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Paris Capital du Libre 2008 Mark Radcliffe DLA Piper USA LLP

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Presentation on theme: "Paris Capital du Libre 2008 Mark Radcliffe DLA Piper USA LLP"— Presentation transcript:

1 Paris Capital du Libre 2008 Mark Radcliffe DLA Piper USA LLP

2 DLA Piper US LLP Largest Law Firm in the World 3600 attorneys 25 countries/65 offices Strong Intellectual Property Practice (220 lawyers): 80+ patent litigation lawyers in the U.S. 50+ lawyers registered with the PTO 45+ trademark/copyright lawyers 40+ technology and sourcing lawyers Strong Open Source Practice (5 partners): Assisted Sun with Open Solaris GC of Open Source Initiative/Chair of Committee C for GPL Review Represent many venture backed companies: SugarCRM, Cleversafe, rSmart, Socialtext, Hyperic Represent many large companies: Sun, Zoran, Adobe, Sony Electronics, Palm Strong Mergers & Acquisition Practice (300 lawyers) 2007: 3 rd Globally and 7 th in the U.S. in completed M&A deals (mergermarket)

3 Jacobsen v. Katzner JMRI Model Railroad software: First open source license in US court Complicated case Patent Domain Name Breach of License Other claims District Court Decision Obligations were covenants and no copyright remedy available Only contract damage remedy CAFC Decision Obligations were restrictions on scope of license Copyright remedies of injunctive relief available

4 Jacobsen v. Katzner: Critical Holding Copyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material. As the Second Circuit explained in Gilliam v. ABC, 538 F.2d 14, 21 (2d Cir. 1976), the "unauthorized editing of the underlying work, if proven, would constitute an infringement of the copyright in that work similar to any other use of a work that exceeded the license granted by the proprietor of the copyright." Copyright licenses are designed to support the right to exclude; money 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. Indeed, because a calculation of damages is inherently speculative, these types of license restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief. *** The clear language of the Artistic License creates conditions to protect the economic rights at issue in the granting of a public license. These conditions govern the rights to modify and distribute the computer programs and files included in the downloadable software package. The attribution and modification transparency requirements directly serve to drive traffic to the open source incubation page and to inform downstream users of the project, which is a significant economic goal of the copyright holder that the law will enforce. Through this controlled spread of information, the copyright holder gains creative collaborators to the open source project; by requiring that changes made by downstream users be visible to the copyright holder and others, the copyright holder learns about the uses for his software and gains others' knowledge that can be used to advance future software releases.

5 Jacobsen v. Katzner: Critical Holding The copyright holder here expressly stated the terms upon which the right to modify and distribute the material depended and invited direct contact if a downloader wished to negotiate other terms. These restrictions were both clear and necessary to accomplish the objectives of the open source licensing collaboration, including economic benefit. Moreover, the District Court did not address the other restrictions of the license, such as the requirement that all modification from the original be clearly shown with a new name and a separate page for any such modification that shows how it differs from the original.

6 ALI Proposals American Law Institute The ALI was founded in 1923 and has a membership consisting of judges, practicing lawyers, and legal scholars from the United States as well as some foreign countries, selected on the basis of professional achievement and demonstrated interest in the improvement of the law. ALI is a very prestigious non profit institution whose purpose is to: "publishes various Restatements of the Law, model codes, and legal studies to promote the clarification and simplification of the law and its better adaptation to social needs, to secure the better administration of justice, and to encourage and carry on scholarly and scientific legal work Principles of the Law of Software Contracting Two year project Major problems: non disclaimable warranties Non infringement No hidden material defects

7 Warranty of No Hidden Material Defects §3.05 Other Implied Quality Warranties a. Unless modified or excluded, implied warranties may arise from course of dealing or usage of trade. b. The transferor warrants to any party in the normal chain of distribution and to the end user that the software contains no material hidden defects of which the transferor was aware at the time of the transfer. This warranty may not be excluded. In addition, this warranty does not displace an action for misrepresentation or its remedies. “Disclosure of a material hidden defect occurs when a reasonable transferee would understand the existence and basic nature of a defect. Disclosure ordinarily should involve a direct communication to the transferee, if feasible. A mere posting of defects on the transferor’s website generally should be insufficient.” From Comment b, following § 3.05.

8 Indemnification Obligation §3.01 Indemnification Against Infringement a. Except as provided in (c) or as excluded or modified under (d), a transferor that deals in software of the kind transferred or holds itself out by occupation as having knowledge or skill peculiar to the software must defend at its own expense any action brought by a third party against the transferee that is based on a claim under the laws of the United States or a State thereof by way of infringement or the like if the transferor knew or should have known of the infringement at the time of transfer. The transferor must pay those costs and damages finally awarded against the transferee in any such action that are specifically attributable to such claim or those costs and damages agreed to in a monetary settlement of such action.

9 : Other New Legal Issues As governments and companies have adopted policies to favor the use of “open source” software: the control of this definition will be critical with the risk of different incompatible definitions Linux: Possible conflict between GPLv2 kernel and GPLv3 “tool chain” Fork programs by going from GPLv2 to GPLv3 for the same software M&A: Greater focus on open source use Several major acquirers have separate “open source” due diligence process Open source is integrated into the strategy of traditional software companies Adobe: Flex Yahoo: Zimbra Hybrid commercial/open source distributions will require careful analysis of licenses and how the commercial and open source software interacts How to “withdraw” open source software from distribution

10 Reasons for Third Party Software Policy Role of a policy Manage risk for both OSS and commercial software Ensure strategic flexibility Unusual OSS risks Automatic termination of GPL Uncertain scope of GPL Broad scope of patent termination in MPL Forking of code Customers are demanding to know what is in your product Compliance important for financings/M&A IT staff turn over and difficulty of following up SFLC undertakes 50 enforcement actions a year (Cisco, Monsoon, Verizon) SFLC requiring an “Open Source Compliance Officer” as part of settlement

11 Conclusions Open source is established and growing Rise of hybrid commercial/open source software Consumer and vendors of software should have an open source strategy Many critical issues remain uncertain Who will control the definition of “open source” What business models will be successful Role of governments Response by proprietary vendors Acceptance of GPLv3


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