Lloyds of London to Offer Open Source Insurance

darkworm writes "Lloyds of London, the world's oldest insurance house, is to offer indemnification for IP litigation worldwide according to the Channel Register: 'Lloyd's of London is close to offering independent insurance protection worldwide against potential IP litigation involving Linux and open source software. The financial services giant has agreed to take on the risk associated with open source, and is finalizing arrangements to work through Open Source Risk Management (OSRM) who will become Lloyd's sole U.S. representative.'"

Comments

A little late

[LostCluster]

Sure, now they offer insurance as it starts to become clear that SCO is going bankrupt.

Re:A little late

[morleron]

Actually, I suspect that the fact that SCO has been absolutely unable to show any infringing code is part of the driver behind this. Insurance companies don't make money by paying out claims, so they're not usually in a hurry to bet on anything short of a certainty. The fact that both Lloyds' and OSRM are beginning to develop this market tells me that not only do they feel that there isn't much risk of them having to pay out large amounts in claims, but it also demonstrates that the Linux market is maturing. Only a reasonably mature, and thus stable, marketplace will attract organizations willing to offer insurance within that market.

What's even more interesting is that, so far as I know, there is no similar insurance offered to MS software users. I realize that MS indemnifies its users to a degree, but I wonder if that would be enough if some suitably large copyright or patent violation were found in MS' software.

Just my $.02,
Ron

Lloyds is not...

[Anonymous Coward]

...an insurance company, it provides a market place where several companies (or syndicates) can sell insurance.

Lloyds history

[augustz]

It was interesting. When I saw that lloyds was offering this I was surprised, as I thought they'd almost been bankrupted in the past.

Their main website and about us timeline make no mention of any major financial issues (were covered by Time / BW etc at the time).

A little digging of course did turn up an interesting read.

http://www.truthaboutlloyds.com/fraud.html

Still, nice to see insurance coming out for this type of thing. Hopefully some more players get involved in the future.

Re:Lloyds history

[rstultz]

Lloyds has a three-hundred year history or ups and downs, it's the insurance industry (quite literally, the insurance industry was created out of Lloyd's, then a coffee house dedicated to maritime shipping).

While I don't doubt that Lloyds has problems, has had problems, will have problems, they are known as a gold standard. It's not a single entity, it's a market, much like the stock market. There are large syndicates, made up of names (investors) who are the ones who actually are taking the risk. Lloyds is the gold standard because they have shown time and time again that they will not allow themselves to go bust. In whole or part. If a syndicate can not pay it's liabilities, then Lloyds governing body pays, with all of the other names sharing the cost. It's expensive, especially considering that they are covering policies they aren't legally reponsible for. But it's worked for 300 years, I still have faith in them.

Also, the financial fraud/troubles your link points out are from 80s and 90s. Lloyds was either the largest or second largest reinsurer (the ones who actually had to pay) on the World Trade Center, and they paid that claim (billions), so I would assume they're not in that much trouble.

Ryan Stultz

But when can we get tiger-attack insurance?

[mcc]

For whatever reason, this is all I can think of right now.

Lisa: By your logic, this rock keeps tigers away.
Homer: Oh? How does it work?
Lisa: It doesn't work.
Homer: Uh-huh.
Lisa: It's just a stupid rock.
Homer: Uh-huh.
Lisa: But I don't see any tigers around here, do you?
    [pause]
Homer: Lisa, I want to buy your rock.

Re:But when can we get tiger-attack insurance?

[jesterzog]

I think the article sums up this area quite nicely:

Arguably, one of the worst-case scenarios is the so-called "colorable case" - where there is no substance to an IP claim, but a company is forced to waste millions of dollars to defend the claim or settles early for a large sum to make the case go away. The average US patent action is estimated to cost $2m, according to the American Intellectual Property Lawyers' Association.

I'm glad the author included this note. It indicates quite clearly why a lot of companies see it as being so important to be cautious of lawsuits. It's not the possibility of losing that matters, it's the cost of fighting. If the cost of fighting is more than a company can afford, it just make sense to settle, and then the overly litigous company wins. Even enlightened CEO's often want indemnification--not because they think a company like SCO has a hope of winning a lawsuit, but because they're concerned about how much it might cost if they're even targeted.

Personally I think there need to be some changes to the system so that those who abuse it in this way are penalised much more, and also more quickly. The fact that SCO was both able to be so noticed in the first place, and can even continue dragging its corpse around today to threaten people with its stench without the likelihood of serious charges being brought against it, its executives or its legal team, suggests that not quite enough measures yet exist.

Woohoo!

[Norfair]

Free Open-Source insurance! Er, wait, that was free as in beer, right?

Smart Move?

[nurb432]

Considering things really havent been truly tested, one bad judgement could cost billions..

Though, sounds like easy money to me.

"Steal" code from an insider friend and use it in your application. Get sued, the friend wins and is paid from the insurance package and you split it with him.

Re:Smart Move?

[meringuoid]

Considering things really havent been truly tested, one bad judgement could cost billions..

Actually, this is a really positive sign. Lloyds of London know all about risk. They've watched the SCO circus go around and have concluded that

- SCO don't have a leg to stand on
- However, they've made some people think there's a risk
- Sell insurance
- Profit!

This is not quite as much a case of free money as the insurance policies you can buy against abduction by aliens, but it's pretty close...

Re:Smart Move?

[bersl2]

That's called "insurance fraud." It's usually highly illegal. It's also not unusual at all for individuals and groups to try their luck at getting away with it. Believe me, I'm sure they've taken a good look at what they're getting into.

Re:The end of OSRM?

[X43B]

" This probably spells the end for that organization that PJ of Groklaw fame used to work for, OSRM that offered a similar product."

I've seen you post insightful comments in the past so I don't think this is a troll, but doesn't the article summary state that OSRM will be the sole insurance agent for Lloyd's in the US? I'm sure if people are worried about buying only from the Big Names, OSRM will be OSRM: Backed by Lloyd's of Lodon!

LoL..

[Anonymous Coward]

Lloyd's of London insures odd things from porn star's throats to Mick Jagger's lips. I believe Elton John has a teddy bear insured by them and same thing goes for Jamie Lee Curtis' legs. Definitely interesting stuff... LoL indeed.

Not just against SCO

[RAMMS EIN]

I know there are going to be lots of SCO-related posts here, but SCO, of course, isn't the only threat here.

Think of all the patents on multimedia. Are you sure your copy of MPlayer doesn't contain any patented algorithms?

How many people do you think have contributed to all the software on your machine? Are you sure none of them have accidentally or purposefully checked in code that someone else owns the copyright to?

Even if your system is completely clean, don't you think there would be corporations out there that would claim otherwise? Are you sure you can convince the court you're innocent when faced with that corporation's ingenious lawyers?

Doesn't this suck?

[visualight]

If a company has insurance wouln't that just make it more likely for them to get sued?

"There is a risk, but it's a material risk," Egger said of Linux and open source. "We are trying to make sure we are not exposing corporates to risk that makes using Linux uneconomic."

Or would the insurance company put up a good fight in court and maybe make suing companies that use Linux uneconomical?

Re:Doesn't this suck?

[FidelCatsro]

It is most defiantly against the interests of an insurance firm to pay out on claims , and they will do all within their powers to stop it , or delay it long enough to cover the costs of the claim via trading and general interest rates acquired through the policy .
Insurance is gambling , but a rather accepted and certainly in most cases a sensible form of gambling .
Perhaps its the most successful form of gambling in the world , that or the stock market .

You get protection in the off chance that something unfortunate happens , and they get to rake in billions upon billions . They would not be offering this insurance if they thought that they would have to pay out on a lot of claims .

Re:Doesn't this suck?

[FidelCatsro]

The true beauty(subjectively so ) of what they do is making people think the risk is higher than it really is. I did rather simply and you are quite correct , I was being a touch cynical .

Re:Doesn't this suck?

[slashdot.org]

If a company has insurance wouln't that just make it more likely for them to get sued?

I think this is quite a complex subject. It seems to me that the legal system has become just an other tool that companies use to 'get ahead' (in lue of a better description).

What we see a lot today are lawsuits that have seemingly little merit, which are just used to either damage a competitor or leach of the sucess of a large corp.

A large ('flush') company can sue a small/new competitor pretty much crushing it with the sheer cost of defence.

On the other side you see small companies suing large companies, perhaps because they have some silly patent and want to leach of the sucess that a large company had with the technology supposedly covered by the patent.

To get back to the question, all this makes the business lawsuits very different from say the more common lawsuits, for example car accident related ones.

If you are in a car accident and the other person was clearly at fault _AND_ you had significant losses _AND_ the other person has significant assets, then lawyers will tell you it's a great idea to sue. If the other person doesn't have assest, then it's not very interesting to sue, because there's nothing to get. Unless they have insurance, in which case you can start the battle with the insurance company. This of course is a much harder fight because the insurrance company has good lawyers...

So with the more traditional situations having insurrance could perhaps make you more of a target IF you didn't have assets. As I described above, it seems that the enviroment of lawsuits at corporate level are very different, so it's hard to say. If I had a small startup, I'd probably try to get some insurance against lawsuits, but on a general basis, not specific to OSS. I don't think this would make me more of a target, if anything less, because it wouldn't (supposedly) be effective to crush me.

Just my 2 cents; not a lawyer and all...

Re:The end of OSRM?

[richg74]

From the article:

OSRM will assess both the risk of the software in use and the individual company, before passing on the risk to the appropriate insurance company on the Lloyds market. OSRM expects to announce the first customers this Fall, and will initially charge organizations $60 per server.

As the article summary indicates, OSRM is going to be the US agent for the insurance. Some arrangement like this was more or less inevitable if OSRM's insurance concept was going to work. OSRM itself almost certainly doesn't have the resources (read, deep pockets) to underwrite the coverage.

Former cases of coverage include...

[D4C5CE]

...the Titanic - so from an insurer's point of view, it makes perfect sense to ascertain they bet on something that's really unsinkable this time.

Makes sense...

[Adult film producer]

These guys are always looking for ways to make money... how much risk would be involved in this endeavor ? That would be the first question they would ask, I would guess... Would Lloyd's involve themselves in a high-risk investment? If anything, this move shows how much faith they have in the GPL+all oss licences .... It's a good thing in my opinion... they could care less about how it benefits society, as long as they're making money from it.

Libre, not Gratis

[einhverfr]

Or so I was thinking. I mean, I can modify this insurance and pass it on to anyone else who needs it free of restrictions, right?

Re:Microsoft!

[slashflood]

It was a fsking joke. Asshole mods...

We know, but it wasn't fsking funny...

Just sounds weird

[darthgnu]

I saved a whole bunch on my open source insurrance by switching to Geico

Sounds like a good business to me.

[Marcion]

At $60 a server, say there are 50 million Apache servers out there (some LAMP some FreeBSD-AMP etc) and there is only going to be more over time (growth of the internet etc). If 2% buy the licence from Lloyds (or from someone else) then that is $60 million per year. That money can defend up to 30 small patent infringement court cases (under $2 million) or 2 to 3 SCO size cases per year, every year.

That is far more protection than, say, LAMP will ever need for legal fees, at least in the long run. It will be good profit for Lloyds, and will make CEOs sleep better because they have paid a few more people for GNU/Linux, (no-one values what they get for free).

Software is going in two directions. For technical users (those able to understand software and customize it e.g. Google, Slashdot readers and so on), software has become a commodity. For some others, especially companies with weak management, software is a 'Giffen good'. When the proverbial fæces hits the fan, the CEO wants to explain to shareholders that they bought the most expensive solution possible.

Indeed I have been convinced for a while that the relatively low total cost of ownership has put companies off free software. Adding "Intellectual property" insurance (something you get very little of with proprietary software) will help to increase the cost of free software and speed its adoption.

Re:The end of OSRM?

[ozmanjusri]

OSRM is going to be the US agent for the insurance.

I wonder if this had anything to do with Bruce Perens' attack on the Open Source Development Labs' patent commons project a few days ago.
http://yro.slashdot.org/article.pl?sid=05/08/13/17 17255&tid=155

Re:Linux Uneconomical?

[benjamindees]

You're right, uneconomical isn't very clear. Linux obviously is economical. In fact, Lloyds wouldn't be selling insurance for it if it weren't.

But there are plenty of things that are economical, yet don't happen due to risks that can't be budgeted. How do you budget for terrorist attacks, for instance?

It's perfectly economical to erect a windmill in your backyard and generate your own power. But if the windmill fails, you have to very quickly purchase a new one, or go without power. So most people will happily pay (extra even) for someone else to take that risk. If one windmill fails in a wind farm somewhere, it doesn't affect anyone. If one fails in your backyard, producing your own power may have just become uneconomical.

Could be good or bad...

[Anonymous Coward]

This is really about those companies who want to use open source software in their products (because it's free) but are scared someone might sue them, a risk which isn't really quantifiable. These guys can be pretty greedy and dumb.

My company, for example, won't touch anything with GPL or even LGPL, even though at least LGPL is supposedly targetted (among others) towards companies wanting to use FOSS stuff in commercial products. The reason they're so paranoid is that a) their legal department's default position on anything they don't understand is to say no and b) they're afraid of one of their competitors, wearinng a rubber Richard Stallman mask, might sue them. (by this I don't mean that Mr Stallman himself would be involved, just some front organization)

Now the 'good' is that these firms might get this service and suddenly find some balls when it comes to adopting FOSS technologies, so wider adoption for FOSS in the commercial world.

The 'bad' is that they might take this further than the community intended or is comfortable with. Commercial development houses like free software in principal, it is software they don't have to pay to have developed themselves. Given blanket protection, they might start pushing the limits of the licenses, getting as much as they can. If the little guy was scared to sue Sun or whoever, immagine how scared they'll be to sue Lloyds, who let me tell you are one old, mean firm, no strangers to a courtroom. Right now the onus of complience with FOSS licences seems to effectively lie with the software houses, for whatever reason. What if this insurance made it so that the onus for proving someone has violated your licence became the FOSS developer's problem? Could make these licenses de-facto unenforcable...