Did you know?
The “free” in “free software” is often misleading. It rarely means free of charge or unrestricted use. In fact, if you read the fine print of the license terms, most “free” software comes with a lot of strings attached that limit what the users may do with the software.
Problems can arise from the “open source” licenses that free software uses. The goal of open source software is to produce high quality software, and sharing source codes with the public encourages open collaboration, transparency and continuous improvement. However, to ensure such aim can be achieved, open source software often comes with license terms which specify the users’ rights and their limitations, and the users’ corresponding obligations, for example, requiring the sharing of changes to the source code.
Why does this matter to you?
It is important to appreciate that, whilst all free software is open source software, not all open source software is free. In our experience, many businesses have received legal threats from software companies for unknowingly violating the terms of an open source license (typically by overstepping permitted use, or failing to share modifications), and demands for millions of dollars of past license fees.
Businesses must always read the fine print. Some companies may subtly change their licensing terms as their business expands, or when they are acquired by another business, converting community users into paying customers. We have also seen instances where licensing terms substantially changed across different versions of the same open source software.
Some open source licenses require that any changes made to the source code must be clearly marked; that the original copyright notice and disclaimer must remain intact when the source code or object code of the software is distributed; and the disclosure of modified source codes when the object code is distributed to third parties.
The terms of such licenses can usually be found in a .txt file as part of the downloaded software library or “package”, or on the website where the software is downloaded from. However, software engineers or programmers, who are typically the business users, may not review license terms in detail at the outset, or think to re-read when upgrading to a new version.
It is also important to check whether the software company offers a dual licensing scheme, which may trigger the need for a paid commercial license. Typically, a commercial license will be required if a business does not disclose its modifications, or if the modifications are used for commercial activities.
It is also increasingly prevalent for commercial software companies (including significant players in the field) to acquire successful open source software and offer a closed-source version under a separate commercial license. These software companies usually require users to purchase a new commercial license.
We note that software companies are stepping up audits for non-compliance with open source software terms. Businesses should proactively take steps to minimize legal risks, for example, scanning their system for open source software and reviewing the license terms carefully. Non-compliance with open source licenses can have serious legal and financial consequences, and can be disruptive to businesses if use of the open source software has to be suspended or replaced.
For further information, please contact:
Kelley Loo, Partner, Deacons
kelley.loo@deacons.com
