In October 2006, open source software company OpenLogic announced that it is offering an indemnity against lawsuits for customers using its code [story link].  The indemnity covers intellectual property infringement claims (including defense of claims, replacement of infringing software, and up to four times the value of the contract for damage awards) for claims arising out of the use of certain open-source software products. These products are listed in its Certified Library.  Of course, there are limitations to the coverage, one of which is that the indemnity does not cover code which is modified by the customer.

The business issue? For licensors, offering such an indemnity is a calculated risk. In this case, it’s designed to give customers confidence in the face of the questions swirling around the open-source community in the wake of the SCO Litigation. Software licensors, whether in the open-source or traditional software market, need to balance the costs associated with risk allocation. The risk allocation analysis has to take into account the potential threat posed by software patents.  Different companies will take different approaches depending on their overall strategy.  For example, Red Hat has developed its own strategy on such litigation, and has taken out a number of software patents for defensive purposes. 

We will be watching these developments closely as open source software legal issues continue to be front-and-centre for many software companies.