Academic journal article Santa Clara High Technology Law Journal

The New Foundations of Open Source

Academic journal article Santa Clara High Technology Law Journal

The New Foundations of Open Source

Article excerpt

In recent years, the news about open source software development has been full of new community players: OpenStack Foundation, CloudFoundry.org Foundation, the Document Foundation, and the Open Source Robotics Foundation. Each of these projects is run by its own corporate entity, created and funded by a handful of major technology company promoters. What are these new foundations of open source? How do they help potential competitors come together to collaborate on open source development? And why set one up, when plenty of open source projects are run informally?

I. The Open Source Lifecycle

Most companies go through several stages of open source involvement. They begin by using other people's open source code. At this stage, companies need to understand how to comply with the open source licenses that apply to the software they are using, and implement internal controls to be sure they keep track of components they are using and remain compliant with the licenses that cover them. (1) At the next stage, companies begin to contribute back to existing open source projects--a bug fix here and a new feature there. They do this in order to improve the code, and sometimes, to influence the direction of its development. At this stage, companies need to understand how to manage their intellectual property and set policies for employees to spend company or personal time on open source projects. (2)

In the last stage, a company takes a leadership role in developing open source projects. This may include releasing existing software under open source licenses, starting new open source projects, funding community development, or coordinating and managing development by others. Many companies never reach this stage, but if they do, they must make strategic decisions about the relationship between the open source project and the money-making activities of the company. This article discusses one of those decisions: whether to create a new entity to run an open source project.

Entities set up to run open source projects are often called "foundations"--such as the Free Software Foundation, (3) the Linux Foundation, (4) or the Mozilla Foundation. (5) The popularity of creating open source foundations has waxed and waned over the last decades, more or less with economic cycles. Many were started in the early 2000s; the 2010s have also seen a crop of newly-created foundations.

II. Inside or Outside

Many of the reasons for setting up a foundation are optical rather than actual. But optics are important, particularly in the open source world, which thrives on the delicate balance of many individual or corporate developers donating their time to a collaborative project. A company setting up--let's call it promoting--a foundation wants to send the message that the project will serve the community instead of the promoter. Setting up a foundation also helps the promoter to separate its assets and resources--intellectual property and otherwise--from its profit-making business.

Most foundations are set up as nonprofit, non-stock entities. They are run by a board of directors, which is either self-perpetuating or elected by members, who have many rights like those of stockholders, but not ownership. A nonprofit open source entity therefore is not a subsidiary of the promoter entity because the promoter entity neither owns the nonprofit (no one can) nor retains control over selection of its board (often necessary to demonstrate community involvement).

Founders frequently select Delaware to incorporate, perhaps for its familiarity and because of the assumption that Delaware favors nonprofits as it does for-profits. Much of this is true. Delaware is very flexible, allowing a nonprofit corporation wide latitude in the structure of its Board, committees, and membership. (6) Delaware affords directors of its corporations more protection through its gross negligence (rather than simple negligence) standard for liability. …

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