Fireballs from Cyberspace –
Open Source Software Licensing for Geeks, Freaks and Technocrats

The connectivity provided by the Internet for a number of years now has been transforming significant portions of the IT industry into commodities by offering alternatives to proprietary software little or no cost.

Open source licensing is a basis for licensing intellectual property that requires affirmative action in the event of re-distribution, rather than an assertion of the exclusive rights of the copyright, patent or other intellectual property or related rights.

The model of licensing stands in contrast to traditional intellectual property licensing, as revenues are primarily derived from the software licence. Business involved in open source software forego this model and elect to create revenue streams from post acquisition ancillary services, such as installation, training, operational and production support expertise, or customised development. Some businesses use open source software as products to introduce unrelated, revenue generating goods and services. Others offer add-ons for fuller functionality producing an enhanced product, and go on to release further functionality as the competition catches up.

The Free Software Foundation lists four essential kinds of software freedom:

• The freedom to run the software for any purpose
• The freedom to study how the software works and to adapt it to your needs
• The freedom to redistribute copies of the software
• The freedom to improve the software and distribute your improvements to the public

Distinctions between Open Source and Shareware and Freeware

Open source software is a contractual licence where the owner of the copyright, patent, and other rights in computer program source code grant permission to licensees to access the source code and modify it generally at no cost. It could be said that software is made available on an open basis, because the licensor of the software does not seek to enforce the restrictive aspects of the intellectual property rights.

In contrast, shareware is made available for a limited time basis to trial it to ascertain whether it is suitable for their purpose, sometimes with restricted functionality. Releasing software as shareware is usually a commercial decision, and releasing or granting access to the source would defeat the commercial objective. Shareware is simply a tag to denote “Try before you buy”, in respect of software.

Freeware is a category of software that the authors release to the public for their own use without cost, and without access to the source code. Not many of us remember that Microsoft Word used to be free software. It was never open source, but that may change in years to come.

Falling Opposition

As opposition falls away, adoption of the open source model has accelerated for the solutions it offers, high points being government departments in Europe and the US taking the opportunity to replace proprietary systems with these open source solutions. Mission critical systems increasingly use the model, the prime commercial driver – reduction in the total cost of ownership. Leading companies such as Dell, IBM, Hewlett Packard and Oracle contribute resources to the open source community for instance, foregoing enforcement of intellectual property rights.

The entire movement relies on something being provided at no cost, usually of a functional nature. The open source software model relies upon assertion of intellectual property rights in reverse to the usual method. Rather than asserting the preventive aspects of intellectual property rights, it replies on positive by those seeking to use or develop software.

The open source community is a business that has seen some successes nevertheless as a business model and the distribution model does not appear to have completely proved itself.

Open Source Projects not directly involving software include:

1. Wikipedia, an open source encyclopaedia that supports itself on advertising revenues
2. Open Directory Project, a catalogue of the World Wide Web.

Open source software can broadly be split into the broad categories of operating systems (Linux, Solaris) and applications (Apache, Sendmail, and equivalents to Microsoft Office).

In a commercial enterprise, other than the reduction in capital cost, the perceived benefits encompass:

1. as the source code is made available to a broader audience, greater functional diversity is achieved in the application;
2. faster development as proprietary resource constraints do not apply to the model;
3. generally more stable and cost effective development and enhancements, as access to the source code mitigates the usual difficulties of interfacing with the application.
4. interaction between independent developers.

These benefits may lead to an increased rate of market penetration.

Fragmentation of the open source software is a natural consequence of a large number of persons developing versions of the same software, creating divergence from a central core application. Apache has countered this by prohibiting the naming of versions that do not incorporate a standard kernel. Due to the complexity of the software participating in the open source market, companies taking on open source software must to some extent be prepared to participate in the industry.

The open source companies that have made their mark in the industry use the foundation made available by the released software to generate revenue from installation services, supporting the software and customisation and development of the base source code.

Traditional software vendors, providing complete products look to maintain a market lead by releasing software to the market that manages itself and performs standard tasks – but not necessarily menial tasks – for the user. Open source software by and large still requires a level of technical prowess to install it and in those most dire of times diagnose and correct a problem when something goes wrong.

For a business considering a trial of open software for use in production or part of their business model, there are at least two key legal issues to consider. Firstly, the licence terms upon which the software is acquired and secondly, the uses to which it is to be put after the business has its way with the software. That is not to say that these are the only issues to consider warranties, indemnities and potential damages claims arising from breach of contract are also fundamental considerations.

Generic Open Source Models

Open source licensing requires delivery of the source code and rights to modify it. There are two fundamental models of open source licensing. Firstly the ubiquitous GNU (pronounced guh-noo [g?’nu]) General Public Licence requires redistribution of the source code to modifications on the same terms as it was licensed originally under the GNU GPL, if it is to be redistributed. The Berkeley Software Distribution (BSD) licence does not require redistribution of the modifications of the source code – and the developments may be exploited commercially on a proprietary basis. Other licensing regimes tend to be variations on these themes.

For both types of applications, it is central to consider the terms of use and redistribution of the source code.

Legal Risks in adopting Facets of the Open Source System

A key risk is for a company is for an employee to perform work and not receive an assignment of the intellectual property in the work that they perform, or worse have ambiguity in the equation. As the developer would own the intellectual property and depending on the circumstances, the developer would potentially entitled to release their work to the open source community, negativing competitive advantage that has been paid for.

Those wanting to enforce an open source licence, in the UK only the copyright owner or an exclusive licensee may take action to enforce the licence, so it would be left to either the original licensor or the licensor of the source code developed under the licence to enforce the licence.

Selection of the right open source licence relies on the anticipated revenue generating business activity and licence conditions that may force business owners to release what they otherwise did not intend, with the effect of eroding or erasing capital investment and enhanced distinctive services.

Although the GNU GPL looks a bit old in the tooth, the advantages of its licensing regime outweigh its age because most people know what it refers to, at least in principle.

Open source software is there for the taking, but it there are significant risks that turn on the turn on the terms of the open source licence. Use of open source software may bring with it an obligation to make developed software available to third parties that defeats the purpose of developing proprietary software.