Click here to close now.

Welcome!

Java Authors: Liz McMillan, Elizabeth White, Pat Romanski, Kevin Benedict, Trevor Parsons

Related Topics: Open Source, Java, Microservices Journal, Virtualization

Open Source: Article

Buying Proprietary Software?

Protect your organization from open source surprises

Open source software has probably been the biggest driver of complex software solutions in the last decade. Access to a large variety of quality, peer-reviewed software has accelerated product development, reduced product introduction intervals and lowered the costs for producers of software and for those of us who leverage third-party software in our projects.

Many of us have heard about the trouble that organizations have come across when using open source improperly... remember Cisco/Linksys, Katzer, and the BusyBox chronicles? You may think that your organization is safe because you are buying proprietary software. However, if your software supplier unknowingly incorporated open source into its product, your organization may face unexpected legal and financial consequences arising from open source licensing obligations and the resulting intellectual property infringement claims. The good news is that there are various tools available at your disposal that can assist your organization in protecting itself from such open source surprises, such as contractual measures such as representations and warranties and indemnities; and extra-contractual tools such as software audits and a structured Open Source Software Adoption Process (OSSAP).

Some Basics About Commercial Contracts Relevant to Software Purchases
Commercial contracts include various provisions that protect and allocate risk among buying and selling parties. Among the most important are representations and warranties ("reps and warranties") and indemnities. Reps and warranties are assurances made by one party that are intended to provide certainty to the other party that relies on them. For example, a hypothetical software company ("Softco Supplier") may represent and warrant that it owns all of the intellectual property rights in the software it sells. If Softco Supplier does not in fact own all of the intellectual property rights in the software, the buyer ("Softco Buyer") has a right to claim damages for Softco Supplier's misrepresentation.

However, in many instances it is impossible for contracting parties to fully guarantee the accuracy of a statement. In these cases, parties opt to provide reps and warranties that are qualified by the knowledge of the party providing them. These types of reps and warranties can be problematic from the perspective of the party that seeks to rely on them. We will return to this in the following section, which specifically deals with the application of reps and warranties, and indemnities to open source.

Indemnities provide security against losses that are triggered by the occurrence of contractually specified events. Unlike reps and warranties, recovery from indemnities is not contingent upon whether a misrepresentation was made. In our example, if Softco Supplier (the "indemnitor") indemnifies Softco Buyer (the "indemnitee") for any intellectual property infringement claims against the software being sold, then in the event that such claims arise, Softco Supplier is obligated to compensate Softco Buyer for its losses.

Reps and Warranties vs. Indemnities in an Open Source World
In the software procurement context, it's important for buyers to determine whether open source code is incorporated into the software that is being purchased. The primary reason for this is that open source license obligations are binding. Failure to comply could have a diminishing impact on software value, as some open source cannot be mixed into products that have trade secret value. In addition, if a buyer purchases software without the knowledge that it includes open source, the buyer runs the risk of commercializing the product in a manner that violates the license that covers the open source code. This can leave the buyer exposed to costly intellectual property infringement claims.

The recent focus on open source reps and warranties and indemnification is linked to the growing instances of intellectual property infringement claims involving open source software. As courts in the United States, Germany and elsewhere have acknowledged the enforceability of open source licenses, notable violators have succumbed to costly settlements, and enforcement organizations such as the Free Software Foundation have become more aggressive in launching suits.

Because of the immense financial and legal implications of intellectual property infringement suits, a software buyer will often require its supplier to represent and warrant that the software being purchased does not contain any open source code. If open source is later discovered in the software, the buyer is entitled to seek damages from the supplier for the breach of the representation. However, as mentioned earlier, it's often difficult for contracting parties to fully attest to the accuracy of a representation. This situation arises in instances in which the contracting party experiences knowledge gaps. In these cases, a contracting party will seek to limit its liability by narrowing the representation to apply to the knowledge that it possesses. Taking our earlier example, if Softco Supplier had acquired code from a third party, or engaged in outsourcing of programming, it may not be positioned to fully attest to the fact that the software it sells does not contain any open source. As a result, Softco Supplier will represent and warrant that ‘to the best of its knowledge, open source is not incorporated into the product.' In this case, Softco Buyer is only entitled to damages if it can show that Softco Supplier knew that its representation was untrue at the time that it was made. If this fact cannot be established, Softco Buyer is left without a remedy for any losses arising from Softco Supplier's misrepresentation.

Unlike reps and warranties, recovery from indemnities is not contingent upon whether a misrepresentation was made. Thus, if Softco Supplier indemnified Softco Buyer for open source infringement claims against the software, Softco Supplier would be obligated to fully cover the losses arising out of any such claims. In this case, it would be irrelevant whether Softco Supplier had knowledge of the presence of open source, as liability is triggered by the occurrence of the contractually specified event (the presence of open source) rather than the misrepresentation made by Softco Supplier.

Buyer's Duty
Another important distinction between reps and warranties and indemnities in our example is in relation to the duty imposed on Softco Buyer to mitigate its own loss. Common law imposes a requirement on parties relying on reps and warranties to take action to mitigate their own losses. In the context of open source reps and warranties, once a software buyer becomes aware that open source is embedded in the software, the buyer must take action to minimize its loss, for example by immediately replacing the code, or making the code freely available. In contrast, there is no parallel requirement for the beneficiaries of indemnities to mitigate their own losses.

Software Audit Can Minimize Exposure
Although open source reps and warranties and indemnities can provide software purchasers with remedies for losses arising from intellectual property infringement suits, they cannot shelter the buyer from being sued in the first place, or from experiencing the loss of goodwill in relation to litigation. As a result, reps and warranties and indemnities should not be regarded as due diligence replacements. Rather than taking the risk of open source surprises, software purchasers can engage resources (internal or external) that have the ability to analyze software to determine the presence of open source prior to executing the purchase.

A software audit entails code scanning aimed at detecting third-party and open source code. After the scanning stage, the purchaser is provided with an audit report detailing the identified code and associated license obligations. Performing such audits at the pre-purchase stage allows the buyer to understand whether the license obligations of the open source code are in line with the intellectual property policies of its organization, and if not, then the buyer is positioned to request the supplier to replace the code in question, or to engage an alternate supplier.

Software Audit in the Supply Chain
One of the contexts in which software audits are particularly beneficial is in the supply chain. Shortly after Cisco acquired Linksys in 2003, it was faced with an infringement suit relating to the use of GPL covered code in its router firmware. It turned out that the infringing chipset was provided to Linksys by Broadcom, which in turn outsourced the development to a third party. As a part of the settlement that was reached, Cisco was forced to make the infringing source code freely available on its website, appoint an open source compliance officer, and make a monetary contribution to the Free Software Foundation. As the Cisco case suggests, software audits can be a helpful tool at the pre-purchase stage when dealing with a supply chain context in which the immediate supplier has little control or knowledge over the code pedigree of the final product.

Review of Available Contractual Tools
Software purchasers have contractual tools (reps and warranties, and indemnities) at their disposal to protect their organizations from open source liabilities; however, it is important to remember that not all tools provide equal protection. While reps and warranties can provide the buyer with a remedy against misrepresentation, in instances where these assurances are qualified by the knowledge of the supplier, the buyer may be left without recourse. From this perspective, indemnities offer increased protection to software purchasers concerned about intellectual property infringement claims in relation to the use of open source.

Open source indemnities are also beneficial in comparison with reps and warranties, as they do not impose an obligation upon the party relying on them to take any action to minimize their own losses in the event of a breach.

Although open source reps and warranties and indemnities can provide software purchasers with means of recovery from intellectual property infringement claims, these contractual measures provide for an imperfect after-the-fact solution to a problem that lends itself well to management practices that would reduce the risk in the first place. Structured open source license management practices and software audits aimed at identifying third-party and open source code and ensuring open source compliance provide an optimal level of protection. These tools provide certainty regarding code pedigree, and enable software purchasers to avoid the negative consequences arising from intellectual property infringement suits.

More Stories By Diana Marina Cooper

Diana Marina Cooper obtained a BA in Politics and Governance and a MA in Globalization Studies. She is currently a JD Candidate (2013), and is pursuing a concentration in Law and Technology. Follow Diana @Diana_M_Cooper

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@ThingsExpo Stories
SYS-CON Events announced today that kintone has been named “Bronze Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY, and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. kintone promotes cloud-based workgroup productivity, transparency and profitability with a seamless collaboration space, build your own business application (BYOA) platform, and workflow automation system.
SYS-CON Events announced today that Site24x7, the cloud infrastructure monitoring service, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Site24x7 is a cloud infrastructure monitoring service that helps monitor the uptime and performance of websites, online applications, servers, mobile websites and custom APIs. The monitoring is done from 50+ locations across the world and from various wireless carriers, thus providing a global perspective of the end-user experience. Site24x7 supports monitoring H...
SYS-CON Events announced today that Intelligent Systems Services will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Established in 1994, Intelligent Systems Services Inc. is located near Washington, DC, with representatives and partners nationwide. ISS’s well-established track record is based on the continuous pursuit of excellence in designing, implementing and supporting nationwide clients’ mission-critical systems. ISS has completed many successful projects in Healthcare, Commercial, Manufacturing, ...
The best mobile applications are augmented by dedicated servers, the Internet and Cloud services. Mobile developers should focus on one thing: writing the next socially disruptive viral app. Thanks to the cloud, they can focus on the overall solution, not the underlying plumbing. From iOS to Android and Windows, developers can leverage cloud services to create a common cross-platform backend to persist user settings, app data, broadcast notifications, run jobs, etc. This session provides a high level technical overview of many cloud services available to mobile app developers, includi...
SYS-CON Events announced today that B2Cloud, a provider of enterprise resource planning software, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. B2cloud develops the software you need. They have the ideal tools to help you work with your clients. B2Cloud’s main solutions include AGIS – ERP, CLOHC, AGIS – Invoice, and IZUM
WebRTC is an up-and-coming standard that enables real-time voice and video to be directly embedded into browsers making the browser a primary user interface for communications and collaboration. WebRTC runs in a number of browsers today and is currently supported in over a billion installed browsers globally, across a range of platform OS and devices. Today, organizations that choose to deploy WebRTC applications and use a host machine that supports audio through USB or Bluetooth can use Plantronics products to connect and transit or receive the audio associated with the WebRTC session.
The WebRTC Summit 2015 New York, to be held June 9-11, 2015, at the Javits Center in New York, NY, announces that its Call for Papers is open. Topics include all aspects of improving IT delivery by eliminating waste through automated business models leveraging cloud technologies. WebRTC Summit is co-located with 16th International Cloud Expo, @ThingsExpo, Big Data Expo, and DevOps Summit.
SYS-CON Events announced today that Tufin, the market-leading provider of Security Policy Orchestration Solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. As the market leader of Security Policy Orchestration, Tufin automates and accelerates network configuration changes while maintaining security and compliance. Tufin's award-winning Orchestration Suite™ gives IT organizations the power and agility to enforce security policy across complex, multi-vendor enterprise networks. With more than 1...
As enterprises move to all-IP networks and cloud-based applications, communications service providers (CSPs) – facing increased competition from over-the-top providers delivering content via the Internet and independently of CSPs – must be able to offer seamless cloud-based communication and collaboration solutions that can scale for small, midsize, and large enterprises, as well as public sector organizations, in order to keep and grow market share. The latest version of Oracle Communications Unified Communications Suite gives CSPs the capability to do just that. In addition, its integration ...
SYS-CON Events announced today that Cloudian, Inc., the leading provider of hybrid cloud storage solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Cloudian, Inc., is a Foster City, California - based software company specializing in cloud storage software. The main product is Cloudian, an Amazon S3-compliant cloud object storage platform, the bedrock of cloud computing systems, that enables cloud service providers and enterprises to build reliable, affordable and scalable cloud storage solu...
SYS-CON Events announced today that Gridstore™, the leader in hyper-converged infrastructure purpose-built to optimize Microsoft workloads, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Gridstore™ is the leader in hyper-converged infrastructure purpose-built for Microsoft workloads and designed to accelerate applications in virtualized environments. Gridstore’s hyper-converged infrastructure is the industry’s first all flash version of HyperConverged Appliances that include both compute and storag...
SYS-CON Events announced today that IDenticard will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. IDenticard™ is the security division of Brady Corp (NYSE: BRC), a $1.5 billion manufacturer of identification products. We have small-company values with the strength and stability of a major corporation. IDenticard offers local sales, support and service to our customers across the United States and Canada. Our partner network encompasses some 300 of the world's leading systems integrators and security s...
BroadSoft on Tuesday announced that it is a recipient of the 2014 Frost & Sullivan Market Leadership Award in the Hosted/Cloud Internet Protocol (IP) Telephony market for Latin America. According to Frost & Sullivan market research, the Latin America (LATAM) hosted/cloud Internet Protocol (IP) telephony market, including integrated unified communications and collaboration (UC&C) applications, is currently experiencing a rapid growth trajectory and is expected to exhibit a tenfold rise in annual revenues in the 2013-2020 period. With more than 600 cloud deployments internationally, BroadSoft w...
In 2015, 4.9 billion connected "things" will be in use. By 2020, Gartner forecasts this amount to be 25 billion, a 410 percent increase in just five years. How will businesses handle this rapid growth of data? Hadoop will continue to improve its technology to meet business demands, by enabling businesses to access/analyze data in real time, when and where they need it. Cloudera's Chief Technologist, Eli Collins, will discuss how Big Data is keeping up with today's data demands and how in the future, data and analytics will be pervasive, embedded into every workflow, application and infra...
Participants will reach the final if their IoT solution is liked. A community vote will determine the best solutions submitted in each country, after which an expert jury will select the national winners and the best international IoT solution. Each country's best solution can win a national marketing campaign worth up to €30,000 and become a partner in Deutsche Telekom's participating markets. The winning international solution can become partner of Deutsche Telekom Group across all eight countries and reach out to a potential of 10,8 million business customers. Deutsche Telekom Group has a...
Health care systems across the globe are under enormous strain, as facilities reach capacity and costs continue to rise. M2M and the Internet of Things have the potential to transform the industry through connected health solutions that can make care more efficient while reducing costs. In fact, Vodafone's annual M2M Barometer Report forecasts M2M applications rising to 57 percent in health care and life sciences by 2016. Lively is one of Vodafone's health care partners, whose solutions enable older adults to live independent lives while staying connected to loved ones. M2M will continue to gr...
SYS-CON Events announced today that Vicom Computer Services, Inc., a provider of technology and service solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. They are located at booth #427. Vicom Computer Services, Inc. is a progressive leader in the technology industry for over 30 years. Headquartered in the NY Metropolitan area. Vicom provides products and services based on today’s requirements around Unified Networks, Cloud Computing strategies, Virtualization around Software defined Data Ce...
Dave will share his insights on how Internet of Things for Enterprises are transforming and making more productive and efficient operations and maintenance (O&M) procedures in the cleantech industry and beyond. Speaker Bio: Dave Landa is chief operating officer of Cybozu Corp (kintone US). Based in the San Francisco Bay Area, Dave has been on the forefront of the Cloud revolution driving strategic business development on the executive teams of multiple leading Software as a Services (SaaS) application providers dating back to 2004. Cybozu's kintone.com is a leading global BYOA (Build Your O...
VoxImplant has announced full WebRTC support in the newest versions of its Android SDK and iOS SDK. The updated SDKs, which enable audio and video calls on mobile devices, are now compatible with the WebRTC standard to allow any mobile app to communicate with WebRTC-enabled browsers, including Google Chrome, Mozilla Firefox, Opera, and, when available, Microsoft Spartan. The WebRTC-updated SDKs represent VoxImplant's continued leadership in simplifying the development of real-time communications (RTC) services for app developers. VoxImplant (built by Zingaya, the real-time communication servi...
What exactly is a cognitive application? In her session at 16th Cloud Expo, Ashley Hathaway, Product Manager at IBM Watson, will look at the services being offered by the IBM Watson Developer Cloud and what that means for developers and Big Data. She'll explore how IBM Watson and its partnerships will continue to grow and help define what it means to be a cognitive service, as well as take a look at the offerings on Bluemix. She will also check out how Watson and the Alchemy API team up to offer disruptive APIs to developers.