Open source is a software whose source code is open for public use. The code is freely available on the internet for anyone to download, review, and use. Open-source software can also be integrated into commercial products. Companies today use open-source code for cost reduction, code quality, and time-to-market, among other things.
Using open-source code commercially can entail legal risks since some open source licenses require companies to make their own proprietary code public. Before using open-source software commercially, companies must review the license terms along with their own objectives to better understand when their proprietary code requires public disclosure.
Each open-source software package has a license agreement specifying terms of its use. Some open-source code is published under a dual licensing system, where the code can be used either for free (under certain rules usually requiring proprietary code disclosure upon product distribution) or under a paid commercial license requiring no such disclosure. Courts have ruled that free licensing agreements have a binding nature and therefore companies need to carefully review the license of open-source code they wish to use.
Open-source issues often arise during due diligence before an acquisition. Acquiring companies review the codebase of the company being acquired for the code’s origin and licensing status. It is often discovered during due diligence that a company improperly used or even relied on open-source software as a key part of the company’s codebase, which can sometimes result in canceled deals.
The Reinhold Cohn Group has developed a service package dedicated to assisting organizations seeking to manage the use of their open-source software in a way that minimizes risks. The service is provided by a team comprised of attorneys specializing in copyright and software experts, and is carried out in three stages:
- Assessing the commercial risk of different open-source licenses used by the organization, taking into consideration the particular use cases of the open source software in the organization’s products and services.
- Building an internal organization procedure for control of future inclusion of open-source code in the organization’s code base, and providing tools for managing the issue by the organization.
- Providing continuous assistance in special cases of open-source code use.