Avoiding Infringement and Other Software Pitfalls: Best Practices and Procedures

Gordon & Glickson LLC Law Seminars International

Life After Rembrandts: New Developments In IP Strategy August 4 - 5, 2005 This presentation is intended to alert the reader to some of the legal issues discussed herein. The impact of the law for each particular situation depends on a variety of factors, therefore, we strongly recommend you engage legal counsel to assess and help minimize your legal liability based on the particular requirements of your institution. Like any presentation, this is not meant to be used as a substitute for legal counsel.

• Trade Secret Considerations œ Implementing Competitive Tools œ Protecting Your Crown Jewels

• Patent Infringement œ Functionality of New Software œ Search The Landscape

• Trademark/Trade Dress Infringement œ Vetting Process œ Think Ahead

• Open Source Minefield œ Inadvertent Impact On License œ Revenue Stream/Business Model Impacts

• IP Registration œ Copyright Registrations œ Trademark Registrations

© 2005 Gordon & Glickson LLC Copyright Infringement • Grounded In U.S. Constitution œ U.S. Code, Title 17 œ Explicitly Covers Software œ Treated As Is Any Other Literary Work œ Foundation of Current Licensing Business Model

• General Considerations œ Sufficient Originality œ Simple Functionality Not Protected

• Trip Wires œ Direct Copying œ Indirect Copying • Substantial Similarity • —Access“ To Existing Work œ Damages/Injunctive Relief

© 2005 Gordon & Glickson LLC Copying œ To Be Avoided • Direct Copying œ Easy To See œ Is What It Infers • Someone Copies Protected Code Into New Work • Time Pressures Are Often The Motive œ Mere Functionality May Protect • Lack of Originality • Simplicity of Tool œ Rather Rare œ Few Will Ever Admit To Copying

• Indirect Copying œ Majority of Situations œ Circumstantial Evidence œ Level of Similarity Is Key Consideration œ Expert Comparisons Are Essential

• Phase I œ Functionality Team œ This Group Reviews The Existing Software Application(s) œ It Then Scopes Out Desired Functionality For New Application œ Final Step Is To Draft Specs For New Software • Must Be Very Detailed • Must Not Be Based On Code Review/Reverse Engineering

• Phase II œ Development Team œ This Group Must Comprise —New Players“ • No One Could Have Been On Functionality Team • This Element Eliminates —Access“ œ Team Members Cannot Have Had Other —Access“ œ This Team Develops The New Application‘s Code

© 2005 Gordon & Glickson LLC Clean Room Preparations • Determine Scope of the —Room“ œ What will it handle? œ Exclude non-development activities (e.g., specification, testing) œ Focus on code generation

• Determine Provenance of Resources œ Confirm source of all code œ Confirm —contamination“ of participants œ Maintain strict guidelines

• Enforce Communications Limitations œ Maintain strict guidelines œ Understand effect of failure œ compromising of defense

© 2005 Gordon & Glickson LLC Clean Room Preparations (cont‘d) • Memorialize All œ and Retain It œ Key reason for procedures œ written record œ Assure clarity œ ease of use in court œ Goal œ Production of Evidence

• Strike A Balance œ Lawyers v. Technicians œ Evidence Generation Must Recognize Need For Development œ Organize Along Lines of Software Functionality

• Organize According To Tech Needs œ Maintain Records Contemporaneously œ Handle Breaches As They Occur œ Do Not Conceal

© 2005 Gordon & Glickson LLC Trade Secret Issues • Protect Your Trade Secrets Vigorously œ These Are Your Critical Assets, So Guard Them œ Assure No Use Of Competitors‘ Trade Secrets œ Most States Have Trade Secret Statutes • Know Their Terms • They Typically Preempt Common Law

• Using Trade Secrets For Development œ Lay Out Detailed Policies Governing Their Use œ Set Clear Proscriptions Against Use of Competing Assets œ Implement Screening Procedures For New Employees • Review Their Prior Contracts • Have Them Acknowledge Existing Duties • Implement Policies For Handling and Avoiding Conflicts œ Make Sure Employees (Old and New) Understand The Policies œ Utilize Clear Employment Terms • Covering Scope of —Trade Secrets“ • Covering Post-Employment Handling

© 2005 Gordon & Glickson LLC Trade Secret Issues (Cont‘d) • General Trade Secret Protections œ Restricted Access œ Limited Sign Out Options œ Lock Down Systems œ Physical Locations Limitations œ Treat As —Confidential“

• Copyright Registration Does Not Mean Disclosure

• When Registering, Redact Code With Trade Secrets œ Copyright Office Regs Permit Redaction œ Prepare Application Same As Usual Otherwise œ Specimen Sample • All Code Lines Should Be Redacted • Advise Copyright Office Of Reasons

• General Patent Considerations œ Standard Novelty, Utility and Non-Obviousness œ Scope of Functionality œ Process/Method Coverage

• Trip Wires œ Unlike Copyright œ No —Access“ Necessary œ Focus Is On Pure Function œ Damages/Injunctive Relief

© 2005 Gordon & Glickson LLC Patent Prosecution • To File Or Not œ That Is The Question œ Compare Benefits To Costs • Legal Fees To File/Prosecute • Disclosure of Invention (May Otherwise Be Trade Secret) • Consider Scope of Protection œ Debate Among IP Community On This Point œ Can You Remain Protected Without A Patent?

• Disclosure of Trade Secrets Appears Key œ Worth The Benefit of Patent Protection? œ Consider Shelf Life of IT Trade Secrets • Typically Much Less Than Patent Term œ Short Duration of Software Trade Secrets Is Standard • Effect Would Be To Keep Your Competition Close • Patents May Not Be Advantageous

• Clean Room Procedures œ Not As Useful œ Not As Critical As With Underlying Development œ Less Useful Because Access Not Element œ Similarity Is Only Criteria

• Create Distinctions Between Works œ Becomes Marketing Asset œ Re-enforces IP Strengths

© 2005 Gordon & Glickson LLC Trademark Issues • Select Brand Options In Advance œ Review Whether Will Join Family of Marks œ Conduct Thompson & Thompson‘s Conflict Review œ This Area Dovetails Into Copyright Law

• Clean Room Procedures Likewise Less Useful œ Less Useful Because Access Not Element œ Similarity Is Only Criteria

• Create Distinctions Between Works œ Becomes Marketing Asset œ Re-enforces IP Strengths

• TM Process Independent of Development œ Marketing Has More Involvement œ Keep Lawyers In Loop

© 2005 Gordon & Glickson LLC Open Source Minefield • Academic/Government œ GPL œ General Public License (v.2) œ LGPL œ Less General Public License (v.2.1) œ BSD œ Berkeley Software Directive (—New“ œ see MIT) œ MIT œ MITPublic License NASA Open Source Agreement (v.1.3) œ NASA œ NASAOpen Source Agreement (v.1.3)

• Private œ Apache Software License (v.2) œ Computer Associates (v.1.1) œ IBM Public License œ Intel Public License (Recently Withdrawn) œ MPL œ Mozilla Public License (1.1) œ Sun Public License œ Sybase Open Watcom Public License

© 2005 Gordon & Glickson LLC Open Source Variations • Noteworthy Characteristics (Academic) œ GPL • Highly viral œ use infects —new code“ • No Control Over —Forced“ Distribution Rights • LGPL has less coverage (allowing for proprietary libraries)

œ BSD (www.bsd.org) • Much less viral than GPL œ allow code to go —closed“ • Focuses on warranty/damage limitation

œ MIT • Focuses on —substantial portions“ of code • Much less viral than GPL œ allow code to go —closed“ • Does not apply to —new code“ œ NASA • Focus on Patent Rights/Distribution Issues • Also contemplates issuance of warranties

œ Mozilla (v.1.1) (www.mozilla.org) • Clearly worded/much use of defined terms • Focus on —Larger Works“ and —Covered Code“ • Much less viral than GPL • One of most popular versions over last several years

œ Computer Associates • Less Viral • More Choice of Allowing Coverage For —Modifications“

œ IBM • Focus on —Derivative Works“ For Coverage • Less Viral

œ Sun and Sybase • Parallels IBM and CA

© 2005 Gordon & Glickson LLC Open Source Traps/Issues • Licensing Issues To Consider œ Good For Internal Use Applications œ Problems For Distributed Code • Forces Application of Provisions Onto —Proprietary“ Portions • Potential Loss of Revenue Stream œ Debate Over Coverage • Stallman œ No Difference • Torvalds œ Exceptions

• Know What You‘re Getting œ Huge Trap For Unwary œ Know Code Pedigree œ Title To Code Can Be Jeopardized

© 2005 Gordon & Glickson LLC Open Source Considerations • Model #1 œ Development For Distribution œ Development Staff Creates Code For Software Product œ Product To Be Sold/Licensed œ Proprietary Model œ Lines From OSS Are Inserted Into Code œ What Happens To Your Rights To Product? œ What Happens As Your (Indemnified) Customers Find Out?

• Model #2 œ Development For Internal Use Only œ Development Staff Creates Code For Internal Use œ Product Not To Be Licensed (No Income Stream) œ Is The App Going To Be A Competitive Breakthrough?

• Model #3 œ Acquisitions of Third Parties œ Each of Above Considerations Applies Here Also œ Due Diligence Is Key

• Know What You‘re Getting ! ! !

© 2005 Gordon & Glickson LLC OSS Best Practices/Thoughts • Create Implementation Policy œ Key Considerations • Products To Be Licensed? • Revenue Stream? • Business Model? œ Integration of OSS Into Company Products • Restrictions on Distribution Rights • Licensing Fees May Be Undercut œ Track Pedigree of Sources • Where Did Your Code Come From? • Copyright Infringement From —Community“

• Internal Developer Handling Policies œ Know What They Do In Off-Hours œ Make Sure They Are Not Infringing Copyrights œ Keep Careful Records of Authorship œ Make Sure Trade Secrets/Copyrights Not Being Waived

© 2005 Gordon & Glickson LLC OSS Best Practices/Processes • Oversight Committee œ Pre-Approval of OSS Use Necessary • Staffing œ Legal and Technical • Careful Documentation of Decisions œ Access To All Necessary Expertise œ Focal Point œ Train Staff As To Terms and Enforcement

• Approval Process œ Careful Documentation œ Should Create Detailed Product Pedigree

• Timing of Process œ Impose Very Early In Development œ Avoid Production/Integration Conflicts

© 2005 Gordon & Glickson LLC SCO Group v. IBM. . . . • Suit Filed in March 2003 œ $1 Billion œ SCO Allegedly Controls Rights To UNIX œ IBM Distributes AIX Flavor of UNIX œ SCO Alleges Linux Infringes UNIX Code • —Substantial“ Amount of Code Involved • Unfair Competition w/ UNIX • No copyright claims • Public Battles œ SCO Warning Letters To UNIX Users (Few Takers) œ SCO Warning (in June 2003) To IBM Rescinding AIX Rights œ SCO Licensing Initiative on Linux œ IBM Counterclaims œ Patent Infringement and GPL

© 2005 Gordon & Glickson LLC SCO Effects • SCO Litigation Status œ Suits Against UNIX Licensees • Red Hat v. SCO (8/4/03) • SCO v. Novell (1/20/04) • SCO v. Autozone (3/2/04) • SCO v. Daimler-Chrysler (3/4/04) • All Stayed Pending SCO/IBM Decision œ Check SCO‘s Litigation Website • www.sco.com/scoip/lawsuits • Links to Actual Filings œ Evolution of Theories • From Trade Secrets • To Copyrights œ IBM Very Aggressive œ Copyright Violations œ IBM SJ Motion Denied œ SCO Case Weakened © 2005 Gordon & Glickson LLC SCO Effects • Effect on Open Source Movement œ SCO Not Very Popular œ Still Innovating Model œ No Long Range Harm

• Enforcement Seems To Have Increased œ Likely Not Linked To SCO œ Probably Maturation of Process œ Getting Closer To U.S. Shores

• Key As Always Is Risk Assessment œ Know Your Risks œ Weigh Them Carefully

© 2005 Gordon & Glickson LLC Fortinetœ Is the Future Here? • Suit Filed in Munich, Germany (April 2005) œ FortinetUK Ltd. (UK subsidiary of California-based firm, FortinetInc.) produces security devices œ Alleged use of GPL code in FortiOSoperating system œ uses Linux and other products licensed under GPL œ GPL-Violations.orgmoved to enjoin distribution/enforce GPL œ Court agreed to injunction œ Recent settlement œ Fortinethas opened up code

• Computer Associates v. Quest (N.D. Ill.) œ Quest allegedly used CA database admin software œ Quest defended œ argued that GPL governed software œ Court rejected œ software was generated using Bison, a tool governed by GPL, thus product itself not covered

© 2005 Gordon & Glickson LLC Yes . . . Probably • Numerous Prior Settlements œ Siemens œ Fujitsu œ LongshineTechnology Europe GmbH(German vendor of networking products) œ TomTom B.V. (Dutch vendor of navigation systems) œ EDIMAX Technology (Dutch vendor of networking systems)

• Pending Matters œ Motorola œ Acer œ Micronet

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