Spring Symposium Wrap-up: Part 2, Controversy and Challenges of Software IP Protection

In the second half of the Copyleft vs. Copyright symposium, our distinguished panel presented various perspectives on the workability of copyright law to provide protections for developers and users of software.

PRACTICAL BUSINESS CONCERNS:

In his talk entitled Navigating the Open-Source Minefield: What’s a Business to Do?, Robert Rehm, Jr. of Smith Anderson, LLC in Raleigh discussed the impact open source software (OSS) has on business. Distinguishing traditional software license agreements from open source agreements, Mr. Rehm underscored the changing nature of software use. Some of these changes are rather obvious and perhaps unimportant in most instances, including the fact that traditional license agreements appear in paper form as opposed to the virtual license agreements for OSS. Other changes are much more significant. For instance, whereas traditional software license attributes included prohibitions on modifications and de-compiling of the source code, OSS provides direct access to the source code and even encourages modification. Using either of the two basic licenses of OSS, “free” or “copyleft”, OSS by its very nature encourages modification by providing access to source code so that users may customize to their needs.

Mr. Rehm highlighted the copyright concerns that must be taken into account; concerns that vary among developers, owners, and licensees and between start-up and mature businesses. For instance, Mr. Rehm identified an inherent tension for software developers between keeping production costs lower versus inheriting a marketability limitation. Since OSS is cheaper to utilize than commercial software packages, start-up costs for developers can be kept much lower. However, the “attribution” requirement to identify the source of the OSS and any modifications done to the original source code create a marketability limitation as an extra requirement not found in traditional commercial software use. Likewise, for an owner of OSS, the company may become a less attractive target for acquisition since OSS requires more detailed bookkeeping in maintaining track of these modifications and attribution records. On the other hand, for the licensee OSS creates a much lighter burden because exclusive internal use makes meeting these requirements much easier or at best even unnecessary so long as the licensee makes no plans on sublicensing the modified product.

Furthermore, Mr. Rehm pointed out that one’s business maturity may affect one’s ability to effectively utilize OSS. Again, a tension arises for new businesses who want to keep their start-up costs as low as possible creating an incentive to use OSS, but these same start-up businesses usually lack the focus and detailed bookkeeping required by the attribution and notification requirements. As businesses mature, the focus on profit, while still extant, generally is relaxed and more attention to these managerial tasks can be given their due.

In the end, Mr. Rehm predicts that OSS is here to stay as another variable in creating one’s business model and emphasizes the importance of advising clients on the need to keep up with their unique copyright obligations.

PRACTICAL IN-HOUSE CONCERNS:

The panel also provided an in-house perspective from a major global software development company located here in North Carolina. As senior counsel for Statistical Analysis Software (SAS), Mr. Tim Wilson provided a rather skeptical look on the efficacy of current IP protection for software developers. As a company that licenses its statistical analysis software on a worldwide basis, SAS must utilize all avenues of IP protection in an effort to preserve their property and profits. However, Mr. Wilson made very clear that there are really only two shields that provide any measure of meaningful protection for SAS and those are digital rights management (DRM) tools and traditional contract restrictions. First, to make sure that any licensees who utilize SAS software continue to pay for the software annually, DRM ensures that a non-paying licensee will have their software shut down if that licensee fails to reregister and pay the annual fee. Second, SAS limits the applicable uses of their software through license agreements that prohibit uses that may infringe on the exclusive right to license out the software. Mr. Wilson relayed a problematic episode that recently transpired regarding a cheap “learning” version of the SAS software, licensed out to unknown companies. One of these companies, as it turned out, obtained a license for the sole purpose of decompiling the “learning” version of the software in an attempt to create its own competing product. In Mr. Wilson’s terms, SAS was being robbed.

The problem in IP protection from his perspective boiled down to two things. First, the inability to effectively copyright the software code developed at SAS. As an example, he pointed to the Supreme Court decision in Lotus Dev. Corp. v. Borland Int’l, Inc., 516 U.S. 233 (1996), limiting the copyright potential on interface and software mechanics. And second, copyright infringement provides a relatively dull sword for battling infringers. International piracy was highlighted as the major problem plaguing IP litigation since the protections provided by foreign law made it difficult if not impossible to challenge infringers.

In conclusion, Mr. Wilson advocated for more stringent enforcement of copyright protections, including the need to have international jurisdiction to prosecute foreign companies stealing domestic product. He also pointed to the overburdening of the patent and copyright offices, which are inundated by large companies hoping to protect thousands of products each year. In response, he advocated a stratified filing fee system, imposing higher filing fees for most large corporate filers as a way to discourage these mass unwarranted filings.

PRACTICAL INVENTOR’S CONCERNS:

To understand an inventor’s concerns with copyright and really with IP law in general, Dr. Yaorong Ge, an Assistant Professor from the Virginia Tech-Wake Forest University School of Biomedical Engineering and Sciences, explained his recent experiences with IP law. After developing two software patents related to medical processes including virtual endoscopy and image reporting, he started a medial software company called PointDx. But his understanding of what he considered a new and innovative product that ought to be protected through patent or copyright law differed from the practical-legal reality he witnessed first-hand.

Generally speaking, he made clear that inventors, as one might expect, are unfamiliar with IP law. That being the case, his understanding of exactly what is or is not patentable or copyrightable was grounded less in any legal training and more in his scientific understanding of what it means to “create” something new. However, for the big companies he dealt with in licensing out his developed software, copyright and patenting were much more to do with legal fiction than scientific reality. He described their “patent troll” approach to applying for IP protection on just about everything developed at these large companies regardless of whether these “inventions” were actually something a lay person would understand as an invention. Guarded by armies of attorneys who know as little about the science as the scientists know about the law, Dr. Ge was skeptical of the law’s ability to advance the exchange of ideas as originally anticipated with copyright protections.

This essential disconnect between the two camps, science on one side and law on the other, led him to conclude that this was an “unfair game” for inventors, at least for small group inventors or those in academia. Dr. Ge indicated that ignorance of IP laws serves to stifle innovation and research both through fear of litigation and through loss of the valuable incentive for development that comes with the assurance of compensation for the value of one’s creations.

AN ANTI-TRUST PERSPECTIVE:

Finally, Dr. Andrew Chin, Professor of Law at University of North Carolina at Chapel Hill, provided a robust discussion: On Antitrust and Installed Software Platform Opportunism. At its base, Dr. Chin pointed to the essential misconception that software products are copyrighted works or patented inventions. Rather, software products are the legal rights and technological capabilities that allow a user to run the software code on a machine. Thus, a software user does not have access to (or at least the rights to) the code itself or the legal documentation preserving copyright or patent rights in the software code. Instead, software is a “creature of contract” backed by the digital rights management (DRM) tools that prevent some breaches of these contractual agreements.

Dr. Chin focused on the anti-trust concerns that arise when corporations use their exclusive control over valuable patents and licenses of software to exclude competition. He sought to analogize the D.C. Circuit Court analysis of antitrust and copyright law in United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) to the current Third Circuit appeal in IBM v. Platform Solutions & T3 Techs., 658 F. Supp. 2d 603 (S.D.N.Y. 2009). Dr. Chin’s analysis of the Microsoft decision can be reviewed in 40 Wake Forest L. Rev. 1. The IBM case involves the refusal of IBM to extend licenses to specific patents required to develop small-scale mainframe systems to compete with IBM’s larger, more expensive mainframe technology. In the forthcoming IPLJ 2010 Symposium Issue, Dr. Chin will explore the correlation of these cases and the developing relationship of IP and antitrust law in the realm of software development.