Many of our clients who are software developers ask us:

  1. How can we make money from distributing our software under an open source licence?
  2. How can we prevent others from making money unfairly from our open source software?

Making money from distributing software under an open source licence

Licensors can make money on what the open source licence doesn’t grant.  For this reason, it is often more rewarding to consider the exclusions from the licence rather than the open source grant of licence provisions.  Examples of common exclusions include trademarks, the names and reputations of the licensors and warranties.  Finally, it must be remembered that the licensor of open source software can always licence his software under other terms and conditions as well.

Preventing others from making money unfairly from our open source software

Two important open source principles need to be borne in mind here. Firstly, licensees are free to make copies of open source software and to distribute them without payment of royalties to a licensor.  This does not mean that a licensor can’t sell open source software.  It merely says that a licensee doesn’t have to pay the licensor for any additional copies that he makes himself, even if those copies are distributed to other people.

Secondly, licensees are free to create derivative works (new software “derived from” the original open source software) of open source software and to distribute them without payment of royalties to a licensor.

Under these two open source principles, it is therefore not possible to completely prevent people from doing so – all licensees are allowed to copy and create derivative works without paying any royalties to the licensor.

If it is important for you to discourage users from creating and distributing derivative works, then a “reciprocal license” is often better to have than a “academic licence” – simply because everyone gets a “free ride” out of everyone else’s distributed derivative works because that software is licensed under the same licence.  Furthermore, the pain here shared by all distributors of the derivative works, not just by the original licensor.

If you really want to prevent others from making money out of your software, you should consider relying on the traditional proprietary software licenses or one of the other alternatives to an open source license.  These include (i) a shared source licence (e.g. the one used by Microsoft where their customers can read and examine parts of Microsoft source code), (ii) public source (where commercial use is prohibited).