Subject: Re: Ransom GPL Licensing: ethically and legally viable?
From: "Stephen J. Turnbull" <>
Date: 17 Feb 2003 11:50:12 +0900

 17 Feb 2003 11:50:12 +0900
>>>>> "Brian" == Brian Shire <> writes:

    sjt> 'I see potential for resentment among customers at the price
    sjt> discrimination,'

    Brian> What price discrimination are you refering to?

The difference between what the paying customers pay, and what the
(more patient) free-riders[1] pay.

Consider the case of the RSA licensees whose licenses expired in the
last few months before the patent did, and were asked to (and in many
cases did) sign up for a three-year renewal (as I recall the story; it
may be apocryphal, but it's certainly plausible).  Take the limit as
day-of-purchase goes to day-of-freedom, and -- voilą! -- price
discrimination by anyone's definition.

    Brian> In either case I don't see the discrimination.

Good.  No resentment.  Many customers will see discrimination, and
some of those resent it.

    Brian> All customers should be aware of the model, in addition

That's potential cause for resentment right there: you're telling them
what they should care about.  Suppose they don't care at all about the
model, only price and functionality?

    Brian> they are paying for the use of the software now, as opposed
    Brian> to later.

On the other hand, they're paying for a much less functional product,
viz, they lack the right to use the source as they see fit.  It's not
an easy call for me (however, based on the fact that the products are
very close substitutes in cost of production and functionality, I tend
to say "same product, price discrimination"), but I think it's likely
that a significant number of customers will find an excuse to feel

 Especially  innovative early adopters who are still amortizing their
original license investments and watch the market they've nurtured
drain away to a horde of cut-price startups based on the free version,
perhaps even dramatically improved versions.

    Brian> I wish I could make a discrimination claim for the price of
    Brian> CPU's in the last 5 years.

You can.  Just because the FTC will assure you (correctly) it's not
illegal price discrimination doesn't mean it's not price
discrimination.  You evidently resent it, somewhat, otherwise why say
"I wish"?

    sjt> '..and conflicts of interest with any other stakeholders in
    sjt> the firm (investors, obviously, but also non-developer
    sjt> employees).'

    Brian> Could you state what the conflict of interest is?

    Brian> employees should not be paid relative to the status of
    Brian> a ransom,

You're assuming a viable firm in the face of a decision to forego
potentially large amounts of revenue, in an industry where the
viability of even viciously proprietary firms is often dubious.

In the case of a bankruptcy where continuing proprietary status of a
popular product might mean continued life for the firm, both investors
and employees will likely sue for continued exploitation of the IP.  I
think trying to overturn the Ransom License is a good bet for them
when they have nothing to lose, don't you?  I have little confidence
in successful defense, and given the way courts tend to rule narrowly,
I see similar litigation based on ever more creative arguments until
it becomes clear that the License can't be broken.

This is much less likely in the case of ab initio free software in my
opinion, and in any case ineffective unless they can get the free
license withdrawn  retroactively .[2]  That has got to be much harder
than withdrawing a free license which is still vapor.

I'm not lawyer enough to state with confidence what would happen in
the case of an assignment to the FSF in trust, but I suspect that's
much stronger than a Ransom License offered by the proprietor.
Furthermore, the assignment in trust promotes the FSF from amicus to
interested party, which should strengthen their hand in court.

[1]  That's a technical economics term, precisely applicable.  :-)

[2]  And they would still face substantial enforcement costs.  It
would have to be a blockbuster product to be worth litigating against
existing free licensees.

Institute of Policy and Planning Sciences
University of Tsukuba                    Tennodai 1-1-1 Tsukuba 305-8573 JAPAN
               Ask not how you can "do" free software business;
              ask what your business can "do for" free software.