This checklist looks at the key issues around the use of open source software both for the business that uses open source software in its own proprietary software and for any customer or licensee of that business.

Open source software is software which is generally provided free of charge under licence and  which grants certain freedoms to the licensee, but also imposes significant restrictions and obligations on the licensee. There are many different types of open source software licences. These differ widely in clarity, length and legal effect but the most commonly used ones are:

the General Public Licence (GPL) and Lesser General Public Licence (LGPL) licences which adopt the principle of copyleft  creating a chain of freedom to use the software without payment.

In the GLP licence, free software reflects the users' freedom “to run, copy, distribute, study, change and improve the software” giving the users four essential freedoms: (i) the freedom to run the program, for any purpose; (ii) the freedom to study how the program works, and change it as required, by accessing the source code; (iii) the freedom to redistribute copies to help other users; (iv) the freedom to distribute copies of the modified versions to others, giving the whole community the opportunity to benefit from the changes. Access to the source code is a precondition for this.

In the LGPL, the above freedoms also apply (through a viral mechanism contained in the GPL) to new works derived from the original GPL-licensed software and, consequently, serve to expand the rights of the public.

Uncontrolled use of open source software may have a damaging impact on the business, including:

·         Failure to comply with copyleft terms, leading to action from the body who enforces the licence terms; these bodies tend to be US based with US applicable law. From a legal point of view, if a condition precedent for downloading or installing the software is including the attribution of any derivative work, the cause of action arises from copyright infringement because the licensee is exceeding the scope of the licence; whereas if the licenceis written so that the licensee covenants or promises to include attribution in the derivative work in exchange for downloading or installing the software, the cause of action arises under contract law ( which requires prove of of lost profits or actual damages which can be very difficult to prove for open source software).

·         Cost of remedial action resulting from a breach of an open source software licence, which may include re-working and re-engineering products.

·         Reputational damage through adverse publicity which could potentially lead to compromised brand value.

·         External perception as disorganised or unprofessional.

·         Lost customer trust and disputes with customers who were expecting to get open source-free software and their management time, effort and expense.

·         Supply-side disputes with open source software licensors and their management time, effort and expense.

·         Missed opportunities to exploit key markets exclusively and wasted resources. Proprietary software may become freely available to rivals unless a (usually expensive) non-open source software workaround can be found.

·         Poor management or housekeeping and the need for remedial action or unnecessary warranty or indemnity cover for a specific event, such as an investment round, initial public offering or trade or business sale.

·         Business continuity issues.

·         Non-compliance with regulatory requirements, where, for example, regulators assess operational risk relating to companies' IT operations.

Proper consideration of the open source software that is used in key products is advisable, so that what open source software is used can be identified and addressed. An assessment will include questions such as (i) where the open source software originates from; (ii) what the open source software does; (iii) where or how the open source software is being used and re-used internally or distributed externally; (iv) the terms of the licence (v) whether there are any conditions placed on use.

All articles are for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2011 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.