Be wary of IP landmines when using OSS
Open source software has become a popular resource for many businesses due to its cost-saving qualities and its ease of use. Through this type of software, the source code is made freely available and may be redistributed and modified for any purpose.
As businesses look to increase operational efficiencies and lower costs during this time of economic turbulence, legal departments may consider using this software that can be easily customized to the needs of the user. Though it is a valuable resource, in-house counsel should be mindful of pitfalls that can arise with OSS.
“The biggest pitfall is not necessarily knowing that you’re doing it when you acquire the rights to certain software,” says Matthew Diskin, partner at Dentons. “From a due diligence point of view, if you are acquiring software from a third party, they may make promises to you about the representations and warranties surrounding that software, but sometimes you should look under the hood.”
Corporations may be vulnerable to legal action for producing or purchasing proprietary software that is beholden to open source licensing guidelines, Diskin says. In-house counsel trying to sell or distribute proprietary software to third parties may find themselves facing legal action if they do not catch open source software in the source code, he warns.
A contractual taint on the code could force the user to make their own software available on the same terms as the open source software that was originally used, thus destroying the value.
In order to avoid intellectual property disputes, Diskin recommends that in-house counsel should work with trusted companies and fully understand the code that they are buying, and its origins.
“Check the risk before you sign the contract,” he says. “The main job of in-house counsel, from my perspective, is issue-spotting, and then knowing, once there’s an issue, that you have to dig into it. If this is something that you’re just not thinking about, it can easily slip by and lead to a bigger problem down the road.” When entering into agreements with third parties, Diskin recommends making use of a service to scrub the code that will allow in-house counsel to identify any open source software and examine licensing terms, prior to use.
Diskin is a Toronto-based partner in Dentons’ IP, and litigation and dispute resolution groups.