It won't help hurricane victims, but...

Posted by: Steve Hamm on October 31, 2005

Eighteen months ago, in the midst of the flurry of worry over SCO Group’s suit against IBM over Linux source code, a little company called Open Source Risk Management was born. The idea: to offer insurance policies to protect corporations using open-source software against lawsuits by companies, like SCO, making patent infringement claims.

The worry over SCO has died down to a whisper, but OSRM has finally put together a deal with an insurance provider. On Oct. 31, Kiln plc of London, a Lloyd’s of London underwriter, announced that it will issue policies covering the costs of complying with open-source licensing rules. OSRM’s part is to do audits of the client companies’ use of open-source code to make sure they’re compliant with all the applicable open-source licenses.

This is an important first step for the open-source crowd. While SCO may no longer be seen as a threat, it’s possible that Microsoft will attempt to use patents to beat back the open-source challenge to its Windows monopoly. If that happens, the open-source developers and users will need all the legal help they can get.

It's an historic moment, since it marks the first time an insurance product has been offered for open-source software. The policy is aimed at companies that use open-source stuff or buy companies that use it--and covers the costs of complying with any licensing rules that might have been broken. In these cases, the likely plaintiffs would be open-source developers or open-source advocacy outfits.

This first product isn't designed as a defense against patent infringement claims. Matthew Hogg, an intellectual property underwriter at Kiln, says he hasn't decided yet whether to develop one of those, but Daniel Egger, CEO of OSRM, says he's working with other insurance providers on infringement insurance, and hopes to have a deal to announce early next year.

Open-source legal eagles applaud Kiln's move. "When an underwriter has been able to write a product, it means the risks are understood. We have gone far enough that an underwriter has seen a commercial opportunity," says Eben Moglen, director of the Software Freedom Law Center in New York. His firm, an offshoot of the Free Software Foundation, was set up early this year to provide legal advice for open-source development organizations.

Moglen believes that patent-infringement insurance may not even be necessary. He says the $10 million legal defense fund raised by the Open Source Development Lab may assure corporations that they can proceed with open source projects without fear of looming legal entanglements.

That may be wishful thinking on his part. Microsoft's potential patent claims against Linux are like a ticking time bomb. That bomb will have a slowing effect on Linux adoption whether or not it eventually goes off.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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