1. Facts & Fairy Tales about Open Source Code Presented to: Society for Information Management Fairfield & Westchester Chapter September 18, 2003 Rye Brook, New York By: Rich Green, Wiggin & Dana LLP © 2003 Wiggin & Dana LLP and the H at and the SCO B ig B ad

2. 1 Wiggin & Dana llp Fairy Tale One: You can’t control the use of open source because intellectual property laws don’t apply. Fairy Tale Two:There is a single, largely beneficial purpose behind open source code—to improve the quality and reduce the cost of software through community development. Fairy Tale Three: Open source software isn’t “commercial” software so licensees-customers have no rights against open source vendors. Facts & Fairy Tales about Open Source Code OVERVIEW

3. 2 Wiggin & Dana llp Facts & Fairy Tales about Open Source Code OVERVIEW What makes Proprietary Software Proprietary? What makes Open Source Software “Open”? Is Open Source Governed by Intellectual Property Laws? Managing Open Source Risks in the Enterprise Pulling it all Together: SCO, Red Hat and IBM

4. 3 Wiggin & Dana llp Facts & Fairy Tales about Open Source Code Some Basic U.S. Intellectual Property Law Copyright © Trade Secrets Patents Trademarks ® tm

5. 4 Wiggin & Dana llp Owning the “Bundle” of Rights Facts & Fairy Tales about Open Source Code Some Basic U.S. Intellectual Property Law

6. 5 Wiggin & Dana llp Certain rights can be granted to others: 5 under copyright statute 2 under trade secrets theory broad range under patent Facts & Fairy Tales about Open Source Code Some Basic U.S. Intellectual Property Law

7. 6 Wiggin & Dana llp Copyright: Display Perform Create Derivative Works (modify/enhance/translate) Reproduce/Copy Sublicense/assign/transfer Trade Secrets: Use Access Disclose Facts & Fairy Tales about Open Source Code Some Basic U.S. Intellectual Property Law Patents: Use in manufacture Embed in product “Improve”

8. 7 Wiggin & Dana llp Licensing: Licensing is when the owner gives the user certain “sticks” from the owner’s “bundle” of rights Facts & Fairy Tales about Open Source Code Some Basic U.S. Intellectual Property Law

9. 8 Wiggin & Dana llp Licensing: Giving certain “sticks” from the ownership “bundle” License Scope Who gets the rights? What rights are granted? What parts of the software can be used? Where can the rights be exercised? How long can the rights be exercised? Are the rights restricted or conditional (no reverse engineering, no third party benefit)? Facts & Fairy Tales about Open Source Code Some Basic U.S. Intellectual Property Law

10. 9 Wiggin & Dana llp U.S. IP Rights Related to Vendors & Employees Work-made-for-hire Invention Disclosure and Assignment Facts & Fairy Tales about Open Source Code Some Basic U.S. Intellectual Property Law

11. 10 Wiggin & Dana llp U.S. IP Rights of Vendors & Employees Work-made-for-hire Applies to © only and must be: an employee or 1 or more of the 9 statutory categories and written agreement as work-made-for-hire Facts & Fairy Tales about Open Source Code Some Basic U.S. Intellectual Property Law

12. 11 Wiggin & Dana llp U.S. IP Rights of Vendors & Employees Invention Assignment & Disclosure Applies to all other rights (including patents and trade secrets) as well as “safety-net” for © that may not be a “work-made-for-hire” Facts & Fairy Tales about Open Source Code Some Basic U.S. Intellectual Property Law

13. 12 Wiggin & Dana llp Fairy Tale One: You can’t control the use of open source because intellectual property laws don’t apply. Fact: Intellectual property laws do apply and control the use of open source software in exactly the same manner as proprietary software—only the effect of that application is different. Facts & Fairy Tales about Open Source Code Applying Intellectual Property Laws to Open Source

14. 13 Wiggin & Dana llp What Makes Proprietary Software Proprietary? What Makes Open Source Software Open ? Facts & Fairy Tales about Open Source Code Applying Intellectual Property Laws to Open Source

15. 14 Wiggin & Dana llp Scope of License Facts & Fairy Tales about Open Source Code Applying Intellectual Property Laws to Open Source

16. 15 Wiggin & Dana llp Scope of License: Open & Proprietary Similarities Address the same subject matter Facts & Fairy Tales about Open Source Code Applying Intellectual Property Laws to Open Source distribution use of underlying human readable code permission to modify/make derivatives definition of number/classes of users definition of types of permitted use

17. 16 Wiggin & Dana llp Facts & Fairy Tales about Open Source Code Applying Intellectual Property Laws to Open Source Limiting number/classes of users Limiting types of use Limiting the components used Limiting duration of rights Limiting or restricting completely modification rights Limiting or restricting completely distribution rights Open Source Software Licenses Enhance the economic value and quality of the software by giving a broad license scope and thus access to many developers * Scope of License: Open & Proprietary Differences Proprietary Software Licenses Preserve the economic value of the software by limiting use through restrictive license scope No limits on number/classes of users No limits on types of use No restriction on modification rights No restriction on distribution rights All conditions are posed in the “positive”

18. 17 Wiggin & Dana llp Facts & Fairy Tales about Open Source Code The Origins of Open Source The asterisk *

19. 18 Wiggin & Dana llp Facts & Fairy Tales about Open Source Code The Origins of Open Source Fairy Tale Two: There is a single, largely beneficial purpose behind open source code—to improve the quality and reduce the cost of software through community development. Fact: There are ideological purposes behind open source code that undercut the commercial cost reduction/quality improvement camp and (unfortunately) increase risk of use.

20. 19 Wiggin & Dana llp Facts & Fairy Tales about Open Source Code The Origins of Open Source The “copyleft” movement Richard Stallman and the GNU Eben Moglan and the Free Software Foundation

21. 20 Wiggin & Dana llp Facts & Fairy Tales about Open Source Code The Origins of Open Source: The copyleft movement “We [...] mean to wrest from the bourgeoisie, [...] the shared patrimony of humankind [...] stolen from us under the guise of ‘intellectual property,’ [...] The measures by which we advance that struggle [... ] will be: Abolition of all forms of private property in ideas. Withdrawal of all exclusive licenses, privileges and rights [...]. Nullification of all conveyances of permanent title. Common social development of computer programs and all other forms of software [...]. By these and other means, we commit ourselves to the revolution [...] of overthrowing the system of private property in ideas.” --Eben Moglan, dotCommunist Manifesto Jan. 2003

22. 21 Wiggin & Dana llp Facts & Fairy Tales about Open Source Code Managing Open Source Risks Fairy Tale Three: Open source software isn’t “commercial” software so licensees-customers have no rights against open source vendors. Fact: Open source software is acquired by most corporate users as part of “commercial” distributions (i.e., Red Hat Linux) and thus user licensees-customers have as many potential rights as in any other transaction.

23. 22 Wiggin & Dana llp Facts & Fairy Tales about Open Source Code Managing Open Source Risks 1. Establish an “Open Source Policy” for your company much like the Internet use policy you likely have now (e.g., no unauthorized Linux downloads over company networks); 2. Use heightened project documentation best practices when developing with or in relation to known open source products in order to keep proprietary source separate from open source; 3. Don’t take “no” for an answer from your vendors (open source and non-open source) when negotiating open source license terms such as warranties, indemnities and remedies; 4. Look for open source where you least expect it –most non-open source vendors today have open source embedded in or bundled with their products in some form; and 5. Include open source risks in your disaster and business continuity planning (e.g., are there reasonable proprietary alternatives to the open source products that can be substituted if the law changes or your open source vendor goes bankrupt). Five Best Practices for Managing Open Source Risk

24. 23 Wiggin & Dana llp SCO, Red Hat and IBM Facts & Fairy Tales about Open Source Code Pulling it all Together

25. 24 Wiggin & Dana llp SCO, Red Hat and IBM 1. Generally speaking, the typical end user of AIX and Linux has no material risk of liability to SCO; 2.SCO has no legal basis to demand license fees from third party users unless it prevails on the merits against IBM; and 3.Even if SCO prevails, third party Linux users may not necessarily be without remedies against their Linux vendors even if they acquired their Linux rights under a typical open source license. Facts & Fairy Tales about Open Source Code Pulling it all Together

26. 25 Wiggin & Dana llp QUESTIONS & ANSWERS Facts & Fairy Tales about Open Source Code Pulling it all Together