How Does Heinz Have 80% of a Commodity Market?* – Leveraging Trademarks in Free Software

The software industry traditionally used the right to exclude granted by copyright as the means for generating revenue. Free software came along and flipped the script, giving away for free what traditionally was the primary mechanism for extracting payment. But free software has struggled ever since, trying to figure out how to create value that customers are willing to pay for when they can’t use the copyright that way.

More and more, companies are recognizing and leveraging the truly unique asset in free software – the brand. Ketchup is a commodity market, but Heinz has captured 80% of it by convincing U.S. consumers that Heinz ketchup is better than all the rest. Open source software is similar to a commodity market because the original software may be competing with the identical product. Open source software companies are learning how to develop business models around the brand, convincing customers that the customer will be better served by remaining loyal to the branded product instead of their competitors who are simply copying and distributing the software.

But it’s also possible for companies to overextend their trademark rights to subvert the promise given in the copyright license. Frustrated at free-riding or the perception of it, companies are now also trying to extract revenue through questionable trademark infringement theories.

This session will review the current state of trademark thinking in free software as a revenue strategy, both the appropriate and inappropriate ways to manage the customer relationship through the brand.

*Robert Young, How Red Hat Software Stumbled Across a New Economic Model and Helped Improve and Industry, Open Sources, Voices from the Revolution p. 116 (1999).