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Do you own everything in your software portfolio?

Palamida CEO Mark Tolliver warns that lax procedures are responsible for products that use unauthorized intellectual property.

The Grokster decision has obvious implications for musicians and entertainers. But it contains an equally pointed message for IT officers charged with managing corporate intellectual property.

In MGM Studios v. Grokster, the Supreme Court took up the question of corporate liability when customers use a service to illegally trade copyrighted digital content. The key issue was whether Grokster took easily available steps to reduce any infringement.

Even before Grokster, the $5 billion intellectual-property infringement suit that the SCO Group brought against IBM drove home the urgency of figuring out who owns what in a software portfolio. But heightened awareness may not be enough to avert a future filled with litigation. That's because the software industry is undergoing a fundamental change in the way applications are being developed.

Gone is the era when software applications were coded from scratch. The ease of access to external components via the Internet has led to an explosion in component-based development. Today, applications are assembled Lego-style from in-house software components, a third-party module or two and some chunks of code from an open-source project.

The Grokster ruling has taught us that benign neglect won't get us off the hook.

If it's a major project, selected components may have been outsourced to an onshore or offshore consulting company. All third-party components have their own licenses--each with its own terms and conditions that can significantly affect the manner in which the resulting application can be distributed.

But a developer--coding away at midnight to meet a deadline--may not be thinking of the legal implications and business ramifications of dropping in that great module found at SourceForge.net, a repository of more than 100,000 open-source projects.

The tremendous benefits of component-based development are higher-quality applications, delivered more quickly. Developers spend less time reinventing the wheel. But when all is said and done, in a significant enterprise application consisting of thousands of components, it's often hard to pinpoint precisely where each component came from and which license governs it.

In most companies, there's a risky level of inconsistency and informality in the process of detecting and managing external software components and licenses. Companies are not setting out with the intent to violate another company's intellectual property.

Many organizations simply haven't had the time to react to the changing development landscape and get in front of the issue.

But the Grokster ruling has taught us that benign neglect won't get us off the hook. The Supreme Court held Grokster responsible in part because the company had not taken active steps to help prevent the illegal appropriation of intellectual property by its users. To prevent legal exposure, it's time to set policies to help ensure the intellectual-property integrity and licensing pedigree of the software applications that your internal and external teams are developing.

Progressive IT organizations, particularly those at the forefront of open-source development, have established multidisciplinary teams of senior IT management, senior developers, legal counsel and procurement specialists to develop appropriate policies. These teams develop procedures for incorporating third-party components (open source or commercial), covering source code access, modification, implementation and licensing. And going to the heart of the issue, it's important to institute a training program for developers on IP rights and licenses.

We are at a real turning point in the software industry, with open-source software changing the rules in favor of transparency and choice. Along with this transformation comes the responsibility to deal appropriately with intellectual property from many sources. Whether we are considering entertainment or enterprise software, awareness of intellectual-property integrity is growing as we better understand both the benefits and the downside of learning to live and work in this new era of collaboration and participation.

The Grokster case will now return to the district court, so stay tuned for further developments. But regardless of the final outcome, you can save your company time, expense and legal hassles by taking steps now to ensure that intellectual property is handled with respect in your organization.

And you'll sleep better.