Indemnification of Software

Indemnification of Software, Part I

By Bill Claybrook
http://aberdeen.com/ab_company/bios/claybrook.htm

September 17, 2003

The SCO-IBM [ http://aberdeen.com/ab_abstracts/2003/03/03030019.htm ] lawsuit has brought to the forefront the issues of software warranties and indemnification. This is, in part, because SCO has made an issue out of the fact that IBM and Red Hat, their partners in lawsuits, do not indemnify their Linux customers against any type of intellectual property (IP) infringement. The reason for no indemnification, the companies say, is that Linux is open source code. No single company provides it. Users understand that there are no warranties with open source code, and the users would have to pay for them if there were.

Most proprietary software companies provide some form of limited warranty that guarantees that they will fix bugs, etc. However, not all proprietary software companies indemnify the software that they produce for all users. One theory is that Microsoft and other companies offer indemnification for some products because they know that they will rarely, if ever, have to pay up, and they can say that they indemnify their software.

The use of the indemnification issue by SCO is to try to scare users (companies) into buying a license from SCO to protect them from being sued by SCO. No one that I know of indemnifies Linux or open source code. IBM [ http://aberdeen.com/ab_company/hottopics/ibmlinux/excerpt.htm ] does not, HP [ http://aberdeen.com/ab_abstracts/2001/09/09010004.htm ] does not, Red Hat [ http://aberdeen.com/ab_abstracts/2002/12/12022968.htm ] does not, nobody. And the companies that deliver Linux products make it extremely clear that they do not. For example, HP's software warranty for open source software clearly states "HP disclaims all warranties with regard to open source software, including all implied warranties of merchantability and fitness."

Indemnification is an issue that each company that distributes software, whether proprietary or open source, must deal with individually. Indemnifying software is a complex issue, and does come with a cost - one reason some companies do not do it. This is why you see some companies indemnifying only some of their own software to some of their customers.

This weblog entry is the first of three parts that will discuss indemnification of software, warranties on software, and then some conclusions, with a focus on Linux and open source software. Questions pertaining to these subjects will be included in my upcoming How Fast is Linux Replacing Unix [ http://aberdeen.com/ab_company/hottopics/linuxvunix/default.htm ] project.

5:03 ET