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Practical Issues in licensing of Software Pravin Anand Anand & Anand WIPO-UNIDO National Seminar 2007 24 th January, 2007.

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Presentation on theme: "Practical Issues in licensing of Software Pravin Anand Anand & Anand WIPO-UNIDO National Seminar 2007 24 th January, 2007."— Presentation transcript:

1 Practical Issues in licensing of Software Pravin Anand Anand & Anand WIPO-UNIDO National Seminar 2007 24 th January, 2007

2 Why Licence? Software i.e. Source Code & Object Code enjoys literary copyright. Copyright includes right to reproduce, sell etc or even use. Mere use of software necessarily requires reproduction in RAM, hence purchase of physical software usually not sale but a license to avoid infringement.

3 Licensing principles License is a contract - permission to use Subject to terms & conditions Terms & conditions stated on: –Printed paper in a box (shrink wrap license) –On a computer screen ( click wrap license) –In a written contract ( negotiated license)

4 Essentials of a contract Offer Acceptance Communication of Acceptance Consideration

5 Who is licensing ? For what? End User eg Bank, Architect firm etc Developer –Web site Advertising management scripts, Affiliate management script, Search scripts, Loomia Recommendation etc –Customised Software Solution for home loans eg Kensoft and Oracle case in India

6 Value added resellers (VARs) Package applications modified by VARs to suit specific customers and individual needs VAR agreement must allow reselling and modification of original software Sometimes source code needed to make changes SAP appointed Siemens in India (ERP software)

7 Types of licenses Three perspectives for classification –Way in which contract entered –Relationship between the two parties –Freedom available to download, copy, modify etc

8 How entered? Negotiable – B2B transactions – goods or services? –Bespoke – if skill and labour exercised – services Non-negotiable – consumer transactions mass produced – sale of goods –Shrink-wrapped –Click-wrapped

9 Shrink wrap License

10 Click wrap License

11 Issues with shrink and click wrap Terms not visible to purchaser Acceptance not communicated Are terms of shrink wrap accepted by opening package and loading software on hard disk? Are terms of click wrap accepted by electronic signatures or clicking on an icon or button?

12 Issues with shrink and click wrap Does registration card have to be filled up or can communication of acceptance be waived? Unreasonable clauses such as limitation of liability may not be enforced Terms can be implied when sale of goods

13 Types of Software Licenses (Contd.) User License Agreements 1. Shrink Wrap Agreements Issues: No meeting of Minds- Users believe they are purchasing the software and not getting a license; Contracts of Adhesion- Unequal Bargaining Power- public policy is against it Validity of Shrink Wrap Agreements- interpreted differently by courts. E.g.: it has been considered valid provided the customer has the opportunity to read-reject terms by returning the product in a reasonable period 2. Click Wrap Agreements No room for negotiating terms. Have been considered valid in PRO CD Inc Case(No. 95-C- 0671-C) and the Beta Computers Case [1996] FSR 367

14 Types of Software Licenses - relationships Developer-Publisher License Agreements Developers include clauses on royalty, limited geographical scope, machine types, Publishers specify clauses under which royalty is given as being the milestones achieved for development of each version etc.

15 Publisher-Distributor License Agreements Domestic and Foreign Distributor Arrangements in order to maximize profits and market penetration. May also include Original Equipment Manufacturers (OEMS e.g. Toshiba PDA with Palm Inc. software), Value Added Resellers (VARS) Issues: Exclusive Distribution Arrangements may be anti competitive in some jurisdictions as EU. Possibility of Product Liability Cases

16 Types of Software Licenses (Contd.) User License Agreements 3. Cross Licensing ( Sun Java & Microsoft Windows) 4. Manufacturing License ( Silicon Graphics- Indian subsidiary) 5.Collaborative License Agreements ( Sony Optics & Ericsson for Telephone-PDA) 6.Run Time License Agreements

17 Open source, free and Proprietary Firefox 11.5% (Internet Explorer 85.9%) the open source web browser had 200 million downloads in 2006., the open source productivity site was used on desktops by more than 200 million people.

18 India Predictions Open source softwares transparent and low cost nature makes it more attractive to countries like India and China. Marten Mickos, CEO of MySQL the fast growing BRIC ( Brazil, China, Russia and India) will be breeding ground of open source in 2007 Governments and BIFS – increasing use 60% of schools in Kerala are using GNU/Linux software.

19 Reasons for growth of Linux Vendor Independence Large developer community to fall back on Cross platform interoperability Open nature supports product innovation Advantages and disadvantages

20 Growth of Open Source in the US Government US Postal Service used in 1998 more than 900 Linux based systems for recognize destination address. New Jersey State Police in 1998 used Linux based servers and network fileservers. Texass Dallas County uses Linux and Apache web servers to power its website.

21 Advantages of open source to government Low price as the procurement process for larger purchases in US governments is cumbersome. IDC Research-1998 : 25% of Federal Computing installations use Linux in their organizations. 16.6% of Large Companies and 12.2% of small companies use Linux.

22 Open source Unlike Freeware – not free Source code delivered to licensee Right to modify Must communicate changes Any product based on OS – also OS Effect of Open source – IT patents in India

23 Top Patent recipients in 2004 US Preliminary Rank in 2004* Preliminary # Patents in 2004* Organization* (Final Rank in 2003) (Final Number of Patents in 2003) 13,248International Business Machines Corporation(1)(3,415) 21,934Matsushita Electric Industrial Co., Ltd. **(4) (1,774) ** 31,805Canon Kabushiki Kaisha(2)(1,992) 41,775Hewlett-Packard Development Company, L.P. ***(5) (1,759) *** 51,760Micron Technology, Inc.(6)(1,707) 61,604Samsung Electronics Co., Ltd.(9)(1,313) 71,601Intel Corporation(7)(1,592) 81,514Hitachi, Ltd(3)(1,893) 91,310Toshiba Corporation(13)(1,184) 101,305Sony Corporation(10)(1,311) 829U.S. GOVERNMENT(881)

24 Top Indian Patent filings

25 Filing Vs Grant PCT Patent Office Filing YearIndianForeignTotalGranted 1990-911080268437641791 1991-921293225935521676 1992-931228223934671272 1993-941266260338691746 1994-951741358953301759 1995-961606543070361633 1996-97166169018562907 1997-9819268229101551844 1998-992247670789541800 1999-002206261848241881 2000-012179632485031318 2001-0223718221105921591 2002-0326938772114651379 2003-0432189389126072469 2004-05174621843

26 Void terms A prohibition to make back up copies A prohibition to study the program or carry out lawful de-compilation Prohibition to obtain information for achieving interoperability. Proprietors get waivers

27 Jurisdictional issues Shrink and click wrap licenses must comply with local laws Local consumer contract laws may bar unfair terms eg applicable foreign law Global software needs licenses with individual sections for different countries

28 License terms Copyright infringement if exceeds scope of grant User – right to use or reproduce for back up or archive – may prohibit modifications or transfers Reproduction House – reproduce for publisher or distributor Distributor – right to distribute by sale lease or license or to display for marketing or training

29 Limitations License grant may be restricted to single computer, single network or single site License agreement with governments or corporations may be wider eg all departments or even global Exclusivity of territory may be barred by some laws

30 Duration Licenses can be perpetual Presumptions in indian copyright law –Territory – if silent then india –Duration – if silent then 5 years –Exercise of rights – if not exercised for one year, rights revert unless contract provides

31 Conclusion The ability to license creates great opportunities for fresh development Software licensed on terms & conditions- breach amounts to infringement Open Source clear alternate to proprietary software- increasing in some sectors( advantages & disadvantages)

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