A software license resembles a rental agreement. The vendor retains ownership of the intellectual property rights in the software but grants a third party with a limited right to use it for a certain period of time. However, not all licensing models are created equal. Significant differences exist between the traditional licensing model of proprietary software and the open source licensing model. We will outline some of those differences below.
The traditional licensing model of proprietary software is inherently based on the implementation of certain restrictions. These restrictions could be manifold. They could apply to the number of end users that can use the software, the number of processors or processor cores which can run the software or the number of permitted installations. Under the proprietary licensing model, if the end user would want to increase this fixed capacity that is being served by the software the only solution would be to purchase additional licenses.
The licenses for proprietary software usually forbid the creation of additional copies or the modification of the software solution. Redistribution of the software and transfer of the license is also usually prohibited. Importantly, proprietary software is habitually delivered in executable format (object code) and the customer has no access whatsoever to the source code. There is also a prohibition for the end user to reverse engineer the software in order to derive the source code from the object code. Traditional proprietary licenses normally also impose a purpose limitation- operation of the software is limited to internal business use or personal use without any form of commercialization.
Overall, the end user can perform only the acts that are permitted under the license and only within the established limits of such permissions. The copyright holder retains exclusive control over how the software can be used in the traditional licensing model. At the same time the rightholder permits certain limited uses of the software that materialize in the form of a license grant to the end users. Thus, the license is in fact a form of authorization from the rightholder that allows third parties to perform certain acts while other acts remain restricted.
Proprietary licenses are usually non-exclusive and non-transferable which effectively allows the vendor to sell licenses to many parties and expand its market presence. The end user does not receive any ownership of the underlying IP rights in the software but only gets a limited right to use a copy of the software. These licenses are provided on standard vendor terms which are non-negotiable in a business-to-consumer scenario and could allow for some minor modifications in a business-to-business scenario. At the same time, the licensee usually achieves some legal certainty and protections in the form of IP warranties, infringement indemnities and vendor liability that is limited to a given cap. Moreover, dedicated professional support and maintenance is provided by the vendor under guaranteed service levels which is very important for software that is critical for the business operations of the licensee.
Over the past decade, a subset of the proprietary model with a different delivery method has been consistently gaining traction – the Software as a Service (SaaS) model. Under this model there is no licensing in the strict sense of the word. The end user obtains the right to access a software application over the open Internet and use its functionalities without having to install a copy of the application on his or her own computer. Therefore, the capability provided to the consumer is to use the provider’s applications that are running on a cloud infrastructure. The applications are accessible from either a thin client interface, such as a web browser or a program interface. Despite the change in the form of delivery of the software, the SaaS model imposes on the end users most of the restrictions that are inherent to the proprietary model. There could be limitations on the number of users that can log-in, the number of transactions or the amount of data that can be processed. Moreover, in a SaaS model many of the typical restrictions (such as restrictions on reproduction or modification of the software) can be achieved effortlessly due to the fact that the end user does not receive an actual copy of the software but only obtains the right to access its functionalities. For example, it would not be necessary to include a provision forbidding reverse engineering as under the SaaS model the end user would not have access to the executable code of the application.
Unlike the traditional licensing model which is built on restrictions, the open source software (OSS) licensing model presents some profound differences as it is based on certain basic freedoms that are transmitted to the end user together with the software.
In general, the concept of open source is built upon three key tenets – i) the open source technology, ii) the open source community and iii) the open source licenses that regulate the use of that technology. These three elements are intertwined together to produce a phenomenon that provides significant benefits to society in terms of both technological development, accelerated innovation and economic growth. Open source software distinguishes itself from proprietary software based on the fact that it provides certain fundamental freedoms to the end user. As per the definition established by the Free Software Foundation (FSF), there are 4 basic freedoms that a piece of software needs to provide in order to qualify as free software (despite some ideological differences the terms “free software” and “open source software” can be treated as interchangeable). These are:
- The freedom to run the program as you wish, for any purpose (freedom 0).
- The freedom to study how the program works, and change it so it does your computing as you wish (freedom 1).
- The freedom to redistribute copies so you can help others (freedom 2).
- The freedom to distribute copies of your modified versions to others (freedom 3).
As we can see from the above, the end user is free to run the program for any purpose she deems fit – personal use, commercial use, educational purposes, research etc. Furthermore, there is no restriction when it comes to the groups of people who can use the software or the fields of endeavor where the program can be used. Secondly, the end user is free to modify the program – something which is strictly forbidden under the traditional proprietary license model. Third, the end user has the freedom to create verbatim copies of the open source software and share those with anyone without any limitations. Fourth, there is also the freedom to share the modified versions of the open source software, which however can be subject to certain conditions that are most notable in copyleft OSS licenses. All these 4 fundamental freedoms are inherently present in any piece of open source software.
The actual key to the 4 basic freedoms in OSS and the fundamental prerequisite for their materialization is the access to the source code of the software. Access to the source code should be provided or it should be possible that it is obtained for every open source software product. As it is clarified in article 2 of the Open Source Definition: “Where some form of a product is not distributed with source code, there must be a well-publicized means of obtaining the source code for no more than a reasonable reproduction cost, preferably downloading via the Internet without charge. The source code must be the preferred form in which a programmer would modify the program. Deliberately obfuscated source code is not allowed. Intermediate forms such as the output of a preprocessor or translator are not allowed.” Therefore, it can be concluded that the access to the source code is the actual engine that makes it possible that the 4 core freedoms are realized. Without access to the source code, it would be impossible for the end user to actually study or modify the software solution.
Under the OSS licensing model, the copyright holder retains his exclusive rights over the software in the same way as the rightholder under the traditional proprietary model. The difference between the two lies elsewhere. It is in the wider rights of use that are granted to the third parties under the OSS model. When it comes to the license grant that is addressed to the end users, it is not inherently based on restrictions but to the contrary – on a permissive approach embodied in the 4 fundamental freedoms.
There are several typical features that outline the notion of an open source license:
First, under an OSS license, licensees are always able to access the source code as this is the foundation for all freedoms that come with the software. This is the biggest and most impactful difference as opposed to proprietary software.
The second typical characteristic of an open source license is that based on the license grant, the recipient of the code can freely use it, copy it, modify it and redistribute it. When it comes to redistribution, it must be noted that there could be additional conditions introduced by copyleft licenses which normally require that modified works are redistributed under the same or equally free license and cannot be turned into closed source software.
Third, there are no license fees or royalties that need to be paid by the end user in order to be able to use, copy, modify or redistribute the open source software. Here it must be noted that the term “free and open source software” does not necessarily denote free of charge, but is a reference to the fundamental freedoms that come with the software. There is no formal restriction forbidding a user to sell open source software. However, this would make no sense due to the freedom to redistribute the software, as one would end up charging for something that could be obtained for free just around the corner. Charging a fee would make sense for a modified work if some additional enterprise features are added on top of the open source core or if additional professional services are provided by a commercial OSS vendor.
Fourth, OSS licenses can be viewed as multilateral copyright licenses. They are multilateral because they reflect the consensus of a community of developers and contributors around the values and principles that should be enshrined in them. Some even view them as a form of a constitution for a given open source community.
OSS licenses usually include a waiver of warranties and liabilities as the open source software is provided on an “as-is” basis. Some of those disclaimers are very broad – they exclude any liability of the copyright holders or software contributors for direct, indirect, incidental, special or consequential damages under any theory of liability. Such an approach is not unexpected as the end users receive the software without incurring any license fees. However, it is possible that commercial open source providers could undertake additional obligations for certain types of warranty, indemnity or limited liability and respectively they could charge a fee for these additional obligations and some additional features they offer. This would be fitting in the case of enterprise open source software that is used by large companies and where certain enterprise features are added on top of the open source software core. On the other hand, community open source software that is used by home users or small businesses will lack such additional coverage.
Another typical characteristic of OSS licenses are their attribution requirements. These mandate the inclusion of the copyright notice in all copies of the software upon redistribution. They could also impose an obligation to apply prominent notices to any modified files clearly stating that the files were changed and in the case of derivative works to retain all the copyright, patent, trademark notices from the initial work.
Interestingly, OSS licenses could come with patent grants. Examples include the Apache 2.0 license, the GNU GPL and LGPL, the Mozilla Public License and the Eclipse Public License. Such provisions usually include the grant of a non-exclusive patent license coming from each contributor to the software as the license only applies to the patent claims that are licensable by the respective contributor. The rationale behind such a provision is to provide legal certainty and protect end users and OSS developers from any patent infringement claims. Some OSS licenses also include what is called “patent peace clauses” which basically proclaim that if a licensee institutes patent litigation against any entity alleging that the work or any contribution to it constitutes patent infringement, then any granted patent licenses to the work shall be revoked.
Finally, an interesting peculiarity to have in mind is that certain OSS licenses could limit the possibility to place the software in an app store and distribute it under different licensing terms and conditions. This is the case for example with the copyleft GPL v2 license which includes the following provision: “Each time you redistribute the Program (or any work based on the Program), the recipient automatically receives a license from the original licensor to copy, distribute or modify the Program subject to these terms and conditions. You may not impose any further restrictions on the recipients’ exercise of the rights granted herein.” Given this provision, it would not be possible for an app store through its terms of use to impose any further restrictions whatsoever on the use of the application. Such type of tension between the GPL v2 and the terms of the application marketplace caused Apple to remove the open source VLC Player from its App Store. Moreover, in the past Microsoft Marketplace forbid the distribution of applications covered under the GPL v3 license.
Each of the two licensing models presented above has its advantages and disadvantages. The fact that one has restrictions as its starting point and the other one – certain freedoms, does not mean that one is better or that the other one is inferior. On the contrary, for certain uses and purposes the proprietary licensing model can be indispensable and for other uses and purposes the open source licensing model can be a better fit. Therefore, the licensee should always be aware of the context in which the software will be used and the peculiar needs and objectives of the end user or the enterprise. These factors will ultimately determine which of the two licensing models would be a more appropriate choice.