The Hindu Business Line : Open Source, sans the risk

Ten years ago, open source was not a popular term. But today, it seems to be unavoidable and every software organisation, in some way or the other, appears to be adopting it. What is open source software? Wikipedia says: "Open source software is computer software whose source code is available under a licence (or arrangement such as the public domain) that permits users to use, change, and improve the software, and to redistribute it in modified or unmodified form. It is often developed in a public, collaborative manner. It is the most prominent example of open source development and often compared to user generated content."

We can broadly classify open source/free ware/third party software under three categories: The source code of the software is available with a licence and is non-commercial; The source code is for branding the company/individual that created it, i.e. selfbranding; The source code is available commercially - for a price. Third Party software fits into this category.

The main point of concern about open source is the possibility of litigation arising out of breach of Intellectual Property (IP) rights. In this article, we take a look at the typical restrictions in open source software and the key precautions that companies should take.

INCREASING USE

A recent survey has shown that 52 per cent of software companies are using open source. The percentage is rising despite the potential risk associated with it. The increasing trend may be attributed to: The source code is available readily and in certain cases without any cost or with an attractive price tag. Companies can modify the source code for the deliverable/derivative works as required.

The deliverable/derivative works is dependent on various factors and not on a single entity.

No `Hidden treasures' or `black boxes' are possible. The modified versions can be used as the code base and new projects can be built on top of it.

Little or no support is required for the maintenance.

Low cost of production of deliverables and increased profitability for the software company.

SOME BASIC DO'S
What should the software company that incorporates open source software in its solution do to protect itself?
It should ensure these steps: Compile the list of all open sources used in various existing products/solutions. Download the licence agreements from the respective sites/sources from where the open source is used.
Obtain a legal opinion on the licence downloaded/obtained.
PROTECTIVE STEPS
What are the general precautions that a software company should take to use open source for the first time?
It is always advisable to ask the client to purchase licences of third party software directly from the vendor. The client should also be informed in advance of all the open source software that is being used in the software deliverable/derivative works. The software company should absolve its liability for any Intellectual Property rights infringement with respect to the open source software in the licence agreement that the company enters into with the client.
It should strictly follow the restrictions mentioned in the open source software licence agreement. If deliverable/derivative works is made available to client in source code form, it must be made available under the same Licensing Agreement and a copy of the Agreement must be included with each copy of the deliverable/derivative works. Do not sell, loan or otherwise encumber or transfer deliverable/derivative works in whole or in part, to any third party.
Do not guarantee on performance or warranty against non-infringement of third party intellectual property rights, when made available to client. Do not create or authorise the clients to create additional classes, interfaces, or sub-packages that are in any way specifically restricted by the Owner of the open source.
EFFECTIVE DELIVERY TO CLIENTS
Based on the open source software licences, the various strategies that the software company can adopt are:
The software company can use/modify/ redistribute the open source - No acknowledgement required for the ownership of the open source.
It can use/modify/redistribute the open source - Acknowledge the ownership of the open source in the deliverable/derivative works.
The software company can use open source only for self-usage rights, and not for redistribution.
If the work includes a `Notice' text file as part of its distribution, then any derivative work or the deliverable/derivative works that the software company distributes must include a readable copy of the distribution notices contained within such `Notice' file, excluding those notices that do not pertain to any part of the deliverable/derivative works.
Such `Notice' is to be displayed in at least one of the following places: within a `Notice' text file distributed as part of the deliverable/ derivative works; within the source code form or documentation, if provided along with the deliverable/derivative works or within a display generated by the deliverable/ derivative works, if and wherever such third-party notices normally appear. The contents of the `Notice' file are for informational purposes only and do not modify the licence. The software company may add its own attribution notices within the deliverable/ derivative works that it distributes, alongside or as an addendum to the `Notice' text from work, provided that such additional attribution notices cannot be construed as modifying the licence.
The software company must add its own copyright statement or Intellectual Property Rights statements to its modifications and may provide additional or different licence terms and conditions for use, reproduction, or distribution of its modifications, or for any such derivative works/deliverable as a whole, provided their use, reproduction, and distribution of the work otherwise complies with the conditions stated in this licence.
VALUABLE IP FOR ALL
Open Source Software has its own pitfalls and drawbacks. But these have to be identi- fied for each of the open source codes and a specific strategy has to be developed for each one. The strategy could be any one of the above mentioned or a combination of it. The growth and popularity of open source software does not at all imply that a wellpositioned business with a clever business model can reap profits. It does not imply that open source will become a multi-billion or trillion dollar sector of the global economy. On the contrary, open source software has the effect of removing points of economic friction by circumventing the traps and nets that allow certain types of profit to be accumulated. It does this by creating `valuable' intellectual property and placing it into the public domain. This IP (the body of all open source code) can be exploited by all at a very low cost.
This low cost software represents `savings' as compared to proprietary, high-cost software, and a business can exploit these savings, lower costs, increase profits, and pass the remainder on to the consumer. These savings apply a powerful economic incentive for businesses, large and small, for instance some companies may adopt Linux in favour of Microsoft Windows, in order to become more competitive in their sphere of competition. Thus, in this way, open source can be, and is becoming a powerful global economic force that will not be diverted.

DISTRIBUTED, NOT CONNECTED
There are some important corollaries to this claim. Although open source software may become a large contributor to global economic output, equalling or exceeding the size of all proprietary software put together, pure-play open source companies, such as Red Hat, are unlikely to become as profitable or as big as Microsoft. Without other business models or revenue streams, Red Hat fundamentally cannot trap income based on licences the way that Microsoft can, because it is not the exclusive owner of the intellectual property embodied in Linux. No pure open source company will be able to do this: the economic benefit of open source is distributed, not concentrated.
These raw economic forces will be powerful engines of change. The adoption of open source software will grow by orders of magnitude, and the vitality of its developer community will increase and expand for decades, if not longer, into the future. Open source software will become the predominant, central feature of the post-industrial world and will reach into all facets of life.
The author is Legal Counsel for Polaris Software Lab Ltd. Views expressed are personal.

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