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E-commerce involves not only the buying and selling of goods over the Internet, but is also a process of business communication through the application of technology to the automation of business transactions. And there is no greater debate regarding the flow of electronic commerce than that which is occurring between advocates of the new open source paradigm and the historic model of development of proprietary software within an enterprise. The United States Constitution provides the framework for intellectual property rights in the United States, granting Congress the power “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries” (U.S. Const., art. I, � 8, cl. 8). This phrase recognizes that monetary incentives for individuals can stimulate useful innovation. That is, the assurance that the creator will reap the profit from his own creation spurs the desire to spend the time and money necessary for innovation, which ultimately contributes to the public welfare. The copyright protection provided by this provision of the Constitution has been defined in court decisions throughout the past two centuries. However, the onset of the digital age has raised a flood of difficult questions about innovation and intellectual property rights, many of which have not yet been answered by the courts. Open-source software is an especially controversial topic, largely because the concept seems to contradict the traditional concepts of monetary incentives for innovation. Rather than reaping all the benefits of their innovation, open-source developers release their source code into the public realm. The argument in favor of this open source model is that software innovation can potentially occur more quickly than proprietary source code protected under patent or copyright laws. The debate between the open source model and the traditional license model is a furious one, gaining momentum and attention at all levels of the electronic universe. The idea behind open source is that it allows and fosters the development of “standard business practices.” Then, the theory goes, when all businesses are part of this standardized system, they may more easily collaborate across platforms, maximizing efficiency, innovation and productivity. The more people who use the code, the more people will modify the code, and the more elegant the code becomes — for all concerned. It is this very collaboration that, it has been said, was at the forefront of the development of the Internet — the “road,” if you will, of e-commerce. The commercial license model effectively involves a “lease” of software — a right to use the software for a certain time under certain circumstances. So, the question is, which model is better? And what does “better” mean in this context? In other words, what is the ultimate goal of software development? WHAT IT ALL MEANS Computer programs are written in a programming language, which tells the computer how to perform certain tasks. This set of written instructions is called source code. When people purchase traditional proprietary software (such as Microsoft Windows, Microsoft Office and many other commercial products), they purchase only a binary program, meaning they do not have any access to the source code that causes the software to act as it does. The consumer can simply run or display the program, not revise or customize it. Proprietary software packages generally have an individual license, meaning the user does not have the right to copy and distribute the software without paying a license fee to the creator of the software. Open-source software (such as the operating system Linux), on the other hand, is distributed by companies or individuals that make the source code, or blueprint of the software, directly available to all its users. The idea here is that knowledgeable users can then modify and customize the program to their own needs by fine-tuning it to their own machine or by adding or deleting features of the software. The technological ramifications of this process are abundant. While a proprietary software like Microsoft Windows often restricts users from making and selling copies of the program, open-source software allows programmers to “read, redistribute and modify the source code for a piece of software.” Whereas Microsoft must create and release patches for its proprietary software in order to fix bugs and security flaws, open-source software is far more flexible. Since the source code is available to everyone, many individual programmers can work on the bugs and release patches for the software. Thus, open-source software is updated and expanded continuously throughout the world. Also, the software can typically be acquired for a very small fee relative to proprietary software. Most often, the software can be acquired for no fee at all on the Internet, since each user has the right and ability to make and distribute copies of the open-source program. The Open Source Initiative is a group dedicated to promoting the popularity and recognition of open-source software. The founders of the group created a uniform definition for open-source software, and one of their main purposes is to certify software that is truly open source. If a piece of software includes modifiable source code, does not restrict others from distributing it freely and is available to anyone regardless of their personal characteristics or field of endeavor, then the software is labeled open source. The aim of intellectual property rights expressed in the Constitution was to promote the public good by encouraging innovation. The Supreme Court has upheld this viewpoint many times. “[I]t should not be forgotten that the Framers intended copyright itself to be the engine of free expression. By establishing a marketable right to the use of one’s expression, copyright supplies the economic incentive to create and disseminate ideas.” Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539 (1985). Congress also recognized the primary importance of enhancing the public welfare — and the role that intellectual property protection plays in that process — when the Copyright Act of 1909 was passed. “The enactment of copyright legislation by Congress under the terms of the Constitution is not based upon any natural right that the author has in his writings, … but upon the ground that the welfare of the public will be served and progress of science and useful arts will be promoted by securing to authors for limited periods the exclusive rights to their writings” (H.R. Rep. No. 2222, 60th Cong., 2d Sess., 7 (1909)). Many have therefore suggested that open-source technology is beneficial precisely because it promotes this aim of the U.S. government. LOWER COST Those in favor of open-source technology vehemently argue that it is better for the public than proprietary software. First and most important, they say, open-source software is far less expensive than its proprietary competitors, since most of it can be acquired for free on the Internet. Even when the software is purchased in a store, there is no need to purchase a license for each computer in a house or company. Users do not have to pay for new versions of the software every few years, since the program is constantly being updated around the world. The open-source software allows the individual to distribute copies to whomever he wants. In addition, open-source software like Linux allows companies to run servers on much cheaper hardware, such as Intel chips rather than expensive Sun chips. ENHANCED SECURITY It has also been suggested that the open-source software is more secure than proprietary software. At first this may seem counterintuitive, since exposing the code to anyone who wants it might seem like an invitation for hackers to exploit the program. However, proponents argue, it is the open nature of the source code that is precisely what protects it. Hackers will be persistent whether or not the code is freely available. If a hacker discovers a security flaw in a proprietary program like Microsoft Windows, for example, she can exploit that flaw on every computer that holds that version of Windows. When Microsoft technicians learn of the flaw, they may eventually develop a security patch and post it to their Web site. However, it may take months for the official patch to be released. In contrast, it has been said that the open source nature of the code allows programmers around the world to find and address security flaws so that the program is subject to continuous debugging and security updates. This process, of course, requires those involved in programming efforts to remain active in their updating of the operating system. INCREASED FLEXIBILITY Finally, advocates of the open source paradigm suggest that the public is better served by open source because of the greater flexibility of the programs. Because consumers have access to the code, the argument goes, they can streamline the program to meet the particular needs of their company. For example, the popular search engine Google.com runs Linux as its server. Since Google searches the Internet and does little else, Google’s programmers removed the parts of Linux that are nonessential to searching, thereby streamlining the server to meet the needs of the company. Further, the open nature of the software potentially means that a collection of thousands of programmers around the world have access to the software’s code. As a result, the program can acquire useful new features and evolve much more quickly than any proprietary software with a programming fleet of a few hundred people. TECHNOLOGICAL INNOVATION In light of the above, it has been argued that in addition to promoting innovation, the “open source revolution” has great potential benefits to the public good. The argument goes as follows. In a capitalist society, as open-source technologies become more user-friendly, they will become increasingly attractive to consumers because of the very low cost of the software. Thus, an inexpensive open source alternative to a Microsoft server could take hold in the market for servers and drive higher priced options out of the market. But as open-source software continues to gain ground in the market, the issue of how innovation is affected will eventually arise again. If there is only a small financial incentive to create innovative software programs, where will the innovation come from and how can the software industry thrive? Software companies will arguably have a strong incentive to hitch a free ride on the research and development costs of other companies since the code would be freely shared. The potential disaster — from an intellectual property perspective — would occur when those companies that invest heavily in research and development are driven out of the market by their higher costs relative to their competitors, with research and development grinding to a halt. Therein lies the dilemma for intellectual property rights. Since the U.S. copyright system is in place to promote the public good, it is critical to consider how the copyright system treats open-source software. United States copyright law provides the following rights to the copyright owner: the exclusive right to copy the work; the exclusive right to make derivative works; the exclusive right to distribute the work; the exclusive right to perform the work; and the exclusive right to display the work. THE OPEN SOURCE LICENSE To retain the benefits of copyright ownership, the copyright owner must restrict the use of the licensee of a work. The most popular license agreement for open-source software is the General Public License, published and copyrighted by the Free Software Foundation, which requires any party who redistributes a copy or modified version of GPL software to abide by the terms of the GPL license. The agreement provides licensees with the right to: (1) copy and redistribute as long as the licensee includes a copyright notice and a disclaimer of warranties; (2) charge for the cost of distribution and offer warranty protection for a fee; (3) make derivative works for the licensee’s own use; and (4) distribute derivative works according to certain clearly defined criteria. This license has a few interesting applications. First, it states that individual parties — which include governments and their subordinate branches, corporations and their subsidiaries, and individuals — are free to use the program and modify the source code for their own use. However, if the user wishes to modify and redistribute the code, she must do so under the same conditions that are in the GPL. This means that if a software company incorporated any GPL code into its product, which it then distributed, the company would be required to release all of the source code for that product, since it implicitly accepts the GPL by redistributing the GPL software. However, if the software company elected to modify the open-source software for use only on the computers within its own company, it would not have to release the modifications to the public. This basic provision of the GPL arises from the idealistic vision of the open source advocates. Although open-source software is often referred to as free software, it is not necessarily free in the monetary sense, but rather in the unrestricted sense. That is, the GPL requires that, while redistributors can charge for the distribution of the software, they cannot add restrictions. Thus, free software must always be free and cannot legally be incorporated or converted into proprietary software. Open source advocates tout the copyright protections that they say are inherent in the open-source software movement. The original source code must always be marked as the original, and any changes must be documented and protected as long as they are distributed. So, if copyright protection is inherent in the open source domain, then why is there an intellectual property dilemma? There is no problem when a software company decides to release its own code as open-sourced material. Each company has the right to waive its exclusive copyright rights to the software it provides. However, problems arise when companies unknowingly have their code shared without waiving these rights. The recent case of the SCO Group, Inc. v. IBM Corp., Case No. 03CV-0294 (D. Utah), is a good illustration of the potential conflicts that may arise in the open source universe. The SCO Group is a small company in Utah that owns the rights to UNIX, a proprietary operating system on which Linux is loosely based. IBM is one of the largest sellers of UNIX, which it licenses from SCO. It is also a very large supplier of Linux. In March, SCO sued IBM, claiming that IBM used parts of UNIX code in its version of Linux and, in doing so, created a derivative of UNIX that should be protected by SCO’s copyright. This lawsuit is a breach of contract claim, alleging that IBM breached the license agreement with SCO when it inserted some UNIX code into Linux. This dispute illustrates one of the major potential problems with open-source software: If intellectual property infringement actually takes place, it is difficult to know who to blame, since many programmers around the world can work on the program anonymously. On the one hand, proprietary software often allows for a higher profit margin, since a company cannot be undercut by the same product being sold elsewhere more cheaply (or even having it given away). For many companies, the only way to recoup the research and development costs of software development is to charge a high price, which is only a possibility with proprietary software. For example, Microsoft is extremely protective of its Windows code because it must charge high prices to make the profits necessary to reinvest in more innovation. Further, companies that want to be sure to protect the trade secrets contained within their code should read the open source licenses very carefully if they decide to use free software. It could be devastating for a company to be forced to release its source code because of an oversight by one of its own programmers. On the other hand, incorporating material that is protected by a GPL into their programs may be the best way for companies to produce the finest product. Rather than selling the product for a high price, the company could release its source code to the public while selling packages of service and technical support. Red Hat, Inc. is an example of a company that has succeeded by selling Linux to customers in a package with technical support. In addition, the company could create proprietary software that runs alongside the open-sourced software. For example, many companies have created closed-source programs that run on top of Linux and make the operating system more user-friendly. In these cases, the company would not have to release its own source code, but could still benefit from the open source work of others without infringing on the GPL. Nontechnology companies debating whether to switch to open-source software packages must weigh similar costs and benefits. Before a company decides to make the switch, it must consider both the overt and hidden costs. Even though open-source software has a drastically lower upfront cost than a proprietary package, it often requires advanced technical advisers to fine-tune the programs to the company’s needs. These advisers can be expensive. In fact, Microsoft commissioned a study suggesting that open-source software can be more expensive in the long run because of the cost of such technical advice. However, as open-source software packages continue to evolve, they likely will become more user-friendly, so this potential cost should diminish. Whichever software is cheaper or easier to use, companies should never begin using any type of software, open source or otherwise, without carefully examining the licensing agreement to ensure that there are no potentially dangerous clauses (such as the GPL clause) require disclosure of source code if the program is redistributed, even in modified form. The important benefit to having open-source software as well as proprietary software is allowing companies and individuals to have the ability to weigh the options and choose the type of software that makes the most sense in each case. THE MARKET WILL DECIDE In all cases, the market will decide the victor of the software battle. The economists tell us that, ultimately, the best product at the best value will eventually rise to the top. The purpose of the copyright protections in the U.S. Constitution was to promote innovation as a means to enhancing the public welfare. Many argue that with the rise of the open source market, companies that formerly were complacent developers of proprietary software may now have to produce more innovative and unique closed-source software if they hope to survive in the market. Alternatively, companies can switch to selling services or packages that are complementary to open source materials. If companies do not adjust, they will simply be driven out of the market by the better products. The question for us now is this: Is the open source revolution in software consistent with the highest ideals of the Constitution, namely, protecting the public good and having well-defined property rights? Will it kill the software market, or will it make the market more competitive, leading to better open and closed source products? Without a crystal ball, no one knows for sure. But one thing is certain: it is the technology lawyers who will be the soldiers on both sides of this high stakes battle. Mitchell is a shareholder with Miller Mitchell (www.millermitchell.com) of Princeton, N.J., and chair of the firm’s technology, intellectual property, new media and entertainment law practice.

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