Notice

Just a reminder, these posts are not legal advice. This site is the personal blog of Mark Radcliffe and the opinions expressed are those of Mark Radcliffe and not those of his clients, DLA Piper or the clients of DLA Piper.

About Me:

Mark Radcliffe

I have been practicing law in Silicon Valley for over thirty years assisting startups and global companies develop and market innovative products and services. I have participated in multiple business cyles in Silicon Valley from hardware to software to internet to cloud. My projects have included developing the dual licensing business model for open source startup, developing the original domain dispute resolution policy for NSI and assisting Sun in open sourcing the Solaris operating system. Recently, I served on the US Japan Innovation and Entrepreneurship Council (one of ten members) to develop a plan to encourage the innovation in Japan and the United States. I have been working with the same attorneys since 1986 although we have merged with other law firms several times. I am now a partner at DLA Piper, a (relatively) new global law firm formed in 2005 from the merger of three law firms. The firm now has 4200 lawyers in 31 countries and 77 cities. My experience in corporate securities (particularly venture capital) and intellectual property enables me to assist companies structure the financing and intellectual property strategy for developing ane exploiting a new product or service. I and my team work with fifty startups at one time as well as Global Fortune 100. I have been fortunate enough to work with companies in software, cloud computing, semiconductor, health care IT and Web 2.0.

The first day of the Open Source Think Tank has been very productive. Alexander Aitken of Olliance Group and Alexandre and Celine Zapolsky (both of Linagora) have done a great job in organizing the conference. The discussion has quite different from our Napa Open Source Think Tank and emphasized the differences between the US and EU software industries. For example, system integrators are the primary contact for European customers in contrast to the United States where the software vendor frequently has direct contact with the customers.

During the brainstorming, my group identified two major challenges for the open source market:

1. The rejection in the EU of commercial open source companies by many customers because they are not viewed as “true open source”. Based on the discussion, a significant number of customers in the EU identified “open source software” as a product which is community supported and preferably has multiple service providers providing support to licensees. Clearly, this position poses a significant challenge to many of the US commercial open source vendors which use a dual distribution model based on a commercial product with more functionality than the open source version.

2. The reluctance of major corporations to “openly” contribute to projects. Although many major corporations do contribute to open source projects, they frequently do so in an indirect manner so that their contribution cannot be associated with them. If the corporation does not contribute its improvements to the open source project, then the community and all licensees will not be able to take advantage of the changes. If the corporation contributed indirectly, the open source project misses the legitimacy which open support would confer. Although this reluctance can be based on valid legal concerns, these concerns appear to be exaggerated.

More tomorrow!

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I wanted to alert you to the Open Source Think Tank this month in Paris Sept 21-23, in conjunction with the Paris Capital du Libre conference. It takes a lot to pull me away from Northern California during the grape harvest, but this event will be great. As in the United States, the Open Source Think Tank is the only by-invitation gathering where leading global experts will come together to collaborate on the issues facing commercial open source. Like the Open Source Think Tank in Northern California, the format will focus on brainstorming sessions, CIO panels and networking activities. We expect that all attendees will actively participate. We have a great agenda and confirmed list of attendees, and unique networking activities including a private reception at the Paris Chamber of Commerce and the main event - wine tasting and dinner while cruising down the Seine through Paris. We have some great speakers including Marten Mickos and Larry Augustin. You can learn more at http://thinktank.olliancegroup.com/. If you need an invitation, please contact Andrew Aitken at andrew@olliancegroup.com.

I have participated with Andrew in all of the prior Open Source Think Tanks and they are great events. They provide an opportunity for everyone to work together in small and large brainstorm groups, addressing the future of open source. The Think Tank will also ensure that you have great opportunities to network with your fellow attendees. In Paris, the first night we will have a reception at the Paris Chamber of Commerce and the second night main event, wine tasting and dinner while on a barge cruising down the Seine through Paris

Most of the attendees of our annual Napa events have said it was either the best or one of the best events they have ever attended and we have almost 100% return attendance. In Paris, the schedule will include analyst meetings, press events (Sun and Jaspersoft and some of the other attendees are planning announcements) and a meeting of North American ISV and European SI/VAR.

I hope to see you there!

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I have been attending DEMO on San Diego since Sunday. The presentations have been lively and the six minute limit ensures a brisk pace. Having worked with startups for over 25 years, I was impressed by the maturity of the “demos”. The presenters manage to get their message across (frequently with a few jokes).

Many of the companies focus on “Web 3.0” (and one company claimed to be the first Web 4.0 company). Two of the most interesting companies provided solutions to the problem of user generated content: how do encourage users to continue to contribute without any income. They combined the web’s capability for distributed collaboration with micropayments. This combination could be very powerful, enabling user generated content to go to the next level: income generation.

Photrade (http://www.photrade.com/) has developed the infrastructure to permit photographers to share, store, protect and license their photographs to advertisers and web publishers. Photographers get paid for each view of their photos.

MixMagicMusic Service (http://www.mixmatchmusic.com/) provides all the tools needed for musicians to collaborate online. They can also communicate with fans and sell their works. It includes a Remix Wizard to permit fans to create music mashes.

However, some of the most interesting companies were not material companies, but more about that later

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The Software Freedom Law Center (“SFLC”) recently published “Practical Guide to GPL Compliance” (“Guide”).
http://www.softwarefreedom.org/news/2008/aug/20/compliance-guide/The Guide is a major contribution to the open source community. It is very clear and valuable explanation about how to comply with the obligations in General Public License Version 2 (“GPLv2”), General Public License Version 3 (“GPLv3”), Lesser General Public License Version 2 (“LGPLv2”) and Lesser General Public License Version 3 (“LGPLv3”) and more generally how to best manage the use of FOSS.

The most critical point made by the Guide is the need to understand what third party open source software is in your software product in order to comply with obligations under FOSS licenses. However, companies should be equally concerned about complying with the terms of upstream proprietary software licenses. The Internet has made numerous software components easily available and my experience is that most software programs now include numerous third party components (both open source and proprietary).

Yet software companies frequently do not have an effective procedure for managing this new reality. This failure can raise significant problems at critical points in a company’s history, such as a financing and a merger. Many acquiring companies regularly perform a software scan of the target company’s software: they will discover these third party components and demand that the target company provide proof of compliance with the upstream licenses (both FOSS and proprietary). The failure to have a procedure for monitoring use of third party software means that the target company must scramble during the merger (or financing) process to prove compliance with upstream obligations. These problems are likely to cause delay in closing the merger (or financing) and, in some cases, may cause a reduction in the price or, rarely, termination of the merger. Recently, I assisted a startup in its sale to a large publicly traded company: the target company had over 100 third party software components of which it was not aware. We had to find a method to comply with the obligations in these upstream licenses in a very short period. The result was costly in management time and legal fees (rush jobs always cost more). In that case, however, the resolution of compliance with the obligations imposed by third party proprietary software component licenses created more problems than the FOSS components licenses.

The Guide is also very valuable for its practical suggestions about how to avoid compliance problems with the GPL such as training multiple developers how to “build” the software and distributing the Corresponding Source with the binary code (rather the alternative of making a written promise to provide the Corresponding Source). The Guide also provides detailed instructions on how to comply with the obligations relating to providing Source Code: the definition of Corresponding Source and the different options available under GPLv2 and GPLv3. For example, one nuanced, but important point is that Corresponding Source under GPLv2 cannot be provided solely by download (although it can be an option), but that option is available under GPLv3.

I strongly recommend that anyone dealing with FOSS compliance should read this guide.

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Although my earlier post focused on the effect of the Jacobsen decision for the open source industry, the case has significantly broader implications. http://lawandlifesiliconvalley.blogspot.com/2008/08/major-victory-for-open-source-in.html. The court’s reasoning applies to any copyright license which means that it will have an impact on licenses well beyond open source licenses: it will impact licenses for commercial software, books, music, television, and movies. The decision will also be important for licenses which govern the growing amount of user generated content on the Web; such content is frequently subject to standardized licenses, such as those created by the Creative Commons and websites like Wikipedia, which do not involve direct economic consideration. The decision sets forth the basic rule very clearly:

“Copyright licenses are designed to support the right to exclude: monetary damages alone do not support or enforce that right. The choice to exact consideration in the form of compliance with the open source requirements of disclosure and explanation of changes rather than as a dollar-denominated fee, is entitled to no less legal recognition.”

Jacobsen deals with the fundamental issue of the appropriate remedy for breach of a copyright license: the basic remedy for breaching a contract such as a license is monetary damages, but under some circumstances a copyright licensor can obtain remedies under copyright law. The courts have established a standard that the breach of obligations that are covenants rather “conditions” or “restrictions” on the scope of the license can only obtain contract remedies. However the line between covenants and “conditions” or “restrictions” has always been murky. The decision provides clear guidance: obligations in a license agreement which are expressly described as a “condition” or, even better, which are introduced by the phrase “provided that” meet the criteria in Jacobsen.

Copyright law remedies include injunctive relief, attorneys fees, actual damages and, potentially, statutory damages. The remedy of injunctive relief is particularly valuable for many licensors because such licensors frequently seek compliance with the terms of the contract. Courts may grant attorneys fees at their discretion and such fee awards can be significant and even exceed the damage awards. Actual damages can be difficult to determine for many copyrightable works and are particularly difficult for breaches of licenses to open source software or other works which are licensed without fee. Statutory damages,on the other hand, are not connected to actual damages and can be as much as $150,000 per copyright for willful infringement and are awarded by the court. However, such statutory damages are only available if the copyright is registered prior to the infringement (or in the case of a recently published work, the copyright is registered within three months of first publication).

Since many open source companies use the dual license model, the decision may be equally important to them for their commercial licenses. In addition, the decision will be important for software vendors with a pure commerical model as well as licensors of other copyrightable works such as books, music and film. These licensors should read Jacobsen carefully and revise these licenses appropriately to take advantage of the new clarity on these issues provided by the decision.

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