Sub-regional Seminar on the Protection of Computer Software and Databases organized by the World Intellectual Property Organization (WIPO), the Romanian Copyright Office (ORDA), and the State Office for Inventions and Trademarks (OSIM) Mangalia, Romania, August 25 to 27, 2010 TOPIC 5: KEY ISSUES IN LICENSING OF SOFTWARE: MATCHING LICENSING MODELS TO BUSINESS STRATEGY Dr. Mihály Ficsor, Chairman Central and Eastern European Copyright Alliance (CEECA) Budapest
Outline 1. 2. 3. 4. Basic concepts and definitions Types and usual provisions of software licenses FS and OS: common and differing features Business models and procurement policy in the PS-FS-OS triangle 5. Relatives of FS licenses : Creative Commons licenses M. Ficsor, Mangalia, August 25 -27, 2010 2
Basic concepts and definitions “Proprietary software”: The model where the software developed by a commercial entity is typically licensed for a fee. The licensor often provides support, training, updates and other similar services needed by customers to use the software. Although the source code of the software may be made available to certain users of the software through special licensing or other agreements, but is usually not distributed to the general public, and may not be copied or modified except in a manner provided for in such agreements. “Commercial software”. This term is used sometimes as a synonym of “proprietary software”. “Commercial software”, however, means those computer programs which are developed and distributed for commercial purposes. Most proprietary software is commercial software in this sense, but there are some exceptions. On the other hand, as indicated above, “free software” does not mean free in the generally accepted meaning of “free” products; there are many computer programs developed and distributed on the basis of the open-source concept that are of a commercial nature. M. Ficsor, Mangalia, August 25 -27, 2010 3
Basic concepts and definitions “Closed software”: Proprietary software whose source code is not available. “Shared source software”: Proprietary software whose source code is made available under certain conditions and for certain purposes, but in which the IP rights are retained. “Shareware”: Copyrighted software available free of charge for a limited trial basis; if the user decides to continue using the software beyond that period, he is expected to register and pay a small fee. By doing this, he becomes eligible for assistance and updates from the producer of the software. M. Ficsor, Mangalia, August 25 -27, 2010 4
Basic concepts and definitions “Open standard” is a neutral concept from the viewpoint of whether proprietary software or free/open-source software is the source of the standard. A standard may be open and proprietary at the same time. Otherwise standards by definition are “open”. A “closed” standard that may only apply a single or a couple of companies is not a real standard; the expression “closed standard” is an oxymoron. “Open” standard does not necessarily means “free” standard in the sense that it may be used free of charge. However, proprietary software, in general, may only correspond to its function as standard, if it is available under reasonable and discrimination-free (“RAND”) terms. M. Ficsor, Mangalia, August 25 -27, 2010 5
Basic concepts and definitions “Free software”. A misleading expression, since it suggests that the programs distributed in the free software system are free of charge. In general, this is not the case. The term indicates a philosophical concept rather than necessarily truly free distribution. This is reflected in the following statement at websites of the free software movement: „’Free software’ is a matter of liberty, not price. To understand the concept, you should think of ‘free’ as in ‘free speech, ’ not as in ‘free beer. ’ „Free software is a matter of the users' freedom to run, copy, distribute, study, change and improve the software. More precisely, it means that the program's users have the four essential freedoms: The freedom to run the program, for any purpose (freedom 0). The freedom to study how the program works, and change it to make it do what you wish (freedom 1). Access to the source code is a precondition for this. The freedom to redistribute copies so you can help your neighbor (freedom 2). The freedom to distribute copies of your modified versions to others (freedom 3). By doing this you can give the whole community a chance to benefit from your changes. Access to the source code is a precondition for this. (Emphasis added; continues. ) M. Ficsor, Mangalia, August 25 -27, 2010 6
Basic concepts and definitions Free software (definition at the free software website; cont. ) „A program is free software if users have all of these freedoms. Thus, you should be free to redistribute copies, either with or without modifications, either gratis or charging a fee for distribution… Being free to do these things means (among other things) that you do not have to ask or pay for permission to do so. You should also have the freedom to make modifications and use them privately in your own work or play, without even mentioning that they exist. If you do publish your changes, you should not be required to notify anyone in particular, or in any particular way. “’Free software’ does not mean ‘noncommercial. ’ A free program must be available for commercial use, commercial development, and commercial distribution. Commercial development of free software is no longer unusual; such free commercial software is very important. You may have paid money to get copies of free software, or you may have obtained copies at no charge. But regardless of how you got your copies, you always have the freedom to copy and change the software, even to sell copies. (http: //www. gnu. org/philosophy/free-sw. html. ) M. Ficsor, Mangalia, August 25 -27, 2010 7
Basic concepts and definitions “Open-source software”. It is a software-licensing model where the source code of the software is typically made available royalty-free to the users of the software, under terms allowing redistribution, modification and addition, though often with certain restrictions. The support, training, updates and other services for the software may be provided by a range of entities, increasingly under commercial arrangements. Open source programs are often, though not exclusively, developed through a collaborative effort in which a number of persons contribute elements of the final software. Software companies are also contributing paid programmer time and programs developed in-house to the open source community. The best-known example is the Linux system. Since sometimes the expression “open source” has been used in somewhat different ways, the Open Source Initiative (OSI) offers a certification service (see www. opensource. org). The “OSI Certified" mark identifies software distributed under licenses that are known to meet the “Open Source Definition” (OSD). M. Ficsor, Mangalia, August 25 -27, 2010 8
Types and usual provisions of software licenses Types of software licenses: § End-user licenses Ø signed licenses Ø shrink-wrap licenses Ø click-on licenses Ø conditional use/access licenses Ø site licenses § Developer licenses § Manufacturer-publisher-distributor licenses § Cross-licenses agreements § Collaboration-licenses § Outsourcing licenses M. Ficsor, Mangalia, August 25 -27, 2010 9
Types and usual provisions of software licenses Usual provisions of software licenses General provisions of any licenses: Øidentification of the contracting parties, Ørights licensed, Ø whether the transfer of the license or sub-licensing is allowed, Ømodes of delivery and acceptance, Øpayments, Ømaintenance, support, Øwarranties, guarantees, Ørelated deadlines, Ø possible reasons for, and effects of, termination of the license, Ø taxation issues, Øforum and applicable law selection M. Ficsor, Mangalia, August 25 -27, 2010 10
Types and usual provisions of software licenses Usual provisions of software licenses Specific issues covered by software licenses Ø identification/published name of the program Øwhether source code and/or object code is covered, Ødocumentation to be made available, Øthe coverage of rights transferred or (normally) licensed, Øliability for functioning defects and data loss, Øconditions of making, using and exploiting derivative programs, Øprovisions reflecting whether proprietary software, FS or OSS license is involved M. Ficsor, Mangalia, August 25 -27, 2010 11
FS and OS: common and different feautures Free software and open source software frequently referred to together as one phenomenon: F/OSS, FOSS or FLOSS (free/libre/open source software, where the French/Spanish word „libre” is a kind of „disambiguation” for the double meaning of the English word „free, ” only corresponding to it in „free speech” and not in „free beer” (bière gratuite/cerveza gratuita). However, although the FS and OSS licenses have common features (such as, the availability of the source code), they also differ in respect of their origins, philosophy and interaction with proprietary software (PS). FS is an ideology-based and quite rigid system, while OS is basically a business-method system (and a tool to compete with PS). M. Ficsor, Mangalia, August 25 -27, 2010 12
FS and OS: common and different feautures Free software; origins and philosophy The foundation of the “free software” movement is linked to Richard Stallman’s name. As early as in the 1970 s – the key decade of software development – researchers and programmers shared their software in a manner similar to what corresponds now to the principles of the free-software movements. In the late 1970 s, however, the various institutions began recognizing the intellectual property value of their software, and introducing licensing techniques in order to recoup their investments and to finance their further development projects. As a result of this, the outlines of what is now the proprietary software system started appearing. This did not correspond to the „hacker philosophy” shared by some programmers who believed that the Internet should be a channel for free distribution. It was in response to this development that, in 1983 -84, Richard Stallman launched the GNU project. He introduced the concepts of "free software" and „copyleft. ” M. Ficsor, Mangalia, August 25 -27, 2010 13
FS and OS: common and different feautures § In 1985, Stallman founded the Free Sofware Foundation (FSF) to provide logistical and financial support for the GNU project. The FSF employed programmers to contribute to GNU, but substantial portion of development was, and continues to be, carried out by volunteers. As GNU gained prominence, and the interested businesses began contributing to the development and selling GNU software and technical support. The most prominent and successful of these was Cygnus Solutions now part of Red Hat. § In 1991, Linus Torvalds created the UNIX-compatible Linus kernel. Although it was not originally free software, in 1992, Torvalds changed the license previously applied to the GNU GPL. Linux was further developed by various programmers and in 1992 combined with the GNU system, resulting in a fully functional free operating system. , referred to, first, as „GNU/Linux” and then ever more just the „Linux system. ” § Stallman laid down his motivations for the GNU project in his „GNU Manifesto” stressing the need to "bring back the cooperative spirit that prevailed in the computing community in earlier days. ” The GNU General Public License (GPL) serves this objective. It is copyright-based, but is to reserve „copyleft” free uses. M. Ficsor, Mangalia, August 25 -27, 2010 14
FS and OS: common and different feautures Stallman’s and the FS movement „copyleft” philosophy (excerpts from the list of „words to avoid” due to their „confusing” nature published on the GNU website): Ø “Compensation: ” To speak of “compensation for authors” in connection with copyright carries the assumptions that copyright exists for the sake of authors … The…assumption is simply false. Ø “Creator: ” The term “creator” as applied to authors implicitly compares them to a deity („the Creator”). Ø “Intellectual property: ” …To avoid spreading unnecessary bias and confusion, it is best to adopt a firm policy not to speak or even think in terms of „intellectual property. ”… [It is] hypocrisy [to] call… these powers “rights. ” Ø “Protection: ” Publishers' lawyers love to use the term “protection” to describe copyright. This word … encourages people to identify with the owner and publisher who benefit from copyright, rather than with the users who are restricted by it. It is easy to avoid “protection” and use neutral terms instead… The term “protection” is also used to describe malicious features. For instance, “copy protection” is a feature that interferes with copying. From the user's point of view, this is obstruction. (www. gnu. org/philosophy/words-to-avoid. html) M. Ficsor, Mangalia, August 25 -27, 2010 15
FS and OSS: common and different feautures S T A L L M A N R I C H A R D M. Ficsor, Mangalia, August 25 -27, 2010 16
FS and OS: common and different feautures Open source The open-source system was launched in 1998 by a group of people – Eric Raymond, Bruce Perens and Christine Peterson – who formed the Open Source Initiative (OSI). They sought (i) to bring a higher profile to the practical benefits of sharing software source code, and (i) to interest major software houses and other high-tech industry companies in the concept. These objectives were alien to the FS ideology. The GNU/FFS website contains an article the title of which is this “Why ’Free Software’ is better than ’Open Source’”. The best way to characterize the differences between the FS movement and the OS system is to quote from that article. M. Ficsor, Mangalia, August 25 -27, 2010 17
FS and OS: common and different feautures The GNU/FS website on the common and different features of FS and OS (contd. ): „The Free Software movement and the Open Source movement are today separate movements different views and goals, although we can and do work together on some practical projects. „The fundamental difference between the two movements is in their values, their ways of looking at the world. For the Open Source movement, the issue of whether software should be open source is a practical question, not an ethical one. As one person put it, ‘Open source is a development methodology; free software is a social movement. ’… „We disagree on the basic principles, but agree more or less on the practical recommendations. So we can and do work together on many specific projects. We don't think of the Open Source movement as an enemy. The enemy is proprietary software… (Emphasis added; continues. ) M. Ficsor, Mangalia, August 25 -27, 2010 18
FS and OS: common and different feautures The GNU/FS website on the common and different features of FS and OS (contd. ): „The official definition of “open source software”… is very close to our definition of free software; however, it is a little looser in some respects, and they have accepted a few licenses that we consider unacceptably restrictive of the users. . . [T]he obvious meaning for the expression “open source software” is “You can look at the source code. ” This is a much weaker criterion than free software; it includes free software, but also some proprietary programs… „They figured that by keeping quiet about ethics and freedom, and talking only about the immediate practical benefits of certain free software, they might be able to “sell” the software more effectively to certain users, especially business. The term “open source” is offered as a way of doing more of this—a way to be “more acceptable to business. ” The views and values of the Open Source movement stem from this decision. „At present, we have… not enough freedom talk. Most people… say little about freedom – usually because they seek to be “more acceptable to business. ” M. Ficsor, Mangalia, August 25 -27, 2010 19
Business models and procurement policy in the PS – FS – OS triangle Co-existence and converging trends Both PS and OS models may be used for a viable business strategy for software companies and for the advantages of customers. The two systems are not mutually exclusive; and companies are increasingly trying to benefit from both and allow them to co-exist. Ø proprietary operating benefitting from the open source development by adopting an open source approach for the lower levels of the system (e. g. device drivers) while keeping the higher levels proprietary (e. g. user interface); Ø software developers contributing commercially developed code to the open source community to allow open source solutions to operate on a broader range of platforms. Both PS and OS seem to have their own strength and challenges, also depending on the circumstances of the field of use and the manner of deployment. M. Ficsor, Mangalia, August 25 -27, 2010 20
Business models and procurement policy in the PS – FS – OS triangle Comparision of the PS and OS systems; the extent of products and services covered and the related revenue (to providers) and cost (for consumers) PS providers obtain revenue from licensing fees for which they also grant product warranty and maintenance and security services (usually for no further fee). This goes along with higher initial costs for consumers but no, or little, subsequent costs. OS providers obtain revenue from supporting services and hardware that they package together with the open source software and for which they charge fees. Another model is to allow free downloads of an open source application and to convert this base of users into paying customers for a full-featured version. The pooling of development resources can also provide indirect revenue to a company that provides open source software, such as the sale of the commercial software and/or hardware they offer beside the open source software. It depends largely on the needs and circumstances of the users which model may be more advantageous for them. M. Ficsor, Mangalia, August 25 -27, 2010 21
Business models and procurement policy in the PS – FS – OS triangle Total Cost of Ownership and other criteria to take into account The concept of Total Cost of Ownership (TCO) is used in different fields of production and services, and it is particularly relevant concerning computer hardware and software. It is defined as all of the possible costs incurred in the life cycle of a workstation, from acquisition to disposal. TCO is usually calculated by taking into account hardware and software together. However, even in this way, studies published by well-known consulting institutions, such as the Gartner and Forrester Group, show that the initial purchase price, in general, does not represent more than 25% of the total cost associated with owning a PC over its lifetime. Both direct costs and indirect costs are calculated, and the majority of the aspects concern software (alone or in interaction with hardware). M. Ficsor, Mangalia, August 25 -27, 2010 22
Business models and procurement policy in the PS – FS – OS triangle Total Cost of Ownership and other criteria to take into account Direct costs -- considering those aspects that are relevant from the viewpoint of software – include, in addition to the purchase/licensing cost – the costs of installation training, support and maintenance/security services (and it is an important factor whether these must be born by the user – by using its own resources or by paying to software distributors/developers) or are rather fully or partly born by software provider). Indirect Costs include, for example, those resulting from downtime, or from „migration” (the extra costs of replacing a program by a new one from a different software developer). Other elements that should be and usually are taken into account for selecting a program is its security/vulnerability, flexibility, and from the viewpoint of governments also national IT and economic development policy. M. Ficsor, Mangalia, August 25 -27, 2010 23
Business models and procurement policy in the PS – FS – OS triangle Purchase decisons and procurement policy Both private purchase and government procurement decisions should be bases on objective analysis of all the relevant criteria rather than on some abstract preconceptions or mere ideological considerations in favor or against software business and licensing models. A great number of surveys and studies are made on the different relevant criteria concerning the advantageous and disadvantageous of the PS and OS models frequently with conflicting results. It seems, however, that it could hardly be said that this or that model is superior or inferior to the other. As a matter of public policy the promotion of an adequate competitive environment is desirable. It may guarantee higher market efficiency, healthy economic and social development, as well as broader choices and better service for consumers. M. Ficsor, Mangalia, August 25 -27, 2010 24
Relatives of FS licenses: Creative Commons licenses The Creative Commons (CC) licensing system created by Larry Lessig and some other academics is based on the same kind of „copyleft” ideology as the FS movement. In fact, the idea of CC licenses has been directly derived from the FS licensing model. For information about such licenses, see www. creativecommons. org. The licenses are based on copyright the same way as FS licenses, in the sense that, if a user does not respect the conditions of the license, it qualifies as infringement. However, the system of CC licenses are offered for those who do not intend to exploit their economic rights, or some of them, and are ready to allow free uses – fully or partly – to the general public. M. Ficsor, Mangalia, August 25 -27, 2010 25
Relatives of FS and OSS: Creative Commons licenses § Key terms of the core suite of Creative Commons licenses: Ø Attribution. Letting people copy, distribute, display, perform, and remix the work, as long as they give credit the way requested (all CC licenses contain this element). Ø Non. Commercial. Letting people copy, distribute, display, perform, and remix the work for non-commercial purposes only (for using the work for commercial purposes, the author’s permission is needed). Ø Share. Alike. Letting people create remixes and derivative works based on the work, as long as they only distribute them under the same Creative Commons license that the original work was published under. Ø No. Derivatives. Letting people copy, distribute, display, and perform only verbatim copies of the work — not make derivative works based on it. § CC licenses do not apply for software; instead FS (or OS) licenses are recommended by the managers of the CC system. M. Ficsor, Mangalia, August 25 -27, 2010 26
Relatives of FS licenses: Creative Commons licenses Advantages of CC licenses: Ø There have always been people to make their creations available to the public free of charge who may have tried to express this in different ways. The CC licenses form a standardized system to express this along with clearly recognizable symbols for the various conditions of free uses. Ø Enriching and facilitating availability of certain kinds of works. Ø Greater legal security for users. Disadvantages of CC licenses: Ø Rigidity due to the irrevocable nature of the CC licenses. Ø Conflicts with collective management systems (due to the fact that CMOs, in order to be able to operate their licensing system – frequently in the form of „blanket licenses” – require their members to assign, or otherwise give representation for – all of their works in respect of the given category of rights). Ø Creating – or even promoting („CC revolution”) – the wrong impression that the CC may be an alternative to mainstream copyright. M. Ficsor, Mangalia, August 25 -27, 2010 27
Relatives of FS liceneses: Creative Commons licenses Who uses CC licenses? Ø Academics, professors, researchers Ø Governments in respect of worked owned by themselves Ø Authors indoctrinated by „copyleft” ideology („free software” licenses as roots) Ø „Wiki-”type collective creation platforms Ø „Bloggers, ” social networks , etc. Ø „Vanity publishers” Ø „Accidental authors” Ø Those who use them as part of business model: offering something free, and getting income from related sources (similar to „open source” licenses „forking” from „free software”) Ø Those who use them as a matter of creative-carrier strategy purposes (to succeed, to become known and then to join the mainstream copyright world) Common characteristics: Ø Other sources of income/financial sources Ø Subsidy, cross subsidy, „self-subsidy” Ø Atypical owners of rights M. Ficsor, Mangalia, August 25 -27, 2010 28
Relatives of FS licenses: Creative Commons licenses Who does not use CC licenses? Briefly: the mainstream copyright world (copyright industry; those for whom copyright is a source of living; those for whom copyright has been created). Studies on the economic contribution of copyright; two examples: Ø US (2007 data): contribution to GDP: core copyright industries 6. 44%, by total copyright industries 11. 05%; to employment : core copyright industries: 5. 6 million workers; 4. 05 % to the workforce; total copyright industries: 11. 7 million workers; 8. 51% of the workforce Ø Hungary (2002 data): contribution to GDP: core copyright industries 3. 95%, by total copyright industries 9. 68%; to employment (population. 10 million): core copyright industries: 163. 000 workers; 4. 15 % of the workforce; to total copyright industries: 278. 000 workers; 7. 10% of the workforce. (For terminology of core and total copyright industries, see „Guide on Surveying the Economic Contribution of the Copyright Industries, ” WIPO publication, 2003, No. 893 (E)) M. Ficsor, Mangalia, August 25 -27, 2010 29
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