Thursday, August 18, 2005

Lloyds - Insuring Open Source

In a move that removes yet another barrier and FUD point from Microsoft, noted insurer Lloyds of London has moved to offer indemnification for open source software for IP claims.

"A Lloyd's spokeswoman was unable to confirm details, but St. Clair said the insurance would initially cover the open-source LAMP stack, which consists of the Linux operating system, the Apache Web server, the MySQL database and the Perl, PHP and Python scripting languages. Other open-source products may be added in future depending on market demand."

This is important on several fronts. First off it indemnifies one of the most critical components in the growth of Linux, the LAMP stack. We are seeing adaption of Linux largely because of this stack. New web services company are constantly built on this stack all the time. By offering indemnification Lloyds believes the IP stack of Linux is relatively clean. This is another vote of confidence for the transparency of Linux and the open source development process.

Much has been made the role of patents, OSRM commissioned a study that Linux infringes on potentially 283 patents. Here's the dirty little secret in software development today. Since they have allowed software patents nearly everyone's software violates someone else's patent. That's the truth. The fact that Linux potentially violates only 283 patents should be a good sign.

Right now everyone with a significant patent portfolio usually signs a cross licensing agreement with each other. The real question is what is going to happen once one of these large patent holders decided that they need to more effectively monetize their patent portfolio? It's hard to say. However attempts by relatively small patent holders (15-20 patents) to monetize somewhat dubious patents have not been hugely effective. While they do generate some revenue, no one has become a billionaire doing it. Indeed certain groups have banded together to fight patents, pooling their resources.

Getting this sort of indemnification for Linux and the entire LAMP stack is a great sign. Getting closed software indemnified at all is next to impossible. Most software companies like MS self under-write their indemnification policies. The last time I tried to get a closed source software solution indemnified, I was unable to do so. This is one of the most critical developments for Linux for continued acceptance in middle level companies and the Fortune 500.

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