Source available != open source

Someone recently asked what open source licence would enable them to provide their customers with source code, but prevent the customer from redistributing or reselling that code.

They had a commercial model, in that they sold their software and did not want to “give it away” as open source just yet. But they still wanted to be able to provide their customers with the source code – not because their customers actually needed it, but in order to be “transparent” and provide customers the assurance of having the source code.

Two points came to mind:

  1. “Source available” != open source. Not for any reason of semantics (semantically, I think it’s acceptable to say open source == source available), just that open source now has a fairly well understood meaning which includes redistribution and other rights. It could be confusing to customers to label a restricted “source available” model as open source. I wouldn’t go as far as calling it misleading and deceptive, but I would recommend using an alternative term if what is being provided is outside of a commonly accepted meaning of open source.
  2. If all you want to do is provide your customers with source code for your proprietary software, there is no need to use a “standard licence” (and little point). There are a few such licences in use – the Microsoft Reference Source License probably being the most common – but these are very basic (which is all they need to be) and not comparable to the GPL, Apache, etc.  A few extra sentences in your standard proprietary license can do the trick just fine.

The growth of open source means that the source available model (I’ll stick with that term for now) will become increasingly common for proprietary software. Probably the best example is Microsoft’s shared source initiative, which has been around for a couple of years now, although this does provide more liberal licensing than the example I’ve given.

Source available will also, in most cases, supersede the little-used (but often cited) code escrow model. Except for special/high-end situations, code escrow has become increasingly irrelevant and has probably long been more hassle than it’s worth. (Has anyone actually called on a code escrow? If so, what did they do with the code?)

So why would a proprietary software developer want to supply their source code on a no-redistribution basis? Three reasons are:

  • To give customers the ability to audit their code (or at least to know it is auditable).
  • To give customers some assurance of being able to fix their code and modify/ /integrate the code for in-house purposes (the code escrow purpose).
  • To improve interoperability.

The down side is that the developer would generally lose any technical ability to control distribution or copying of their code, whether or not that is legally permitted by the licence.  This may be critical where the code itself constitutes a trade secret, such as for high-end complex applications, code implementing proprietary algorithms / processes, and applications with significant market value.  In such cases, if the developer nevertheless still wants to provide the source code, a contractual indemnity (i.e. requiring the customer to indemnify the developer for the customer’s breach) may be appropriate.

However, in some cases this “down side” should be weighed against the decreasing costs of development. The barriers to entry for software development are continually lowering. Free IDE’s and platforms and better tools and libraries continue to make software development quicker, easier and (supposedly) cheaper. Open source development provides vast free resources to projects.

As a result, some proprietary source is not the asset it used to be. Consequently the commercial value of maintaining source code as a trade secret has decreased; not yet to any critical degree – there is no question that proprietary software continues to be an exceptionally successful industry model – but enough to make services and subscriptions an important strategy for many proprietary developers. It may make commercial sense to accept some of the downside risk for the up-side benefits.

Key points

Some key points for licensing on a source available, no redistribution basis:

  1. If you do not intend the customer to disclose the source (if you did, you probably want an open source licence), make sure it is covered by a confidentiality provision.
  2. As with all confidentiality agreements, make sure the “confidential information” is properly defined. A classic mistake is to impose an obligation of confidence over ill-defined (or even undefined) material.
  3. Specify what the customer is and isn’t allowed to do with the source. Can the customer create and distribute derivative works? Can the customer adapt the work in-house? Must the customer provide any improvements back to you?
  4. The source code should not be assignable, sub-licensable, etc, without prior written consent.
  5. The licence should be “collapsible”, i.e. the licence should automatically terminate upon certain events such as insolvency of the customer.

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