Open-source Software Doesn’t Necessarily Mean it’s “Free”
At the end of July, a federal court in New York issued a decision that put a high price on “open-source” or “free” software. Companies are looking more and more closely at ways to cut expenses, and using open-source software is one way to take advantage of software licensing without purchasing software. Open-source software, however, does not fall outside the bounds of copyright law. Contrary to conventional wisdom, it is not in the public domain.
The software involved in the New York case is titled BusyBox. It is described as a series of small utility-type programs that are tailored for and embedded in various products, such as wireless routers, firewalls, modems, internet radios, PDAs, media players, and HDTVs. Various manufacturers use the BusyBox software and its source code to make their products work. Although BusyBox and its source code are available without charge, the use of BusyBox is subject to the GNU General Public License (or “GPL”). GPL is an open-source copyright license. Although the software is free, the license places requirements on further distribution of the licensed software. For example, if a product is embedded with BusyBox software, the product’s manufacturer/distributor must provide the source code and any upgrades or modifications available on the same terms, i.e. without charge. The GPL also prohibits licensees from distributing the software under a license that is more restrictive than the GPL. Gartner, Inc., a leading international IT firm, estimates that 85% of companies use open-source software in some fashion (Source: www.groklaw.net).
BusyBox claimed that Westinghouse, in addition to 13 other distributors, infringed the copyright license in the software. Westinghouse distributed HDTVs that were embedded with the BusyBox software while, at the same time, imposing more restrictive licensing terms than those in the GPL. The more restrictive licensing terms included a limitation for “personal, non-commercial purposes only.”
The federal judge deciding the case
- found that Westinghouse’s infringement was “willful” and awarded treble statutory damages of $90,000,
- granted a permanent injunction against the distribution of HDTVs embedded with the BusyBox software,
- ordered all infringing HDTVs returned to the plaintiff, and
- awarded attorneys’ costs and fees of $47,865.
The significance of the case is particularly evident considering the software at issue is available at no cost. Businesses should be familiar with the licensing terms of open-source software and abide by those terms. Open-source software remains subject to copyright law and the parameters of the license agreement.
If you are distributing products that rely on the use of open-source software, be aware of potentially infringing activity if you do not make the source code and any modifications available at no-cost, and if you impose more restrictive licensing terms than the GPL, or whatever license the open-source software is subject. The GPL is not that difficult to comply with, see http://www.busybox.net/license.html. If you are contacted by an organization representing any software company or developer, do not ignore their demands. Consult with Wright Penning & Beamer immediately.
Heather Brenneman Miles
Still wondering how the federal Patient Protection and Affordable Care Act (”PPACA”) will affect you or your business? Not sure what changes you may need to implement to avoid penalties? You’re not alone. While the nation attempts to navigate the overhaul of the health care system, here are a few key points to help you understand some aspects of this complex law:
If a large employer does not provide any coverage, and for that reason an employee qualifies for a subsidy (or “premium credit”), the employer faces a monthly penalty, calculated as follows:
Whether you personally post or tweet, chances are good your company’s employees participate actively on any number of social networking websites. According to the Pew Research Center, adult use of such sites accounted for almost fifty percent of the internet activity in America in 2009. Aside from its personal and entertainment value, social networking can be a valuable tool for fostering successful business relationships. The blurry line between personal and business use, however, can create unforeseen risks for your company, including the risk that posted comments by your employees will be treated as official statements from the company.
If the company later lets Sally go for poor performance, can the supervisor’s post be used as evidence that Sally’s performance was fine and that she is being discriminated against because of gender? In both instances, the answer is probably “yes.”
For the time being, the Senate has again abandoned efforts to impose a “carried interest tax” on venture capitalists, investors, and managers of family businesses. The tax would have increased the 15% capital gains tax rate on certain investors’ profits to the top income tax rate, which is scheduled to hit 39.6% on January 1st (H.R. 4213). The share of investors’ profits is called “carried interest.” It might appear at first glance that it’s perfectly fine for investment managers to be taxed at higher rates on their “carried interest.” But venture capitalists and investors don’t reside exclusively on Wall Street. The law was written so broadly that it could have hit approximately 6.5 million people invested in real estate partnerships that own anything from a single dwelling to sizable commercial properties.
In reality, the proposed legislation could have imposed a higher tax rate on any partnerships invested in particular assets. The higher rates would apply to investment gains and also to gains from the sale of the partnership, and therefore, a sale of the family business would not qualify as a capital gains transaction. Family operations are commonly formed as partnerships and managed by a family member. Under the proposed legislation, the managing family member could be subject to the “carried interest tax.” For a family partnership to gain liability protection and also not be subject to the higher taxes, an outsider – not a family member — would have to manage the partnership. The House version of the legislation exempted family farms and ranches held in partnerships. Other family partnerships would have had to wait for the Treasury Department to exempt them through regulations.
Wright Penning & Beamer is pleased to announce that Dan A. Penning has been named a FIVE STAR Wealth Manager by HOUR Detroit magazine in its June, 2010 issue.
Wealth managers, broadly defined, are those individuals who help you manage your financial world and/or implement aspects of your financial strategies. Common examples of wealth managers are financial advisers, life insurance agents, accountants, tax advisors, attorneys, etc. With more than 11,000 wealth managers in the Detroit area, how do you find someone who listens to you, represents your interests and operates with an emphasis on integrity and service? HOUR Detroit magazine can help. The magazine formed a partnership with Crescendo Business Services to find out which wealth managers scored highest in overall satisfaction.
The resulting list of 2010 FIVE STAR Wealth Managers is an elite group, representing less than 7 percent of the wealth managers in the Detroit area. Only 686 of the top-scoring wealth managers made this year’s list. . . . ”
Recently, many Wright Penning & Beamer clients who own multiple acres of land in northern Michigan have been contacted by petroleum company representatives and offered oil and gas rights leases for their land. While many of these companies are reputable and offer fairly standard terms in their leases, they are generally trying to secure leases that are most favorable to them. The landowner should be aware of provisions that can be included to protect their investment and maximize the owner’s financial return.
A “Pugh Clause” protects the landowner by requiring the oil and gas company to release certain land subject to the lease after termination of the lease term that has not been pooled into the land subject to the royalty payment in the event an active well results from the lease and exploration. For example, an oil and gas company may only pool an apportion of the leased land for royalty purposes and without a Pugh Clause, the companies in some instances can tie up the entire parcel subject to the lease even though they are only paying royalties on a portion of the land.
A large portion of the businesses in the United States are closely held companies, and many of the closely held companies are family owned enterprises. The long term perpetuation of the family business is a common and laudable goal of most founders. Developing strategic and successful transitions to subsequent generations largely centers on who will control the company and whether the control will be concentrated in one family member or a small group of family members, or if the control of the company will be spread out among a large group of family members or all the family members. Limiting control to a sole shareholder or a concentrated group of shareholders that are involved in the company is usually the preferable option. The founder’s decision to select the most advantageous successor(s) is hardly adequate, however, and many founders approach this first order of business tepidly and do not make the difficult decision due to the attendant consequences that include a possible disruption of the business and family relationships. A successful transition inevitably involves addressing the possible conflicts that will arise within the company itself and among the family members involved. Conflicts can emerge from the most expected and unexpected sources, and a founder that is willing to plan for and manage potential conflict will provide a more secure foundation for the business to continue successfully beyond his or her lifetime.
Lawyers provide legal advice in these unfortunate situations, however, lawyers also have a unique perspective in that we also see successful family enterprises implement transition plans that go beyond the necessary buy-sell agreement. Successful family transitions are usually the result of cultivating cooperation, understanding, and forgiveness amongst family members. Founders who succeed at fostering personal growth and character development, including honesty, respect and leadership alongside teaching business acumen generally observe a more successful and peaceful generational transition of the control of their business. The founders themselves must make a deliberate and long term dedication to cultivating a family culture that brings in and nurtures the emotional intelligence necessary to perpetuate a successful family business. There are a myriad of resources available to business owners who desire guidance in this area. The Family Firm Institute, Inc. is an excellent starting point of which Dan A. Penning is a member. The attorneys at Wright Penning & Beamer are committed to helping our clients successfully transition their businesses to the next generation, and we can provide you with resources that will complement a comprehensive buy-sell agreement.
On May 1, 2010, the “Dr. Ron Davis Smoke-Free Air Law” went into effect in Michigan. Smoking is now banned in most public buildings in Michigan and in outdoor areas where food or beverages are served, such as restaurant patios and porches.
After seventeen years practicing law, I find that most business clients appreciate the services I have to offer and are willing to pay a fair fee for them. But I have yet to meet a client who feels at all inclined to pay the legal bill of a competitor who has just sued. That’s like being thirteen and kissing your sister. Yet when corporations sue each other over the alleged theft of a valuable employee, the dispute can quickly become a fight over attorney fees.
If the competitor goes to the trouble of suing you, it will probably bring every plausible claim available against you. In non-compete cases, this usually involves a claim that the employee and you have conspired to steal the competitor’s trade secrets and proprietary information. In most lawsuits between business competitors, each side pays its own legal expenses – win, lose or draw. But under Michigan’s version of the Uniform Trade Secrets Act, a prevailing plaintiff can recover attorney fees if it shows that the defendant willfully and maliciously stole a trade secret.
Obviously, the judge’s decision on the injunction will either strengthen or weaken the suing party’s claim that you acted maliciously. Either way, both sides will need to consider carefully how much more legal expense they are willing to incur solely to fight over who should pay the fees to date. If the case appears ready for settlement even before the judge rules on the request for an injunction, you still may face a fight over attorney fees. I have seen plaintiffs with no real damages become all the more insistent that they recover attorney fees as a matter of principle to ensure that the perceived misconduct does not go unpunished. If you are defending, do you buckle and pay some portion of the other side’s fees, or do you hold ground as a matter of principle? If you hold fast, you may end up paying far more money in the long run, albeit to your own attorney rather than to your competitor’s. As a colleague once told me, “It is perfectly appropriate to stand on principle, once you have acknowledged that principle is expensive.”
Over the last several years, Michigan has experienced extraordinary job loss. One fruit of those job losses has been an unusual number of business start-ups. All over the state, laid off workers have “reinvented” themselves, sometimes going back to school to pursue a different or more advanced degree, and sometimes going into business for themselves doing either the kind of work they have always done or something entirely new.
These online tools don’t replace the need for tax or legal counsel, but they can help you make better and more efficient use of both your time and our office, which in turn can save you money. If you are considering a new business venture or you need our assistance with a legal matter affecting your ongoing business, please contact any of the attorneys at Wright Penning & Beamer. We would be pleased to help you!