1. Key Issues in Licensing Software and Associated Intellectual Property: Matching Licensing Models to Business Strategies Steve Mutkoski Regional Director, Interoperability & Innovation Microsoft Corporation steve.mutkoski@microsoft.com

2. What We License Software and the four distinct bodies of IP law – Patent broad protection for a range of implementations of an innovation “software” patents vs. other patents – Copyright protection limited to copying of “expression” also does not prevent others from independently developing same ideas primarily a tool to prevent “piracy” (reproduction of entire work or key components) not very effective at preventing “cloning” or duplication of features – Trade Secret broad protection but does not prevent others from independently developing same ideas – Trademark icons, logos and stylistic elements; User Interface End User Product Licensing vs. Technology Licensing – Different terms and purposes

3. Co-existence of Open Source and Commercial Models Unlikely that either licensing model will disappear soon OSS itself depends heavily on IP laws Developers mix and match – Must understand implications of mixing code – Significant implications on how you monetize what you as a developer create End users really care about products – Total cost, security, reliability, usability

4. End User Licensing Proprietary software licenses typically restrict the licensee’s right to copy, redistribute, or modify the software and normally do not grant access to the software’s source code. These restrictions help to protect the developer’s investment in the software by preventing third parties from expropriating the software’s economic value without the developer’s authorization. This approach is reflective of the fact that proprietary software developers typically generate revenue and fund future R&D by exploiting the economic value of their software (specifically, the intellectual property (IP) embodied in the software) in the marketplace. While some proprietary software developers accomplish this by selling their software outright to customers, others – particularly those who distribute their software to multiple customers – do so by means of commercial software licenses with the provisions described above

5. Developer Licensing Dozens of inbound, outbound and cross licenses with key players in the industry – And increasingly “related” industries – Convergence of devices and portfolio overlap – Guarantee “freedom to innovate” “Currency of innovation” that can be traded – Less frequent “offensive” use in industry today- more and more, licensing is seen as the solution – A positive direction for the industry- contrast with historical “MAD” viewpoint – Patent reform can play a role too

6. “Open Source” Business Models Subscription model – Software is distributed either in “static” form for one-time fee or “dynamically” for annual per user fee – Enables distributor to receive “per copy” subscription fee that looks a lot like a software license fee – End user effectively pays for update service, as opposed to initial release of software Services/Consulting model – Give away software, make money on consulting services Commoditization – In portions of software “stack” where company has no competency Some interesting wrinkles in subscription model – Subscription agreement that entitles licensee to ongoing stream of security and performance enhancements – Requires payment of per server fee; Includes audit clause typical of traditional EULA; Terminated if OSS code is modified – Starts to look a lot like the proprietary EULA Challenges – The desktop: Fedora – Services and the average user- how to monetize?

7. Similarities among models Community – Both OSS and Commercial companies benefit from this to some degree – Question how broad participation is and how much “support” an enterprise can get from community alone Hybrid products – Part OSS, part proprietary Shareware or “liteware” – Try-before-you-buy version is free – Up-sell into enterprise features, other products or support

8. Services vs. Licenses Is this about “Open” vs. “Proprietary” or more about the way companies make money? There is room for both models From End User standpoint – Total cost, security, reliability, usability From a Developer standpoint – Hard work and lots of competition in both models – VC funding- do you have a solid business plan? – How will I make money to pay my employees? Pay for R&D within my company? – Does the services model favor larger established participants?