A SOUND IP LEGAL FRAMEWORK FOR THE

PROTECTION OF SOFTWARE

Seow Hiong GOHDirector, Software Policy (Asia)

Business Software Alliance29-30 May 2007

BSA Global Members

BSA Asia Regional Members

Software as Foundation

• Technology as key economic enabler• ICT – software, hardware, services,

telecommunications• Software as foundation

• Key to innovation• Rapid development

• Software innovation is a driving force for economic, social, and technological progress

INTELLECTUAL PROPERTY & INNOVATION

Sustaining InnovationKey Elements:

• Effective intellectual property (IP) protection

• Recognizing the value of IP

• Create virtuous cycle of research & development (R&D)

IP ProtectionMany forms

• Copyright, Trade Mark, Patent, Trade Secrets, etc.

• Licensing allows competing companies to work together

• Create new innovation and standards

Value of IP Questioned?Some argue against IP

• Oppressive regime by international companies and foreign countries?

• Abused to prevent use of fundamental concepts?

• Inhibits new ideas and innovation?

Information Economy

• Knowledge and information key assets, key driver

• Better IP protection leads to better creativity, competition, economic success

Software Piracy

• Asia Pacific: study shows 55% of software is pirated

• Worldwide average is 35%

• Costly to industry• Damages not just international

companies but also domestic companies

• Deprives countries of jobs and revenues

• Lacking respect for intangible property

Foreign Investment

• Good IP regime a key factor• Companies who want to invest and

compete need to know and work in environment where ideas and innovation are protected

• Benefits• Scientific and technological progress• Knowledge transfer

Local Investment

• Local companies also benefit• Better position to negotiate with large

companies• Cross-licensing, buy-out

• Invest in new resources, R&D through licensing and royalties

• Benefits both large and small companies

• Lack of IP respect or protection=> lack of incentive to invest in R&D

Revenue

• International software products• Benefits both local and international

companies• Local industry earns more than

international companies from products

• Local industry involved in distribution channels, IT services market, support, maintenance, add-on, etc.

Reducing PiracySignificant benefits in reducing piracy rate

• Studies show benefit of 10 point reduction• Asia – reduction of 10 points over 4 year

create:• Additional 2 million jobs• Additional US 135 billion contribution to GDP• Of which 80% revenue to local vendors

Future of Asia Pacific

• Asian companies can become formidable international force

• Must lead in innovation, and not mere followers or adopters of technology

• Need IP protection to have incentive for people to devote time, effort, resources to innovate

INTELLECTUAL PROPERTY &

SOFTWARE

Software Models

Development ModelBusiness ModelLicensing Model

Software Development ModelsOpen Source

– Collaborative – different people, different places, no formal association – contributing elements towards final software

– Not exclusively so today • Large companies also release in-house applications to

community

Commercial Software– Usually developed by a commercial entity– Internal teams, though maybe over large

geographical area or even international borders

Software Business Models

Open Source– Not primarily on the software product– Revenue model is on supporting services and

hardware – System integrators

Commercial Software– Focus is on the product– Revenue on customer buying products and its

upgrades– Motivation for customer to buy next version if it is

more innovative and has improved functionality

Software Licensing ModelsOpen Source

– Source code usually provided royalty free– Terms on redistribution, modification, addition

stipulated, rather than requirement for fee to be paid

Commercial Software– Product sold or licensed to customer, In object code

or executable form, for a fee– Source code may be made available to certain users

through special licensing or other arrangement, but not to general users

• Usually not to be copied or modified, except as provided in arrangement

IPR and Software DevelopmentBoth models rely on IPR protection

– Netfilter Project v Sitecom Germany GmbH case

Defendant used open source code within proprietary solution

Plaintiff initiated action to ask defendant to disclose proprietary solution

Plainitff had course of action because of copyright in code– Could not initiate action in other instances because

no copyright

The Debate

Is one software model superior to the other?– Not inherently!

Customer needs and circumstances determine what advantages and disadvantages are relevant and applicable– No generic “truths” across the board

Strong IPR remains the foundation

Technical Issues

CostSecurityFlexibility

See “Considering Open Source and Commercial Software”, available at http://www.bsa.org/asia-eng/policy

Policy Issues

Software PiracyDigital Divide Domestic Software Industry DevelopmentCompetitionSovereignty

See “Considering Open Source and Commercial Software”, available at http://www.bsa.org/asia-eng/policy

Implications – Piracy

Not a solution to software piracy problem– Software products not like other consumer-oriented

commodity products• Different productivity gains; akin to engaging professional

services

– Where piracy rates are high, lower cost of software does not deal with lack of mindset to buy legitimate copies

– Buyers of computers loaded with open source obtain pirated copies of commercial software to replace

– Both open source and commercial software predicated on strong copyright protection

Implications – Piracy

Developer’s perspective– Risk assessment on code base and code

reuse• Inadvertently use code subject to GPL?• Risk of being sued by competitor

– Piracy of a different form• Disregard of licensing terms• Incorporation into commercial products

Implications – Developing Local Software Industry Developing the local software industry

– Different segments of software industry with different needs

• Products versus Services

– Tracking the reuse of software– Effects up-stream and down-stream

• Financial viability• Understanding Licensing and Limitations

Implications – CompetitivenessFree market competition – drives innovation

– Greater efficiency, greater choice

Best product wins, not preferencesDistinguish inertia of change from lack of choice

BSA’s Principles of Software InnovationGovernments should select software on its merits

(quality, functionality, reliability, value), not simply the model of development

Governments should ensure that funded research is available to all, regardless of development model

Neutral and market-based standards should be promoted

Strong intellectual property protection maintained, consistent with neutrality, not preferences for licensing model

Intellectual Property

Strong intellectual property protection remains the foundation of software industry, irrespective of development model

Intellectual property as the most important asset in the information economy

See “Considering Open Source and Commercial Software”, available at http://www.bsa.org/asia-eng/policy

THANK YOU

Questions? Comments? Clarifications?

Seow Hiong GOHEmail: shgoh@bsa.org