License FAQ's

The membership and licensing regime was developed after a year of extensive consultation with Members and industry participants. The key drivers behind the licensing policy are as follows:

• To protect LIXI’s core intellectual property– ensuring that LIXI has the ability to protect and enforce the IP in the Standards
• To broaden the membership base. By separating licensing from membership LIXI is able to lower the cost of membership and thereby open membership up to organisations with an interest in being involved in LIXI, without necessarily wanting to license all the Standards
• To link the cost of use to the benefits of use – a Tiered License Fee model means license fees are now set relative to the number of standards used and the scope of their use. Major LIXI users, like the Big 4 Banks, using all of the Standards, paid a higher license that a single-standard user operating in a single State, like a small valuation firm.

An option to sub-license would break the relationship between the licensing of the IP and the use of the IP, eroding the consistency of the licensing agreement and distorting the revenue structure.

Question 3:

This is a common misconception which arises because of a fundamental misunderstanding with the terminology. It fails to recognise the distinction between Contributed Materials and Standards.

Contributed Materials typically include the input by contributors’ representatives at Working Group meetings, business requirements documentation and sample schema, and postings to LIXI discussion threads. Sometimes contributors will also make pre-existing material available to LIXI. It is essential that LIXI receive a license to use these materials for the purpose of developing the Standards. Therefore, LIXI requires that contributors grant it a non-exclusive license over any Contributed Materials - but not that they assign the IP in all Contributed Materials.

It is only when Contributed Materials become part of a Standard that LIXI requires that the IP in any part of the Contributed Materials that is incorporated into the Standard is assigned to LIXI. Having developed a Standard, it is essential that LIXI own the IP in the Standard so that it is able to provide Licensees with a secure right to use it. A Standard consists of contributions by all of the Working Group participants as well as work done by LIXI’s staff to document and creates the Business Requirements, Schema, Implementation Guidebook and any other documentation and material that comprise the Standard. It is in the interests of users of Standards that they know LIXI is the sole source of IP in the Standards, as this provides them with increased certainty that they will not face a claim by a contributor that their use of a Standard in some way infringes the contributor’s IP. It is also in LIXI’s interests that it remain the only source from which users can license the Standards.

Contributors who have concerns about the assignment of their IP to LIXI when it is incorporated into a Standard should bear the following in mind. First, it is always a contributor’s choice as to what materials they contribute. If you consider that IP gives you a core competitive advantage that you do not want made available to LIXI Licensees, do not contribute it. Second, contributors generally seek to have their IP incorporated in a Standard for a reason – so that the Standard aligns more closely with their way of doing business. It is in fact to their business benefit that a Standard look more like their own way of doing business.

Finally, a contributor is given an opportunity to notify LIXI if any IP it is not willing to surrender is included in a Standard. This provides a final safeguard for contributors who do not want to assign their IP in a Standard to LIXI. LIXI’s response in such a situation would likely be to modify the Standard so that it no longer incorporated the contributor’s IP, because the principle that LIXI own the IP in the Standards is absolutely critical to LIXI’s Licensing model.

The old regime did not assign to LIXI IP in Contributed Materials which become part of the Standards. Rather, it relied on the license granted to LIXI to use the Contributed Materials for the purpose of developing the Standards. The review conducted in 2006 identified this as a deficiency in the old regime, because it could undermine LIXI’s ability to enforce and protect its rights in the Standards, as the exclusive owner of those rights. Finally, it is worth noting that the new approach to this issue brings LIXI into line with other standards bodies, including MISMO, LIXI’s US equivalent, which adopts a similar policy.

Wholly owned subsidiaries engaged in the internal business purposes of the Licensee are entitled to benefit from the license granted to the Licensee. This is reflected in the End User License Agreement, as a wholly owned subsidiary, parent or sibling entity is an Authorised User, provided its use of the Standards is solely for the internal business purposes of the Licensee.

The Authorised User provision does not extend to related entities that are engaging in their own business, as opposed to the business of the Licensee. If you are in any doubt as to the whether an entity in a corporate group qualifies as an Authorised User, then you should request that LIXI consider whether the entity in question can be specifically named as a Licensee or Authorised User in your license certificate.

In making a determination regarding whether a wholly owned subsidiary uses a standard solely for the internal business purpose of the Licensee, LIXI takes a number of factors into account including whether product sets are competing or complementary, and the degree of separation between the businesses management, operations, and systems.

LIXI does not permit joint ventures to benefit from the License granted to one of the joint venture parties. In this case, the joint venture must obtain its own License.

You are permitted to license your software directly to the end users of any Licensee, including your clients’ end users, provided that they are using the software for the internal business purposes of the Licensee. Clause 3.1(c) provides that you may license your software “to a person who holds a current license from LIXI to Use the relevant Standards”. An end user of a Licensee who is using your software solely for the internal business purposes of the Licensee holds a current License (Clause 1.1 of the End User License Agreement).

This covers the situation where, for example, broker point of sale software is used to submit electronic applications using the CAL Standard to a lender who holds a License of the CAL Standard. When submitting applications to the lender, the broker is an Authorised User of the lender because they are using the software for the internal business purpose of the lender. Under clause 3.1(c), the software provider is entitled to license the software directly to the broker for submitting applications to the lender, as the broker holds a License of the Standards for that purpose.

It is important to note that in this example, the aggregator/broker group under whom the broker is submitting the application will itself need to hold a License if it uses the Standards for its own internal business purpose as part of the same transaction. An example of this is where the aggregator has integrated the point of sale system with its own back end systems, including CRM, loan tracking or commission systems. In these cases, LIXI is being used for the aggregator’s own internal business purpose, as well as for the lender’s internal business purpose, and both lender and aggregator must hold a License.

The End User License Agreement is quite clear on this point – you are not permitted to license your software to anyone unless they hold a License to use the relevant Standards or are otherwise an Authorised User of the relevant Standards. Any license you purport to grant to a party who does not meet this test will be in breach of your obligations to LIXI under your License to use the Standards.

You should take your own legal advice on how to ensure that you do not breach this obligation to LIXI. For example, you may choose to include warranties in your license agreements to the effect that your client holds all necessary licenses from LIXI. Or you may ask LIXI that a client who does not itself hold a License be named as an Authorised User under your License Agreement. LIXI will consider granting such a request only in exceptional circumstances, such as to deal with the transition from the old to the new regime. Ultimately, it is your responsibility to ensure that you meet your obligations under the End User License Agreement.

Third line forcing involves making the supply of goods or services to a person, or the supply of goods or services at a particular price or on particular conditions, conditional upon the person obtaining goods and services from an identified third party.

LIXI has obtained legal advice that the new licensing regime, and in particular, the requirement that software incorporating the Standards be licensed only to parties who themselves are Licensees or Authorised Users of the Standards, does not contravene the third line forcing prohibitions in the Trade Practices Act. Such an arrangement is not uncommon in the software industry, where one piece of software requires another piece of software to run. A simple example is when you send someone a Powerpoint document you expect that they will have licensed a copy of Powerpoint from Microsoft in order to open the presentation.

LIXI is a special case because, as a not for profit organization funded only by membership and license fees and largely staffed by volunteers, it does not have the resources to manage the risks that are covered by the indemnity. LIXI acknowledges that the indemnity is broad, but it is intentionally so, because LIXI believes it is not in the interests of the mortgage lending industry that LIXI be exposed to loss which is not caused by LIXI, but by the actions of a Licensee or one of its Authorised Users. Such exposure might lead to LIXI being insolvent, in which case the custody of the Standards may pass from the Board elected by the Members to an administrator or liquidator appointed by LIXI’s creditors.

It is important to note that the indemnity is limited to the extent that there must be a connection with the loss suffered and the Licensee’s or its Authorised Users’ use of the Standards. A Licensee cannot be asked to indemnify LIXI for loss caused quite separately from the Licensee’s or its Authorised Users’ use of the Standards. It is important to note that LIXI provides Standards, not software. Users of the Standards have full visibility into what they are deploying, because the Standards and supporting documentation are what is being licensed, not executable software code. This can be contrasted with proprietary software, which is commonly licensed in object code (the stuff that computers run), not source code (the stuff that developers write) form, meaning that users have no way of guaranteeing that the software will function as specified without actually testing and using it. A LIXI Licensee can ensure that the Standards will meet their requirements simply by reviewing them and comparing them with their requirements.

It is also worth noting that nothing in the indemnity prevents you from seeking redress from any third party, including a LIXI Member or Licensee who has breached your IP. The indemnity is designed only to protect LIXI for the reasons set out above.

Update: This clause has been removed.

The sole purpose of clause 9.2 is to give LIXI the ability to terminate any existing Licenses in the event that termination, rather than modification under clause 11.5, is required by a change to the licensing regime in future. In hindsight, clause 7.2 should have been drafted more tightly to reflect this, and this will be remedied in the next version of the End User License Agreement.

In the meantime, LIXI will not use the rights in clause 7.2 for any other purpose than to implement changes to the licensing regime.

In the event that LIXI is wound up, rule 130 of the LIXI Constitution provides a mechanism for the members to determine how all assets including IP are disposed of. This provision protects Licensees by ensuring that LIXI’s IP continues to be made available to the lending industry by an institution with the same or similar aims as LIXI.