Open-Source Licensing and Business Models: Making Money by Giving it Away

Free and open-source software (FOSS) has become an integral part of nearly any successful business model that depends upon commercializing computing software. Whether creating consumer products that incorporate software, licensing software in exchange for customer royalty payments, or offering software-based services via the internet, providers of software products and services ("providers") will typically be required to use at least some FOSS in order to deal with third-party vendors, providers, partners, and customers. For the few providers that are not required to use FOSS, failure to take advantage of available royalty-free FOSS resources for at least some portion of the business arguably reflects a poor investment of financial and technical resources. However, while nearly all providers' businesses depend upon FOSS, some providers go further by commercializing specific FOSS projects or otherwise incorporating FOSS licensing into the delivery of their products and services. Section I of this article addresses the fundamentals of FOSS licensing with a particular focus on characteristics of FOSS licenses relevant to commercial use of FOSS. Section II catalogs some of the common ways that companies are directly commercializing FOSS projects or incorporating FOSS licensing into their software products and services. I. Introduction to Free and Open-Source Licensing Before building a business that relies upon FOSS or incorporates FOSS licenses, it is helpful to understand the different categories of FOSS licenses and how the characteristics of those categories can impact commercial use of FOSS. A. Free, Open-Source, and Public Licensing The terms "free software" and "open-source software" refer to software licensed under terms satisfying the specific criteria set forth by the Free Software Foundation (1) and Open Source Initiative, (2) respectively. The free and open-source software definitions are not coextensive, but nonetheless place many of the same requirements on qualifying licenses including the availability of the licensed software's source code and the recipient's rights to modify and redistribute the software. Despite the imperfect correlation, the terms "free software" and "open-source software" are often used interchangeably or referred to collectively as "open source," "FOSS," or "FLOSS." The differences between free software and open source software are meaningful to the philosophical purpose of open-source, but neither definition meaningfully impacts a commercial use analysis. Moreover, the terms "free" and "open source" are commonly used to describe software available under a license that is neither. The term "open source" in particular is often used to refer to a broader class of software that is made available (a) to the public, (b) in source code form, and (c) under the terms of a standard, royalty-free license. (4) Software satisfying this broader definition might more accurately be referred to as "public-source" software. The diagram below depicts the overlap between free, open-source, and public source software licenses and provides examples of licenses falling into each category. For the purposes of this article, "FOSS" is used to refer more generally to public source software. The release of software in source code form under a standard, royalty-free license is one characteristic distinguishing FOSS licensing from traditional commercial licensing. A more comprehensive list of features distinguishing features is provided in the table below. B. Copyright, Patents, and Copyleft Copyright and patents are forms of intellectual property ("IP") protection that enable commercial software distributors to place specific limitations on how their licensed software may be used by recipients. For example, IP holders may impose licensing fees on use of the software, prohibit modification or reverse-engineering of the software, or restricting the field or purpose for which the software may be used. …