Article: Legal tools in creation of an open source business

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Martin von Willebrand, a partner at HH Partners writes on:

Use of Legal Tools in Creation of an Open Source Project and Business Model

The legal rules often play a key role when it comes to business models in software businesses and notably in free and open source software projects. This is particularly true when the project owner wants to maintain some level of control over the software and the project itself. The balance between control and freedom is achieved by legal tools and policies, such as licenses, compliance policies, contracts, trademarks, organization rules, contribution policies, only to name a few.

All choices on how to use the available legal tools depend ultimately on the business model and the goals of the project owner or host. How does the project host intend to make money or savings with the project? Or are there other goals? However, legal tools are not there to just take control on all aspects of the project, but they are there to achieve the right balance. Legal tools can be used to control, to free and to enforce freedom.

When choosing an open model for a project, one typical goal is to get attention and participation from a broader audience, i.e. the project’s future community. When choosing what to control and what to free, it is important to understand that with each layer or element of control, you sacrifice an element of participation. A totally free open source project with decent governance is likely to attain a lot more interest than a company controlled project that is only partly open.

Trade-off Between Control and Participation

Community participation may lead to lower development and support costs while increasing the amount of payable customers. This can happen among other things via an increased amount of users, customers and feedback, participation in bug-finding and fixing, development contributions, community support, and more business partners. The community can become a competitive advantage, if maintained correctly.

At the same time, many projects benefit from the advantage of having one or more commercial actors investing in the project and gaining profit in relation to the project. So the success of a project may also be dependent on whether or not it creates business opportunities for others while growing the business of the project host.

So the trick is to find the right balance between freeing elements to support participation and controlling to maintain interest for long-term investments.