Who Has a Shaky Foundation?

The commercial software licensing business as we now know it started with the move from mainframe computers to affordable personal computers and has been around for at least 20 years. Similarly, open source licensing as we now know it arguably started with release of version 2 of the GPL just a few years later.

Even though these software license and distribution models have been in effect for roughly the same period of time, "conventional wisdom" (the Freakonomics definition) appears to be that the proprietary software license model is built on a solid legal foundation, while the open source model is filled with legal uncertainty. Recent developments on the legal front for both business models remind us that these stereotypes often do not hold true.

The open source community has had a recent string of recent "wins" giving it more credibility from a legal perspective. The continual flow of BusyBox cases, including the recent initiation of an action against Extreme Networks and settlement with Super Micro Computers, Inc., has shown that the GPL can be readily enforced, particularly in cases where GPL-covered code can easily be tracked and where the nature of the software requires the type of linking or integration that would create a derivative work or modification.

In addition, Red Had recently settled a patent dispute and showed that it is possible to successfully negotiate a patent license that protects the open source community as a whole. Both Red Hat's explanation of its strategy, and Mark Radcliffe's analysis of the license terms are fascinating reading for anyone who wants to see the gory legal details that go into making open source work for everyone.

By contrast, a recent case in U.S. Federal District Court in Seattle illustrates that the very foundation of the proprietary license model is still subject to uncertainty. In Vernor v. Autodesk, Autodesk found itself on the losing end of the court's interpretation of the "first sale doctrine," a principle in copyright law that permits purchasers of a copy of a copyrighted to distribute that copy without obtaining additional permission. Another implication of the first sale doctrine is that copyright holders cannot use license agreements to control distribution of copies of their work in perpetuity.

While this Autodesk case was decided in a district court, at least two U.S. Courts of Appeals have made similar rulings, and some others have yet to address the issue directly. The difference in opinion between the Circuit Courts has not been addressed by the U.S. Supreme Court. As another indication of the momentum behind this view, William Patry, Senior Copyright Counsel for Google and author of one of a highly respected legal treatise on copyright law, stated in response to the Vernor decision that to permit a license to circumvent the first sale doctrine "is an absurd position to me, and in such cases, federal courts should take a common sense view of the transaction in order to avoid abolition of the first sale doctrine".

The first sale doctrine is consistent with some of the basic principles of open source, but it does not provide the same level of freedom that copyleft and other open source licenses provide. As a result, the Vernor decision isn't likely to impact the open source model directly.

Instead, the important message here is that no matter how exciting the successes they enjoy or how dire the challenges they face, both the open source and proprietary software license business models as we know them today have solid legal foundations and will certainly survive.