To address the flip-side of my previous post, this post looks at “crowdsourcing.” While eager entrepreneurs attempt to lure funding from accelerators and VC firms, established companies are making open calls to the public in search of the next big idea. First coined by Jeff Howe nearly 7 years ago, crowdsourcing “represents the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call.”
With the growth of this relatively new form of outsourcing, this post attempts to inform the would-be participant (i.e., the member of the crowd) of the implications of her participation in such an event. In particular, I will use the recent Netflix Cloud Prize Contest and its corresponding Terms & Conditions to highlight some of the crucial aspects related to the intellectual property license contained therein.
For starters, software developers should know their work is generally protected under U.S. Copyright Law. When they develop original code they “own” the underlying work. That code can then be lawfully used by others, but only to the extent the developer has granted a license to that user. To put it simply, software licenses are copyright licenses. The key copyright license rights are:
- The right to reproduce
- The right to modify (also, the right to create derivative works)
- The right to distribute
- The right to publicly perform (also, the right to publicly display)
- The right to use (including install, download, etc.)
- The right to sublicense (i.e., the right to pass license rights on to third parties)
Looking now to crowdsourcing, and the Netflix Cloud Prize Official Rules in particular, here is how a software developer’s rights are affected by virtue of their submission to the contest. The software developer (the “Participant”) grants the below license to Netflix, as the “Sponsor” of this crowdsourced project. For ease of interpretation, I will address the license in discrete pieces, first, addressing the scope, and then addressing the specific rights licensed.
Participant (and all members of your team, if applicable) grant to Sponsor a non-exclusive, worldwide, royalty-free, perpetual, irrevocable, fully sublicensable (through multiple tiers) and transferable license, without additional consideration to you (or any members of your team, if applicable) or third parties, to […]
This licensing scope is very broad. The software developer Participant is giving Netflix license rights that have no limitation in geography, volume (no royalty payment based on Netflix exercising its license rights), duration, or revocability. More interesting, the license is “non-exclusive” and “sublicensable”.
Developers should interpret the non-exclusivity as a benefit to this otherwise one-sided transaction. This means, that while Netflix has broad license rights, the developer still has the ability to license its software to other entities in the future. Less appealing to the developer, however, should be the fact that they are agreeing to allow Netflix to sublicense the software. This will allow Netflix to provide license rights to third parties without further consideration or negotiation with the developer. Developers who participate in this contest that may wish to commercially exploit their software after participating in the crowdsourcing event, should consider whether a competitor would be able to license its software through Netflix where the developer herself would not enter into such an agreement with that competitor.
Continuing now to the actual rights licensed:
[…] to (a) reproduce, distribute, perform and display (publicly or otherwise), adapt, modify, edit, translate, make available to the public, make, sell, offer to sell, import and otherwise use and exploit (and have others exercise such rights on behalf of Sponsor, through multiple tiers) your Submission (the “Licensed Work”) and any ideas, trademarks, patents and other intellectual property accompanying, related to or embodied in the Licensed Work, and any materials embodying, incorporating or derived from the Licensed Work, in any format or media now known or hereafter developed; [and to] (b) create derivative works from and incorporate the Licensed Work into other works or into Sponsor’s or its designees’ products or services; […]
As subclauses “(a)-(b)” make clear, the software developer, as a condition of submitting her software in the contest, grants Netflix every license right under copyright law. That is, the rights to use, reproduce, distribute, modify (create derivative works), and publicly display/perform. Interestingly, albeit understandably, subclause “(a)” casts a wide net in order to remove all ambiguity by including within these rights all other IP rights (i.e., patent, trademark, and “ideas”) that are “related to” the participant’s software.
Like the scope of the license itself, these rights are expansive. While developers would surely anticipate Netflix’s use and commercialization of their software, they may be less aware of Netflix’s right to create derivative software that leverages the developer’s submitted work. This is true regardless of the developer’s initial intent for how the software would be used. Software developers considering this contest must be prepared to relinquish full control over their design, code, and future manipulation of their product, regardless of whether or not they win the contest.
Finally, while somewhat beyond the scope of this post, it’s interesting to point out the final subclauses of this license, which include the following marketing rights and likeness rights:
[…] [to] (c) use the Licensed Work for Sponsor’s advertising and promotional purposes; and (d) except where prohibited by law, use the name, photograph, portrait, picture, voice, likeness, statements, and biographical information of you (and all members of your team, if applicable) for Sponsor’s advertising and promotional purposes, whether or not in connection with your Submission, in each case for the purpose of administering and promoting the Contest, any future Sponsor promotions, and/or Sponsor.
These rights, while not standard for general software licenses (other than distributor licenses), are a product of the crowdsourcing method. This goes back to the original definition. Crowdsourcing is a call to the public, a contest of sorts. As such, the software developer participant grants Netflix the right to use the likeness of the developer to promote not only the software but the fact that the software was the product of a crowdsourcing event. Most contests contain similar language in their rules of participation, so this should not be too surprising for participants; however, software developers should consider how comfortable they are with privacy matters and their inability to control how Netflix (should it choose to exercise this right) portrays the developer to the public.
Given the lack of restrictions on these rights or in the scope of the license, software developers should weigh the probability of winning the contest prize ($10,000) against the possibility that they could commercialize their software. While participating in the contest will not preclude the developer from commercializing their software by licensing to other firms in need of SaaS widgets, their market is diminished by virtue of Netflix’s ability to exploit, in all manners, the developer’s software (and to sublicense that exploitation to others without the developer’s consent). Of course, developers may perceive certain intangible benefits to the contest, such as those often associated with social networking, as tipping the scales in what might otherwise be an unattractive deal. Certainly, that’s what the crowdsourcing movement has largely depended on.