By: Anthony Lloyd, Alex Horder & Edmond Lau (Technology’s Legal Edge – DLA Piper)
From the browser on a smartphone, to word processing software, to an entire operating system, Open Source Software (Open Source) is so ubiquitous that you’re likely using it without even realising. So, what is it and why do we care about it in the context of an M&A transaction?
As opposed to proprietary or ‘closed source’ software, where the source code and usage rights are privately owned and controlled, Open Source is a form of publicly-accessible software source code that is subject to ‘open source’ licence conditions, generally allowing the licensee to use, view, modify, and redistribute the Open Source’s source code, at no cost. Open Source’s ease of access, flexibility and constant updates have made it extremely popular in software development, as it can be used to fast-track development of software and expand the functionality and capability of software quickly and inexpensively.
However, as a quid pro quo, Open Source licenses also require any development work done on that Open Source to be made available on an open source basis, and that requirement can also extend to and ‘infect’ other proprietary, previously ‘closed source’, software.
In the context of an M&A transaction where a key asset the subject of that transaction is the seller’s proprietary software, Open Source’s ubiquity means that Open Source will likely form part of that software. Organisations looking to undertake such transactions, on both the ‘buy’ and ‘sell’ side, should therefore be careful to understand the extent to which Open Source is being used in key software assets, as well as the risks and issues that generally arise due to its use…