best Buy.
Thus, a reasonable technical decision can dramatically change the obligations of the distributor. Since the GPLv2 is a “conditional” license, the failure to comply with these terms means that the license terminates automatically without a cure period. Thus, the distributor would be a copyright infringer. Since products including Android are frequently mass market products, the consequences could be significant liability arising from millions of unlicensed units. This reality demonstrates once again the need for careful management of the use of Android and clear communication between the developers and the relevant counsel.
I am looking forward to the upcoming Open Source Think Tank 2011 which we are co hosting with Olliance Group/Black Duck. Andrew Aitken has prepared a great agenda and we are going to have a case study by AOL which they describes as follows: AOL is planning two related open source initiatives: employing open source technologies and practices to improve the innovation and efficiency of their developers and releasing elements of their software portfolio as open source to enrich their ability to deliver content and encourage community contributions.
This year the Open Source Think Tank will be particularly interesting because of the dramatic expansion in the use and importance of Freedom and Open Source Software (”FOSS”). We will be discussing the recent completion of many important industry initiatives to make FOSS easier to use: Project Harmony (contributor agreement), SPDX (assisting management of the supply chain by providing a common vocabulary for describing licenses), new Mozilla license and Open Web Foundation (contributor agreements).
The Open Source Think Tank is unique because of the breadth and seniority of those who attend, from CEOs such as Larry Augustin (SugarCRM) and Tim Yeaton (Black Duck) to counsel such as John Noerenberg (Chief IP Counsel, Qualcomm) and Marissa Aufox (Compliance Counsel, Go Daddy Group) to CTOs such as Shawn Douglass (EMC) and Paul Daugherty (Chief Technology Architect, Accenture).
We will also be discussing the recent government initiatives which could dramatically increase the market for FOSS. I have mentioned these government initiatives in an earlier post. http://lawandlifesiliconvalley.com/blog/?p=607.
We have a few more spaces left for the Open Source Think Tank, but if you are interested you will have to move quickly. http://thinktank.olliancegroup.com/
This year has seen an increasing focus on the use by free and open source software (“FOSS”) by governments with recent announcements by the UK, the Australian Federal Government and NASA. FOSS projects and companies need to be aware of these efforts because of the scope of the opportunity to transform government and provide less expensive software infrastructure to government. Governments are also a very large market for software. Yet governments continue to be hampered by their habits of using proprietary software as demonstrated by the recent decision by an administrative court in Lille, France. http://lawandlifesiliconvalley.com/blog/?p=584 .
The UK Government recently provided a very broad endorsement of FOSS and open standards in UK government procurement. The UK government described its new policy for the next 24 months recently: http://www.cabinetoffice.gov.uk/resource-library/uk-government-ict-strategy-resources. The approach to FOSS is described below:
To assist with the deployment of agile solutions using open source technology, the Government will establish an Open Source Implementation Group, a System Integrator Forum and an Open Source Advisory Panel. These will aim to educate, promote and facilitate the technical and cultural change needed to increase the use of open source across government.
This encouragement is similar to the approach of the Department of Defense in the United States several years ago. http://lawandlifesiliconvalley.com/blog/?p=314. The UK government describes its goals in broader terms as follows:
The Government is taking a different approach to deliver this strategy, characterised by a strong centre and continued commitment to greater transparency through regular and open reporting. The approach includes:
mandatory open standards;
spending controls to ensure that new ICT solutions comply with strategy objectives;
transparency to ensure the continued comparison of common ICT services so that government gets the best price;
increased standardisation and modularisation of business processes and supporting technologies to create a platform from which government can deliver new models of open and innovative public services;
a new, strengthened governance structure; and
greater engagement with departments and suppliers to remove cultural as well as technical barriers.
The FSF Europe provides additional information on the approach in the UK. http://fsfe.org/uk/mapping-uk.en.html
This UK policy announcement follows a similar one by the Australian Government earlier this year which requires “covered procurements”, those procurements for over $80,000 AUS must comply with the Open Source Policy in procurement. http://www.finance.gov.au/e-government/infrastructure/open-source-software.html. The principles are summarized below:
Principle 1: Australian Government ICT procurement processes must actively and fairly consider all types of available software.
Australian Government agencies must actively and fairly consider all types of available software (including but not limited to open source software and proprietary software) through their ICT procurement processes. It is recognised there may be areas where open source software is not yet available for consideration. Procurement decisions must be made based on ‘value for money’. Procurement decisions should take into account whole-of-life costs, capability, security, scalability, transferability, support and manageability requirements.
For a covered procurement (over $80K), agencies are required to include in their procurement plan that open source software will be considered equally alongside proprietary software. Agencies will be required to insert a statement into any Request for Tender that they will consider open source software equally alongside proprietary software. Tender responses will be evaluated under the normal requirements of the Commonwealth Procurement Guidelines (CPGs). For a non-covered procurement (below $80K), agencies are required to document all key decisions, as required by the CPGs. This includes how they considered open source software suppliers when selecting suppliers to respond to the Select Tender or Request for Quotation.
Principle 2: Suppliers must consider all types of available software when dealing with Australian Government agencies.
Australian Government agencies will require suppliers to consider all types of available software (including but not limited to open source software and proprietary software) when responding to agencies’ procurement requests.
Agencies are required to insert this requirement into their tender documentation. Suppliers will need to provide justification outlining their consideration and/or exclusion of open source software in their response to the tender. Agencies will determine compliance with this requirement when assessing tender responses.
Principle 3: Australian Government agencies will actively participate in open source software communities and contribute back where appropriate.
The Australian Government, through AGIMO, will actively seek to keep up-to-date with international best practice in the open source software arena, through engaging with other countries and organisations. Australian Government agencies should also actively participate in open source software communities and contribute back where appropriate.
In the United States, NASA recently held an Open Source Summit where it described how it is using open source and how it intends to use it in the future. http://www.nasa.gov/open/source/live.html. Although I was not able to attend, the presentation by David Wheeler from the Institute of Defense Analysis of the Department of Defense was very interesting, both for his criticism for NASA’s approach to using FOSS as well as his discussion of how FOSS fits into the regime of government contracting. http://www.slideshare.net/ckleclerc/2011-nasa-open-source-summit-david-wheeler. The Federal Government has an elaborate set of procurement regulations (which differ between different agencies and which are very different from traditional “commercial arrangements” and set up a “unique” infrastructure for software licenses. Wheeler’s presentation describes how FOSS can be used in this system. I don’t agree with Wheeler’s complaints about the use of “intellectual property” but his summary can be very useful for persons trying to understand the fit between government regulations and FOSS.
Governments offer an enormous potential market for FOSS and the community needs to moniter government decisions on procurement, both at the policy level and on decisions about individual procurements.
My French partner, Sandrine Rambaud, brought to my attention a decision dated December 29, 2010, that leveled the playing field for open source vendors: the Administrative Court of Lille, France cancelled a public procurement procedure because the procedure excluded the possibility of proposing open source software in bid responses. Instead, the municipalities that put out the bid expressly required bidders to propose an Oracle database and Business Objects environments for the generation of reports.
The French company, Nexedi, which offers open source solutions, alleged that the tendering of the public procurement under such terms does not comply with the principles of equal treatment and non-discrimination, and in particular with Article 6 of the French Public Procurement Code. Article 6 provides that technical specifications included in a public bid cannot include the reference to a trademark or a patent, as such reference could favor or exclude some bidders or products. Such reference is only possible in very specific cases.
Nexedi challenged the validity of such procedure before the Administrative Court of Lille, which ruled to cancel the procedure. This decision is great news for open source companies and open procurement!
The Sixth Annual Spring Open Source Think Tank has now been scheduled on April 7th to 9th at the Sonoma Mission Inn in Sonoma. The Spring Think Tank is one of my favorite events because I get to spend time with the most interesting people in open source and discuss the future of the industry in one of the most beautiful areas of the world. By limiting attendees to CEOs, industry luminaries, CIO/CTOs, senior technology executives, legal experts and investors, we assure a lively and informed discussion (and a great opportunity to network with your peers).
We will be using our experience at the successful Fall Think Tank in Paris to add more real-world business cases to the agenda. Selected case studies will focus on the growing commercial maturity and complexity of open source and the evolution of cloud computing and SaaS. We are working on the agenda and will make it available closer to the date of the event. Just a reminder – this is not a traditional conference; all attendees are expected to contribute and actively participate in the brainstorming and workshop format.
This event sells out every year, if you have not already received an invitation, please go to .thinktank.olliancegroup.com and request an invitation.
Moreover, Andrew’s selection of Sonoma as the venue means that we are in the heartland of Pinot Noir and it is an implicit recognition by Andrew of the superiority of Pinot Noir over Cabernet Sauvignon. I am glad to welcome him to the lovers of the true wine!
The results are in for the first quarter in venture investing and they are positive. After a tough 2009, the first quarter resulted in a significant increase in venture capital investing. The Dow Jones report for global venture capital investments increased by 13% over last year http://bit.ly/1Q10Glbl. The US continues to take the lead with 65% of deals by numbers (and 67% by value). This growth is confirmed by my discussions with Silicon Valley Bank who have told me that they have seen a significant increase in the number of new bank accounts opened for startups. In fact, SVB told me that the number of new accounts in March was more than all of the accounts opened in both January and February. This increase reflects the general optimism expressed in DLA Piper’s 2010 Technology Leaders Survey. http://www.dlapiper.com/US/news/detail.aspx?news=694c8f9d-faf5-40d2-8018-7c352437288f.
The growth in the US was roughly the same as the global average at 12%. http://bit.ly/1Q10Fin. Venture capitalists invested $4.7 billion in 578 deals. And the shift in the relative amounts of investment among industries continues to shift. For a long time, IT represented more than 50% of deals, yet in the first quarter, IT was only 32% of the deals. The IT investments in the first quarter represented a 15% increase over the same period last year. However, the cleantech category increased by more than 69% in the same period.
But I think that these comparisons in the IT sector may mask the new reality of starting software and web companies where the cost of developing a product has plunged due to the use of open source software and cloud services. In the past, a software startup would need to buy its own servers and proprietary software development tools, representing significant capital expenditures. Now, most of my software companies use open source and other pre-existing software to “assemble” their products and host them on the cloud. They require much less money to start; and they wait to seek traditional venture capital until they are much further along in product development and distribution.
Red Hat has launched “Opensource.com” as the town square for the “open source” community http://opensource.com/should-be/10/1/welcome-conversation-opensourcecom. It provides for a single location to discuss the legal, social and economic consequences of the open source model. This site comes at an inflection point for the FOSS community: FOSS is now ubiquitous and many of the earlier battles for credibility and acceptance are won. Yet, with those victories, the FOSS community finds itself facing new challenges, such as how to deal with managing the numerous modules of open source in many products in a consistent manner (the so called “Bill of Materials” problem) and the continuing problem of dealing with patents http://opensource.com/law/10/2/looking-out-bilski-software-patents-v-foss. And open source is now being viewed as a model for collaboration beyond software http://opensource.com/business/10/2/what-could-politicians-learn-open-source-way. These discussions cut across wide variety of topics and have been spread out across many sites and blogs.
Opensource.com provides a forum to discuss these topics in one place and the opportunity to collaborate in the best tradition of the FOSS community. However, the site will only be valuable if it is used by the community. Red Hat has done the community a great favor and provided the platform, but now the community needs to step up and participate in the discussion. Let’s get to it!
The NY Times published an article about open source yesterday which was very disappointing. The article perpetuated many of the myths and misperceptions about open source. http://www.nytimes.com/2009/11/30/technology/business-computing/30open.html?_r=2&hpw=&pagewanted=all The first misperception is found in the title: “Open Source as a Model for Business is Elusive”. Open source is not a “business model.” It is a development methodology which supports multiple business models as I have discussed in an earlier post. http://lawandlifesiliconvalley.com/blog/?p=147 The article starts from two false premises: (1) open source software is released free of charge to the world and is maintained by volunteers and (2) the revenue for open source companies comes solely from “support” deals. These assumptions are very dated. For the last five years, much of the most useful open source software has been created by commercial companies who develop most of the software using their own employees, such as SugarCRM and Zimbra. Similarly, most open source companies use a combination of license or subscription revenue as well as revenue from support services. For example, MySQL received revenues from licensing of a commercial edition its software as well as “support” revenues.
The most disappointing quote was the following: “Whether open source firms are practical as long-term businesses, however, is murkier.” The problem is that the long term business strategy of most software companies is “murky” due to the rise of less expensive “open source” alternatives and cloud computing. The fact that several open source companies were sold at very substantial multiples to their revenues suggests that large software companies view them as valuable. Moreover comparing the profitability of open source businesses with the traditional enterprise software model fails to take into account the tectonic changes which the traditional software business model is undergoing. In fact, the traditional enterprise software model has proven not to be a “long term business” for many proprietary companies. You need only consider the demise of Siebel Systems and PeopleSoft. Open source software is one of the major driving forces in these changes. For example, the Linux operating system is the most serious competitor to Microsoft’s operating system business. The fact that it is supported by IBM, Intel and other large companies is a further testament to its competitiveness and value. Although the Linux code may be contributed by corporate employees, the Linux operating system is continues to be distributed at no charge under the GPL: it is truly an “open source” program. Moreover, Linux users do not care whether the contributors are corporate employees or individual “volunteers”. And Linux has succeeded where proprietary operating systems from major companies, such as IBM’s OS2 failed.
The final part of the article continues the unfortunate pattern: it suggests that the sale of open source companies to larger traditional software companies is a failure of the “open source business model.” It is not. This conclusion fails to consider that more than 90% of venture backed software companies in the past three years have been acquired rather than gone public, whether they used an open source or a proprietary development methodology. These acquisitions prove little about the viability of the ”open source business model” or open source software companies. In fact, they suggest that sophisticated companies are willing to pay a substantial premium for such companies.
It is not often that the Department of Defense provides an industry with a marketing hook. However, I can’t think of a better description of the memorandum issued by on October 16 by David Wennergren, Deputy CIO of the Department of Defense. The memorandum is entitled “Clarifying Guidance Regarding Open Source Software” (“OSS”). http://www.defenselink.mil/cio-nii/sites/oss/2009OSS.pdf and provides one of the best (and most cogent) summaries of reasons to adopt open source software. This summary is all the more persuasive because it comes from one of the most conservative IT cultures on the planet. I have included the relevant part of the memo below:
There are positive aspects of OSS that should be considered when conducting market research on software for DoD use, such as:
(i) The continuous and broad peer-review enabled by publicly available source code supports software reliability and security efforts through the identification and elimination of defects that might otherwise go unrecognized by a more limited core development team.
(ii) The unrestricted ability to modify software source code enables the Department to respond more rapidly to changing situations, missions, and future threats.
(iii) Reliance on a particular software developer or vendor due to proprietary restrictions may be reduced by the use of OSS, which can be operated and maintained by multiple vendors, thus reducing barriers to entry and exit.
(iv) Open source licenses do not restrict who can use the software or the fields of endeavor in which the software can be used. Therefore, OSS provides a net-centric licensing model that enables rapid provisioning of both known and unanticipated users.
(v) Since OSS typically does not have a per-seat licensing cost, it can provide a cost advantage in situations where many copies of the software may be required, and can mitigate risk of cost growth due to licensing in situations where the total number of users may not be known in advance.
(vi) By sharing the responsibility for maintenance of OSS with other users, the Department can benefit by reducing the total cost of ownership for software, particularly compared with software for which the Department has sole responsibility for maintenance (e.g., GOTS).
(vii) OSS is particularly suitable for rapid prototyping and experimentation, where the ability to “test drive” the software with minimal costs and administrative delays can be important.
Open source companies should quote this memorandum in all of their marketing material. It has the virtue of being both correct and persuasive.