Open source software licensing: boon or bane?

By Shalika Bhalla, Lall Lahiri & Salhotra

We are all mindful of warranties and guarantees while shopping for gadgets. However, this does not seem to extend to licences. Today even the purchase of a simple mobile phone requires the possession of a licence to use various uploaded software. Although people say they buy software, they are actually purchasing a licence rather than the software itself.

Software usage requires compliance with copyright law. Users must have permission to use or copy software. This comes from the licence agreement, which allows the licensee to use the software while not infringing copyright.

Shalika Bhalla,Associate,Lall Lahiri & Salhotra
Shalika Bhalla
Lall Lahiri & Salhotra

As the scope of software products expands, so do the challenges faced by the industry – more network environments, greater competition, increasingly dominant players, substantial price cuts and lower margins. Two separate reports by Gartner give revenues from software as a service as US$7.5 billion and in spite of the recession the industry saw quarterly revenues climb by 41% in the fourth quarter of 2009. Changing business models and the internet have impacted the industry resulting in more flexible software licensing arrangements.

A critical change has been the emergence of the concept of open source licensing (OSS), which arose with programmers reacting to “a distributor driven model of copyright licensing”. While in the 1960s IBM sold commercial computers with free software, in the early 1980s Richard Stallman founded the Free Software Foundation and drafted the GNU General Public Licence, which ensures that free software remains free. In 1998, the coining of the term “open source” helped to extend it to the commercial world.

The open source licensee may use the software for any purpose. They can copy it, prepare derivative works, distribute it, access and use the source code and use the OSS in combination with other software, including proprietary software, without paying royalties to the licensor.

The benefits of the OSS licensing system include that it provides a community-driven environment of intensive interactive skill development at little explicit cost. The popularity of OSS licensing is largely down to the internet which makes it more cost-effective and efficient for programmers to find tools, collaborate on development projects and distribute them. Consumers trust OSS because of its “nothing to hide” policy, which assures them that no malicious code is being acquired. This improves the developer’s image, increasing market penetration while lowering marketing costs.

OSS developers do not have to worry about technical support services as online forums offer help for free. This is only possible due to the open access to the source code, which enables the developers to fix any security holes and to optimize the programme. OSS also increases market competition, which makes proprietary competitors drop their prices and motivates them to innovate so as also to offer more features that their OSS counterparts.

However, there are also weaknesses. Hidden costs such as those of the requirement of installation software, customization or middlemen are the bane of OSS. Technical support is available for OSS through forums or individuals over the internet unlike a support system team that comes with proprietary software. OSS normally results in linked lists and a complex design process causing longer running time of the software in individual cases. Furthermore OSS mostly evolves in response to the developers’ needs rather than the end-users and there is also not much functional or technical documentation. Incompatibility of the software with the present systems, especially proprietary, cannot be ruled out due to its use of open formats. Furthermore, as the OSS is often free or relatively inexpensive it can also be swiftly abandoned if there is not enough community interest. OSS is not a viable system for all kinds of programmes, such as network security systems, as source codes need to be secret to keep the hackers at bay.

As long as software is completely proprietary the rules are clearly set out by the owner of the IP rights. While such licensing reserves as much legal territory as possible for the copyright holder, under OSS licensing the copyright holder is almost irrelevant. Though open source licensing bypasses the rules of IP rights its infringement cannot be ruled out. Developers work on old-fashioned codes that have been written by other developers, making it possible that a person might infringe a proprietary licence, adapt or modify it and then put it under the OSS licence. This also puts a question on the liability of the end-users who would be using infringed software. Furthermore, OSS may be developed or used by a community of small time developers who might not have the financial viability to fulfil their liability of an IP infringement. It is also possible that an open code could be part of a new work that is subsequently distributed in a manner contrary to the OSS licensing.

Bill Gates acknowledged in an unguarded moment in 1998, “Although about 3 million computers get sold every year in China, people don’t pay for the software. Someday they will, though.” Software products are abundantly available at high prices and until people can pay for the expensive licences OSS will continue to exist.

Shalika Bhalla is an associate with Lall Lahiri & Salhotra where she specializes in trademark opposition and cancellation work.


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