As will be discussed further below, “open source” software is becoming very important in the business world. Nor is it a matter of small concern for Oregonians. Oregon, and even more specifically, Beaverton, may become a central location for open source development.

But what exactly is open source? Open source software is any software where the source code (the “human readable” code) is freely available and public. Inherent in the concept of open source is that there is a community of developers who are free to submit improvements, modifications and bug-fixes to this publicly available code. There are a number of open source licenses (public statements of permissible terms of use), but all of these public licenses allow generally free distribution of any modified or improved open source product, providing that all of those modifications or improvements are also published as publicly available code under that same public license.

Linux is the most famous open source project. Linux is basically an open source operating system for computers. However, open source code has been used successfully in various other applications in addition to operating systems for computers. For example, many of the servers for the World Wide Web operate Apache Web server software, which is open source code software. Apache Web server software has become very well known for its reliability and stable operation. But the Apache Server software is not the only other open source project. In fact, a myriad of companies are now pursuing the development of numerous open source applications, only some of which are based upon the Linux operating system.

Open source software appears to present a great opportunity for Oregon. The Open Source Development Lab (the “OSDL”) is located right here in Beaverton, Oregon. This is a non profit organization dedicated to expanding the use and applications of the Linux open source operating system. The organization includes as members such companies as Cisco Systems, Unilever, NEC, IBM, Mitsubishi Electric, Hitachi Ltd., Fujitsu Ltd., HP, Intel and Beijing Software Testing Center. Additionally, both Oregon State University and the University of Oregon have open source labs. The City of Beaverton is also considering open source software as one of the core business categories targeted for its business incubator project.

This is no small affair. Indeed, it seems that Oregon could become the open source software capital of the world! The gravitational pull towards Oregon (and in fact Beaverton) no doubt is due in part to the presence of the Oregon Graduate Institute, and the strength of the local semiconductor industry, (including Intel). It also helps that the founder of Linux, founder Linus Trovalds, has relocated to Beaverton to participate in the OSDL.

Nor can it be said that open source software is a passing fad. The importance of open source is exemplified by the fact that Bill Gates has identified Linux as one of the biggest threats to Microsoft.

The SCO Lawsuit Against IBM

In March, 2003, Caldera Systems, Inc. (better known under its business name, the “SCO Group”, or simply as “SCO”) filed suit against IBM for IBM’s allegedly improper technical contributions to the Linux operating system. SCO owns rights in a UNIX operating system, and SCO is interested in promoting the UNIX system. The “SCO” lawsuit against IBM is still pending. In this lawsuit, in general, SCO claims that IBM violated certain written agreements and violated U.S. Copyright law by contributing certain software code information to the public community of Linux software developers. In other words, SCO claims essentially that IBM wrongfully gave software code portions to the public, in violation of SCO’s rights.

This SCO litigation is complicated, very fact specific and still continuing. The outcome is difficult to predict right now. IBM has in fact counter-sued SCO under various theories. So far, there has not been much concern over the SCO lawsuit in the U.S. market.

However, as to the risk to other companies with regard to the Linux system, the following observations can be made. First, whether or not IBM is in breach of its license agreements should not be of concern to companies that are not connected to those agreements. With very limited exceptions, a company cannot be liable under a written agreement unless it is a party to that agreement.

Further, even if a copyright infringement claim against IBM were established, it is likely that this would only affect portions of the Linux software, and that the affected portions of the Linux code would simply be re-written. Moreover, at the very least, proving copyright infringement will be very difficult with the complicated development history involved in the lawsuit.

It is certainly true that if SCO were to get a determination of copyright infringement, SCO could pursue all Linux users for a licensing fee for the all “infringing” copies of Linux. In fact, SCO has been requesting these fees (although, apparently, very few companies feel any pressure to pay those fees). The OSDL (in Beaverton) has begun establishing a litigation defense fund, so that it will be better prepared to wage battle against SCO.

At the present time, the degree of danger represented by the SCO lawsuit to other companies that are using Linux does not seem to be great. However, it is certainly true that local industry has an interest in the outcome of the SCO lawsuit. More than legal risk to particular companies, this lawsuit has begun to symbolize a test of the legitimacy of open source software as a market force. It also serves as a signal that the Linux operating system is now becoming a mainstream computer operating system.

Legal Risks of Open Source in General

While the SCO case is based upon very particular facts, software is a type of technology, and all technologies are subject to possible attacks from competitors on the basis of copyright, patent or other intellectual property rights. The difference with open source products is merely that the developing process involves a bigger, or less controlled, community of developers. While the size of the open source development community increases the number of potential sources of such problems, the type of legal risks posed by open source software are the same that are present in any software product.

It is likely that the open source community will continue to implement stricter standards in documenting the individual contributions to the development process, in an effort to minimize such problems creeping into the software development. Assuming the individual contributions are well documented, the development process becomes open and transparent. In the end, it may be possible to present a strong argument that there is less risk in adopting open source software products versus “traditional” proprietary software products.

© 2004, Bradley J. Schrock. This article was published in the July, 2004 issue of the Yuuyake Shimbun. Bradley Schrock is an attorney in Beaverton, Oregon practicing Business Law, Civil Litigation and Estate Planning. He has over 16 years of experience as an attorney. He also speaks Japanese and lived in Japan for six years during which time he was an attorney in the Toyota Group company Aisin Seiki, working in the Licensing Group of the Intellectual Property Department on intellectual property issues, international licensing and other business transactions. His phone number is (503) 626 – 3087, and email address is . This article is intended for information purposes only, and not as legal advice.