Jack Ellis

This week it emerged that LG has agreed to buy certain assets from Hewlett-Packard relating to the WebOS operating system, which the US company acquired when it purchased Palm in 2010. The deal demonstrates what can be achieved if open source is an integral part of a wider IP strategy.

According to an HP press release, LG will acquire source code, engineering staff, documentation and websites associated with WebOS, which it plans to use as the operating system for its smart TV products. The Korean company will also obtain licences to HP patents that originally belonged to Palm.

HP has struggled to recoup any significant value from its $1.2 billion buyout of Palm. It initially planned to roll out WebOS across its full consumer product range. But the company had a tough time competing in the crowded wireless device marketplace and eventually decided to shift its strategic focus to software services. In August 2011, it announced its intention to spin-off its Personal Systems business and discontinue WebOS products. Not long afterwards, HP opted to open up the operating system’s source code – which had originally been proprietary – to the wider software development community. “Since we weren’t making WebOS devices anymore, we were trying to find a way to really maximise the value of the assets we had acquired from Palm – including some really interesting IP,” Michael Thacker, a spokesperson for HP, told IAM in a recent interview. “One of the early decisions we made was that we wanted to increase the value of the operating system for the whole community, and therefore we decided to make it open source.”

HP would have had to spend large amounts of money over a long period of time if it had wanted to maintain WebOS as a proprietary asset and continue to develop it internally. But by making the code open source, it has been able to leverage the collective expertise and manpower of software engineers outside the company. As a result, improvement, modification and adaptation of WebOS is able to happen far more rapidly than if it were attempted in-house. LG – which has indicated that it will keep the software open source – will also enjoy these benefits; and at the same time it has the opportunity to get its smart TV products to market more quickly by incorporating what is effectively a ‘ready-made’ operating system.

Furthermore, there is the potential for HP to receive ongoing revenue from the WebOS ecosystem. It has retained ownership of patents that cover technology relevant to the software and has licensed these to LG. “If LG is successful with leveraging WebOS on their smart TV products, there is an opportunity that those patent licences can be a revenue stream for HP,” Thacker explained. By holding on to the patents, the US company also keeps the option of licensing them to other parties, or selling them on.

By embracing open source, HP has been able to add value to WebOS, making it more attractive to prospective buyers. At the same time, it keeps patents that could prove to be a source of future revenue. HP may not be able to make back all of $1.2 billion it paid for Palm. But by recognising the possibilities of both open source and proprietary business models, it has been able to create value from its purchase.