warranties

[Carol A. Kunze]

At 07:45 PM 1/30/01 -0800, David Johnson wrote:
>On Tuesday 30 January 2001 05:23 am, Carol A. Kunze wrote:
>
>> Implied warranties on open source software do not make sense because there
>> is no  license income to support granting a warranty.
>
>Why do warranties have to depend on license income? Why can't they depend on 
>support, media, or even *sales* income?

All good points.  Let me reiterate that this is not intended as legal advice.

Requiring suppliers to subsidize software warranties through income from
other sources (media, services, etc.) puts them at a competitive
disadvantage regarding the profit from those other sources compared to
those who command a proprietary profit from the software, the medium and
the services. 

This is doubly disadvantageous for the open source supplier as not only do
they grant everyone the right to compete in the distribution of the
product, by distributing the source code they also put everyone in the
position of being able to compete in servicing the software.  The
distributor/servicer is disadvantaged compared to one who merely services
the product. 
 
>> The implied warranty of merchantability is that the product "is fit for the
>> ordinary purpose for which such computer programs are used."  No one really
>> knows what this means in the context of software.  Everyone (at least
>> within my knowledge), proprietary and open source alike, disclaims this
>> warranty.
>
>This has been the bit that has always bugged me. By not warranting 
>merchantibility, Redhat (as an example) is telling me that their software is 
>UNFIT for the ordinary purpose for which unix-like operating systems are
used.

I disagree. I know of no software product that does not disclaim this
warranty.  Does anyone?  And yet they all believe in their products.

This is really a question of legal and financial risk and has nothing to do
with what suppliers think of their software.  

>> Market economics will not tolerate a profit on the software under this
>> competitive scenario.  In fact, Red Hat is selling the medium, printed
>> documentation and services for $29.95, but the software is free.
>
>The media, printed matter, services *and* software all combine into a single 
>product. They are indeed selling the software. If you think about it, you'll 
>have to agree that they couldn't sell a shrinkwrap box with blank CD, manual 
>and support package for the same price as one that actually includes the 
>software.

The question is, could a supplier provide a free download version of Linux,
and then "sell" printed documentation and installation service together for
$29.95. Based on what I just paid for a book on how to use one of my
software programs that looks like a good deal to me.

However, whatever the rule is, it also has to make economic sense for when
the software is being provided alone.  

>> Compare this to a small business which
>> "buys" a copy of Linux for $29.95 and makes 9 more copies.  Has the
>> supplier warranted 10 copies or 10 users?
>
>The supplier only warranties what was sold. If one box was sold then only
one 
>box gets warrantied.

It doesn't work like that.  A warranty on software warrants the operation
of the software, not some physical item.  If it only applied to a physical
copy then the copy installed in the computer would not be warranted because
it is not the copy that is on the disk. 

With proprietary software if the license grants the right to make a copy
for a laptop the warranty would apply to that copy also. 

So what happens when an unlimited number of copies can be made?  I don't know.

>> Given that open source software does not generate license income, implying
>> a warranty is not reasonable.  Put another way, open source software cannot
>> even afford to win a warranty lawsuit.
>
>Remember, we aren't talking about liability here. If Redhat is 
>so stupid as to not honor returns (which is what the standard limited 
>warranty is in every other industry), they deserve any class action lawsuit 
>brought against them. The warranty is not attached to the IP, it's attached 
>to the product. It's Redhat that sold Redhat, not Linus Torvalds or Bruce 
>Perens. They have nothing to worry about.

Yes, we are talking about liability.  You've conflated the issue of whether
there is an implied warranty with what the remedy is for breach of that
warranty.

I should note that physical disks are generally warranted, and the remedy
usually provided in licenses is to get a refund or a replacement.  I do not
discuss this warranty, but a warranty on the software. 

Setting aside what the parties may agree to differently in a license, the
law would imply a warranty and provide that in the event of breach the user
is entitled to direct, indirect, and consequential damages.  

Again, setting aside whether the licensor can disclaim the warranty and
limit damages with the licensee's agreement, the question is whether the
above is an appropriate default rule for software which is in fact free, or
at least on which the supplier does not make a profit.  Does it represent a
fair allocation of risk?  One party has all the costs and risks and another
gets all the benefit for free.  Doesn't seem like sound market economics to
me. 

Regarding whether the original licensors are liable, I don't know what you
mean when you say "the product".  As I stated, a software warranty warrants
the functioning of the software - those who wrote the code are the original
producers of the product.  

Not to scare everyone silly, but Maryland has recently imposed mandatory
consumer warranties on software and specifically provides that a merchant
can recover from a licensor for any damage the merchant had to pay for
breach of the mandatory warranty that the licensor caused. So the liability
does travel upstream.  

Let me caution that this is just a brief description, not legal advice, and
whether this liability would apply in any particular situation should be
reviewed with an attorney.

I will note that Maryland has been asked to review this provision.

The basic issue is whether the law should imply a warranty on software that
is free.  I believe the answer is no.  Any other answer jeopardizes the
continued supply of that software. 

Please keep in mind, that if you personally want to give away free software
or  "sell" it for a small profit on the medium AND issue a warranty on it,
you are entirely free to do so.  

I spare you my views on why mandatory software warranties on open source
software are unconstitutional restrictions on free speech. 

Carol






^^^^^^^^^^^^^^
Carol A. Kunze 
Napa, CA
ckunze at ix.netcom.com
707.966.5211
707.371.1807 (fax) 
^^^^^^^^^^^^^^^^^^