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IPR for ICT-Producing SMEsIPR among SMEs, improving registration and enforcement of rights and combatingcounterfeiting.2.3.4 Open source software and IPRThis paragraph provides a summary of essential information about the open sourcesoftware phenomenon, as a necessary background to the analysis of the role of patentsin the software industry. Because of its characteristics, the OSS model is well suited toand embraced by many SMEs in the sector. Large enterprises rarely adopt OSS as theironly business model.Open source software (OSS) represents a fundamental shift in the way to producesoftware, emerged in the last 20 years as an alternative to proprietary softwaredevelopment. It is also known as FLOSS (acronym from Free/Libre/Open SourceSoftware). According to IDC, the open software movement has changed the competitiverules in the software market, so that companies now compete on business models (wheretheir revenues come from) as well as on their products and services. According to theOpen Source Software Initiative, its main characteristics are:Free redistribution of the softwareReasonable and well-publicized access to the source codeModifications to the source code and derived works are permitted and are allowedto be distributed under the same terms as the original licenseNo discrimination against the usage of the software by any individual or group or fora particular purposeNo restrictions on other software distributed alongside the open source softwareAccording to IDC 21 analysis, OSS is not a market segment, but a software developmentand distribution model cutting across all of the software industry. Software developersuse most often copyright licenses for their OSS projects.A study promoted by the EC on the economic impact of FLOSS on the European ICTsector 22 , conducted by a consortium of research institutions led by UNU-MERIT's RishabAiyer Ghosh, arrived to the following conclusions:FLOSS applications are top rung products in terms of market share in severalmarkets.The existing base of quality FLOSS applications with reasonable quality control anddistribution would cost firms almost Euro 12 billion to reproduce internally. Thiscode base has been doubling every 18-24 months over the past eight years.The notional value of Europe’s investment in FLOSS software today is Euro 22billion (36 billion in the US) representing 20.5% of total software investment (20% inthe US)2122IDC reports used for this paragraph: “Worldwide Open Source Software Business ModelsTaxonomy”, Dec 2006; “Open Source Software Businesses: What is and what is notworking”, 2007; “Open Source in Global Software: Market Impact, Disruption, and BusinessModels”, 2007Study on the Economic impact of open source software on innovation and the competitivenessof the Information and Communication Technologies (ICT) sector in the EU, Final report,November 20, 2006, http://ec.europa.eu/enterprise/ict/policy/doc/2006-11-20-flossimpact.pdf35
IPR for ICT-Producing SMEsWhile the US has an edge in large FLOSS-related businesses, Europe is theleading region in terms of globally active FLOSS software developers, and leads interms of global project leaders, followed closely by North America. Asia and LatinAmerica face disadvantages at least partly due to language barriers, but may havean increasing share of developers active in local communities.By providing a skills development environment valued by employers and retaining agreater share of value addition locally, FLOSS can encourage the creation of SMEsand jobs.2.3.5 Piracy and counterfeiting issuesDespite the fact that most of the WTO members have adopted legislation implementingthe minimum standards for enforcement set out in the WTO TRIPS Agreement, piracyand counterfeiting remain significant obstacles to the success of Europe’s ICT industry,as well as to other IP-reliant industries. Piracy and Counterfeiting refer to themanufacture, distribution or sale of goods that have been made without the authority ofthe owner of the intellectual property. In the ICT industry, usually “piracy” refers tocopyright infringement (excluding private copying) while “counterfeiting” refers totrademark infringement. While especially concern over piracy and counterfeiting is notnew, it has magnified due to the availability of efficient compression algorithms,broadband Internet access technology and powerful peer-to-peer networks. Thesetechnologies make it possible to not only distribute legitimate content but also illegalcontent.According to the ICT Taskforce Working Group on IPR, “Piracy and counterfeiting in theEC are at unacceptably high levels and, for many industries, are dramatically increasing.In 2000, piracy and counterfeiting rates were believed to have reached 16 % in audiovisualindustries and 10 % in the music industry. In 2005, the software industry reports apiracy rate of 35 % . For example the software industry estimates that a 10 point drop inpiracy in the EC could add 155,000 new jobs, over € 70 billion to its economies andcontribute € 20 billion in tax revenues” 23 .There are different positions in the IT industry about software piracy. IT industries infavour of software patents and strong IPR protection believe software piracy createseconomic damages, limits the growth of the industry and must be fought with all possiblemeans. The OSS movement supporters do not share this view: they believe that the freecirculation and licensing approach weakens the reasons to carry out software piracy, thatsoftware diffusion is good in itself, even if they do not agree with copyrights violations inprinciple. A different matter concerns copyright violations of digital content (illegallydownloading music or films for example) either by individuals or for business reasons, anextremely complex issue.This study scope does not cover the analysis of the piracy and counterfeiting issue in theICT industry, even if some implications for ICT SMEs IPR strategies will be taken intoaccount.23 IDC study: “Expanding the Frontiers of Our Digital Future: Reducing Software Piracy toAccelerate Global IT Benefits”, December 2005. Economic Study commissioned by theBusiness Software Alliance.36
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