Open Source Software

Moorcrofts has a niche specialism in advising clients on all aspects of open source software. As a former software engineer (and qualified NeXT developer), Andrew Katz has himself released software under open source licences.

What is Open Source Software?

In a nutshell, open source software is a means of software development whereby companies and individual programmers share the “blueprint” (technically: source code) of their software and make it freely available for others to adapt, develop, extend, debug, distribute and use.

This sharing of source code makes for a collaborative model of software development in which loosely-coupled teams of developers can develop highly complex, effective and reliable pieces of software which can compete with commercial offerings in the marketplace.

This is probably best exemplified by the Linux operating system which, hosting the open source web server software Apache, runs the majority of web servers worldwide, as well a huge variety of other platforms and applications.

Open source software has no licence fees, and no restrictions on the number of computers on which it can run.

How Can Companies make Money out of Open Source Software?

IBM, HP, Red Hat and Novell all make significant amounts of money out of open source software. In fact, IBM’s revenues from Open Source Software in the last few years have topped $1 billion annually.

This is because, in any major software project, the cost of licensing is only a smallish proportion of the overall cost of implementation, development, integration, training, hardware provision and support. IBM (and the other open source software companies) continue to charge for these things.

Customers for software in the marketplace are keen on open source software because

  • The software itself may well be best of breed
  • There is the comfort that they are not reliant on one supplier
  • There are no hidden costs in forced upgrades
  • There are no licence fees (although it is important not to overstate this point)
  • They can choose from a number of suppliers to provide warranties for the software
  • They have the freedom to extend, adapt and amend the software as they see fit
  • They know that there are no backdoors, disabling devices or artificial usage limits in the software (or if there were, they could be easily removed); and
  • There are, for most well known open source software packages, many competent software engineers around who know the software well and can support and maintain it.

Companies who supply software are increasingly embracing open source because:

  • There is no need to reinvent the wheel: it is likely that a large proportion of the code they need for their project has already been written and is available for use;
  • There are many programmers available who know the most common software well and are familiar with working with it;
  • The ready availability of exsiting code means that products can be brought to market much more quickly, both giving market advantage and (crucially for a start-up in particular) enormously reducing the capital requirement to fund development;
  • Programmers like it because they can be signficantly more productive, knowing that they can do much of the job by reusing code from elsewhere;
  • Programmers like to be part of the open source community, and contribute to projects, which gains them personal kudos; and
  • The market increasingly likes to purchase open source solutions.

What are the legal issues with Open Source Software?

For end-user companies, there are few issues which differ from those to be considered when sourcing proprietary software. Licence terms need to be considered in a little more detail, as there is no one large organisation standing behind the licensee and the associated intellectual property rights. Also, as this is a newish market, more care needs to be taken to ensure that the supplier is solvent, able to provide the services promised, and has the rights to supply the software in the first place.

For software companies the issues are more complex. There are perhaps 200 different licences under which open source software is available. Many of these are the simple so-called “academic” licences, which allow the company to use the code and incorporate it into its own software with very few restrictions (possibly just acknowledging the author, or putting a disclaimer in the documentation). The software can then be licensed for a fee, or on an open source basis, as the company’s business model dictates.

Other licences, particularly the GPL, need particular consideration. If a company incorporates GPL code in a project for distribution, then the whole of that project has to be made available as open source.

For this reason, a software company has to think carefully about whether it wants to license its software out to customers on closed-source (proprietary) or open-source basis – or, increasingly, make its functionality available through the cloud on a SaaS basis – and this decision will affect which free-available software, governed by which licences, it is able to use in its codebase.

How Moorcrofts can Assist

Licensing in and out

Moorcrofts advises both software and end-user companies on open source issues, including in-licensing and out licensing, as well as helping to implement open source and “found source” usage policies.

We are familiar with assisting clients to manage the risk in open source projects by developing practice and procedures, drafting the appropriate legal documentation, and identifying appropriate insurance products.

Acquisitions and Fundraisings

Open source can also be an issue in acquisitions and fundraisings.


Software companies on the acquisition trail will want to know that the licence base they acquire has the appropriate open source licences and that there are no hidden issues there.  Moorcrofts are used to carrying out due diligence exercises across the board, but particularly in relation to open source.  With our unique blend of software and legal skills, we are well placed to provide advice for those on the acquisition trail.

For companies engaged in normal acquisitions (i.e. not those just in the software field) open source is still an issue when acquiring a company which relies on specific key software applications.  Again, open source issues can be checked as part of due diligence processes.

On fundraisings, funders are increasingly keen to ensure that they understand the open source issues in companies they are backing.  This applies not just to software companies but also to any company which has mission critical software.

Our skills and experience

Andrew Katz is recognised as a leader in the field of open source licensing in the UK. He was involved in the drafting of the UK Creative Commons Licence, and has contributed to the GPL Version 3 project. He has spoken at events worldwide including Seoul, New York, Boston, Brussels, Amsterdam, Barcelona, Mangalia (Romania), London, Edinburgh, Helsinki, Reykjavik, Stockholm, London and Reading, His articles and commentary have appeared widely in the press, including The Telegraph, Financial Times, Microscope and the Register.   He is a founder editor and contributor to the International Free and Open Source Software Law Review, is a visiting lecturer at Queen Mary College, University of London and has published work through the Oxford University Press, BIS, BCS and the Open Source Press.

The independent legal directory Chambers and Partners says:

The “entrepreneurial” and “immensely experienced” Andrew Katz is an “easy guy to get along with” and a“technology enthusiast.” His expertise includes computer and telecommunications technology and he has a particular focus on open source licensing issues.

Contact Andrew Katz


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