Key Issues in Licensing Software and

Associated Intellectual Property:

Matching Licensing Models to
Business Strategies
Steve Mutkoski
Regional Director, Interoperability & Innovation
Microsoft Corporation
steve.mutkoski@microsoft.com
 What We License
• Software and the four distinct bodies of IP law
– Patent
• broad protection for a range of implementations of an innovation
• “software” patents vs. other patents
– Copyright
• protection limited to copying of “expression”
• also does not prevent others from independently developing same ideas
• primarily a tool to prevent “piracy” (reproduction of entire work or key components)
• not very effective at preventing “cloning” or duplication of features
– Trade Secret
• broad protection
• but does not prevent others from independently developing same ideas
– Trademark
• icons, logos and stylistic elements;
• User Interface
• End User Product Licensing vs. Technology Licensing
– Different terms and purposes
 Co-existence of Open Source and
Commercial Models
• Unlikely that either licensing model will
disappear soon
• OSS itself depends heavily on IP laws
• Developers mix and match
– Must understand implications of mixing code
– Significant implications on how you monetize
what you as a developer create
• End users really care about products
– Total cost, security, reliability, usability
 End User Licensing
• Proprietary software licenses typically restrict the licensee’s right to
copy, redistribute, or modify the software and normally do not
grant access to the software’s source code.
• These restrictions help to protect the developer’s investment in the
software by preventing third parties from expropriating the
software’s economic value without the developer’s authorization.
This approach is reflective of the fact that proprietary software
developers typically generate revenue and fund future R&D by
exploiting the economic value of their software (specifically, the
intellectual property (IP) embodied in the software) in the
marketplace.
• While some proprietary software developers accomplish this by
selling their software outright to customers, others – particularly
those who distribute their software to multiple customers – do so
by means of commercial software licenses with the provisions
described above
 Developer Licensing
• Dozens of inbound, outbound and cross licenses
with key players in the industry
– And increasingly “related” industries
– Convergence of devices and portfolio overlap
– Guarantee “freedom to innovate”
• “Currency of innovation” that can be traded
– Less frequent “offensive” use in industry today- more
and more, licensing is seen as the solution
– A positive direction for the industry- contrast with
historical “MAD” viewpoint
– Patent reform can play a role too
“Open Source” Business Models
• Subscription model
– Software is distributed either in “static” form for one-time fee or “dynamically” for annual per
user fee
– Enables distributor to receive “per copy” subscription fee that looks a lot like a software
license fee
– End user effectively pays for update service, as opposed to initial release of software
• Services/Consulting model
– Give away software, make money on consulting services
• Commoditization
– In portions of software “stack” where company has no competency
• Some interesting wrinkles in subscription model
– Subscription agreement that entitles licensee to ongoing stream of security and performance
enhancements
– Requires payment of per server fee; Includes audit clause typical of traditional EULA;
Terminated if OSS code is modified
– Starts to look a lot like the proprietary EULA
• Challenges
– The desktop: Fedora
– Services and the average user- how to monetize?
 Similarities among models
• Community
– Both OSS and Commercial companies benefit from this to
some degree
– Question how broad participation is and how much
“support” an enterprise can get from community alone
• Hybrid products
– Part OSS, part proprietary
• Shareware or “liteware”
– Try-before-you-buy version is free
– Up-sell into enterprise features, other products or support
 Services vs. Licenses
• Is this about “Open” vs. “Proprietary” or more about
the way companies make money?
• There is room for both models
• From End User standpoint
– Total cost, security, reliability, usability
• From a Developer standpoint
– Hard work and lots of competition in both models
– VC funding- do you have a solid business plan?
– How will I make money to pay my employees? Pay for R&D
within my company?
– Does the services model favor larger established
participants?