Open Source Licensing Versus Commercial Licensing

When you're starting a new software project, choosing the right software license for your needs is important. Two common types of license are commercial licenses and open source licenses, each of which have many variations as well.

This article will cover what commercial licenses are, what open source licenses are, their key differences, and how to choose one.

Let's begin.

What are Commercial Licenses?

Commercial software licenses are legal agreements between the creator or owner of a piece of software and its users. They are often known as End User License Agreements, and have a range of different clauses.

These clauses cover things including:

• Payment scope
• Usage restrictions
• Upgrades or service terms
• Warranties and disclaimers

EULA's contain a wide range of other terms, in comparison to open source licenses.

Let's take a brief look at some of the types of clauses you would expect to see in an EULA.

License Scope

In most commercial license agreements, the scope of the license is one of the first clauses. This includes, for example, whether the license is exclusive or non-exclusive, limited or unlimited, worldwide or bound to a particular region, and more.

Here's an example from Adobe's EULA for its Captivate software:

You can see in this example that Adobe is granting a non-exclusive and limited license to install and use the software in the customer's region, during the term of the license, within the scope of the license terms, and in a manner consistent with the agreement.

Here's another example from Apple. In this example you can see that the license is "nontransferable" and is for Apple-branded products that the customer owns or controls:

You can also see that the user is not allowed to distribute the software, or use it on multiple devices simultaneously. If the user sells their device, they also have to remove the software before doing so. There are also limitations on copying, reverse-engineering, disassembling, deriving source code, or creating derivative works.

Usage Restrictions

Instead of including restrictions in the scope of the license, some EULA's include additional usage restrictions within another term of the license.

Here's an example from Adobe. In this example you can see that the customer is not allowed to modify, port, adapt, or translate the software. The customer is also not allowed to decompile, disassemble, or discover the source code of the software:

Most commercial licenses set these terms out (scope and restrictions) as either one clause or two separate clauses.

Upgrades and Service Terms

Another key feature of commercial license agreements is that the software creator usually provides updates, upgrades, patches, maintenance or service for the software.

Here's an example from Steam. In this example you can see that the licensor might deploy or provide patches, updates, and modifications to games that are downloaded over Steam and installed on the user's computer:

Here's an example from BlueRange:

In this example you can see a maintenance clause, in which BlueRange provides maintenance for prior releases and versions of software for 1 year following the release of the new version.

For commercial licenses, you'll need to include a clause on what service or maintenance you provide for the software.

Warranties

Warranties are another key area in which commercial and open source software licenses differ. For commercial software, vendors often include a warranty, at least for a limited period of time.

Here's an example from Veeam:

In this example you can see that Veeam provides a warranty that the software will perform "substantially in accordance" with the software documentation for 90 days from the date the software is delivered.

Some vendors choose to try to limit their liability, although this may not be successful when selling software commercially.

Laws in many countries require that sellers include a warranty or other types of guarantees for the sale of their goods or services. Here's an example from Steam:

You can see in this example that Steam tries to limit its liability "to the fullest extent permitted under applicable law" for warranties, and says the game, game client, and manuals are provided "as is."

Now let's take a look at open source licenses.

What are Open Source Licenses?

Open source licenses are legal agreements between the software creator or owner, and the user, that allow the user to modify, use, and distribute the software freely.

There are often very few restrictions on the distribution of the software, although there are some rules depending on the license type. For example, copyleft licenses require that any modified versions of the software also contain the same license as the original. Permissive open source licenses provide more freedom, and can also allow open-source software to be combined with proprietary software.

Some common open-source licenses include:

• MIT License
• Apache License 2.0
• GNU General Public License (GPL)
• Mozilla Public License

Let's take a look at those in more detail.

MIT License

The MIT License is a permissive license that requires attribution but allows software to be modified and distributed without restriction.

This is the full text of the MIT License:

You can see that the software is given free of charge, without restriction (including copying, modifying, sublicensing, and selling copies of the software). The only requirement is that the MIT license notice is provided in copies of the software.

You can also see that unlike commercial licenses, no warranty is given.

Apache License 2.0

Another example of a permissive license is the Apache License 2.0. This includes very similar terms to the MIT license, but with some differences.

For example, the section on Redistribution states:

This is a little bit more restrictive than the MIT license, in that it requires copies of the license in more places, and all notices from source forms of derivative works have to be retained.

It also allows code to be modified and made proprietary - i.e. the software may be released as open source, but it doesn't have to stay that way.

Like the MIT license, the Apache License also disclaims warranties and only offers software on an "as is" basis:

Now let's take a look at some copyleft licenses.

GNU GPL

GNU GPL is one of the copyleft open source licenses. This means that code released under the GNU GPL must remain under the GPL. This also means that any modifications or derivative works also need to use the same licence.

You can see in the basic permissions clause below that users can "make, run, and propagate covered works that you do not convey, without conditions so long as your license otherwise remains in force."

The GNU GPL is one of the more restrictive open source licenses and can help to make sure your software or code remains open source. Projects using code licensed under the GNU GPL cannot be made proprietary down the road. Keep this in mind if you think you might like to change your software licensing later.

Mozilla Public License

The Mozilla Public License is another type of copyleft license, but it is not as strict as the GNU GPL. You can see it grants users a world-wide, royalty-free, non-exclusive license:

Users can also use, reproduce, make available, modify, display, perform, distribute, and otherwise exploit contributions, either unmodified or as part of a larger work.

The Mozilla Public License does require that modified works remain under the same license, but proprietary components can be added, or components that use a different open source license.

You can see in the clause below that the Mozilla Public License also disclaims warranties and provides software only on an "as is" basis:

Most open source licenses are good for encouraging collaboration and further development, with wide adoption and use of your software, with limited legal liabilities or responsibilities.

Let's take a look at some of the key differences between these license types.

Key Differences Between Open Source and Commercial Licenses

As you can see from the examples above, there are some significant differences between open source and commercial licenses. Some of these key differences include:

These differences highlight the ways in which these two licenses are, in many cases, polar opposites. Now let's take a look at what to consider when you're trying to decide how to choose a license.

How to Choose a License

When you're deciding which type of license to apply to your software project, consider the key differences between open source and commercial above.

Some questions that might help you include:

• Do you want to get paid for your software?
• Would you like others to continue to develop and improve upon it?
• Do you want to offer warranties or service?
• Is your "audience" for the software businesses or individuals, software developers or academics?

If your software is not being made for commercial reasons, and you'd like others to contribute to it as part of an academic or development project, an open-source license would be a good choice.

On the other hand, if you want to make money from your software, and intend to market it to businesses for commercial sale, then using a commercial licence makes sense.

Summary

Both open-source and commercial licenses have their place, and serve a purpose in terms of software licensing approaches.

Open-source licenses are usually for software that should be used by communities, such as software developers, academics, or widespread users on a free basis.

Commercial licenses are better suited to business software and paid projects, in particular if you're going to be providing support and maintenance.