Dual licensing is an important issue with open source software. Common open source business models, selling complementary products-services, appropriate little returns. A recent report on open source markets stated that despite projected proliferation of open source technologies, "that revenue will substantially lag behind the distribution of open source software." Open source firms need more agility and flexibility than their current business models enable in the competitive technological environment, and new ways of driving revenue - dual licensing has promise.

In a new study, scholars analyze situations when dual licensing represents a profitable commercial strategy for open source firms. Stefano Comino and Fabio Manenti, Dual Licensing in Open Source Software Markets (2007). Comino-Manenti find that dual licensing is a form of “versioning” for open source firms. Inventors leverage the ubiquity that comes with open source licensing to the technology community, while appropriating returns through proprietary licensing with commercial firms.

By leveraging vastly restrictive open source licenses with the community, open source firms induce commercial firms to pursue proprietary licensing deals with them rather than simply downloading the code for free. The more restrictive the license, the more it is difficult for commercial firms profit from the free code. Open source firms have incentive to dual license with commercial firms, granted the risks of losing competitive advantage and cannibalizing their own markets with an “open source only” business approach where anyone can get your code for free.

Comino-Manenti make a keen observation that bears on technology policy: 1) prospective licensees are concerned not only with the quality of code, but also the terms under which it is distributed, and 2) restrictive open source licensing intentionally limits commercial adoption of source code. Consequently, restrictive licensing may currently restrict the proliferation of open source software, rather than its quality (and perhaps even proprietary competition). When the Free Software Foundation complains that software patents or proprietary firms somehow stifle innovation, perhaps the cause is actually the Foundation's obstinent delusions of grandeur (errr the GPL).

The Comino-Manenti theory is certainly interesting, and in many ways intuitive. However, it presents challenges for open source firms. In some regards, current open source development and business stand antithetical to dual licensing. When too many inputs come from outside the firm, an organization can face deterring costs in clearing intellectual property rights to their own products. Further, many volunteer open source programmers, whose code an open source firm adopts, may not be amenable to business concerns the lead to dual licensing. It is also likely the extreme-end of the open source community, the Free Software Foundation, would seek community enforcement against the proliferation of dual licensing by open source firms.

To make dual licensing a viable strategy from an organizational standpoint, open source firms may need to review development and licensing practices to ensure they control the intellectual property in their product or can negotiate with the owner. Thus, one immediate item is for open source firms to say NO to outside GPL contributions. The second important item is to keep a tight funnel on outside contribution (the less code from the community, the less copyright clearances necessary). Integrated open source firms that primarily develop in-house face fewer organizational challenges in dual licensing, as would firms that leverage licenses whereby community modifications are granted back with little restrictions.

Dual licensing is one means by which to increase growth and revenue for open source businesses. Dual licensing can also bridge the technological community, and result in more collaborative partnerships between open source proprietary firms. A landscape of innovation, with both open source and proprietary software is certainly a vast improvement over the Free Software Foundation’s vision that a single license, the GPL, will coordinate all transactions in the industry and displace direct contracting by entities working under competitive pressures. The technology sectors require too much flexibility and diversity in private contracting that the Free Software Foundation's vision would impose the utmost rigidity on commercial transactions, and effectively stifle innovation in the name of a myopic jihad.

posted by Noel Le @ 6:00 AM | Academia, Free Culture Movement

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