Building an Effective Open-Source Software Compliance Program for Growing Companies

Open-source software (OSS) is the backbone of modern technology, powering 96% of modern applications and accelerating development. For growing companies, it offers immense advantages—cost-efficiency, flexibility, and access to a global community of contributors. However, alongside these benefits comes a critical responsibility: ensuring compliance with OSS licenses. Failure to address this early can lead to legal risks, reputational damage, and operational disruptions.

Why OSS Compliance Matters

OSS licenses vary widely in their terms, ranging from permissive licenses like MIT and Apache to copyleft licenses like GPL. Each comes with specific obligations, such as attribution, sharing modifications, or maintaining transparency about the use of code. Non-compliance can result in license enforcement actions, including lawsuits or demands to release proprietary code under open terms.

For instance, in 2019, in Patrick McHardy v. Geniatech the German courts ruled against the former for violating the terms of the GPL license by not providing access to the source code of a modified version of OSS they distributed. The result? An expensive settlement and significant reputational damage.

Beyond legal concerns, a robust compliance program establishes trust with stakeholders—customers, investors, and partners. It signals that your company takes intellectual property (IP) and software quality seriously, which can be a competitive advantage in a crowded marketplace.

Key Components of an OSS Compliance Program

1. Awareness and Education: Start by building awareness of open-source software licensing among your team. Developers, legal advisors, and product managers should understand the basics of license requirements. For example, Google provides internal training for its developers on OSS compliance, ensuring they understand the nuances of licenses like GPL, LGPL, and Apache. Such initiatives reduce errors and foster a culture of compliance.
2. Clear Policy Development: Create an OSS policy that outlines your company’s stance on using, modifying, and distributing open-source software. For instance, a startup using React (MIT license) might define an internal rule that only OSS with permissive licenses like MIT or Apache 2.0 can be used without further approval.
3. Inventory and Tracking: Maintain a centralized inventory of all open-source software used in your projects, including their licenses and versions. Automated tools can simplify this task, scanning codebases to identify OSS components and flag potential license conflicts. In 2018, a major cloud services provider discovered a copyleft-licensed component during an audit before a product release. Thanks to their inventory tracking, they avoided distribution and replaced the code in time, saving both their IP and reputation.
4. Review and Approval Processes: Implement a workflow for approving OSS usage. Before adding a new library or framework, developers should submit a request detailing its license and intended use. For example, Adobe’s internal approval process for open-source software requires developers to justify the business need for a library and confirm its license terms are compatible with their product’s distribution model.
5. Contributions Back to OSS: Encouraging your team to contribute to open-source software can be beneficial, fostering goodwill and improving the tools your company relies on. Companies like Microsoft have adopted structured processes for open-source contributions. For example, their engineers must follow a contribution checklist to ensure that no proprietary IP is inadvertently shared.
6. Incident Management: Establish a plan for handling potential compliance issues. In 2021, a fintech company discovered post-release that one of their libraries incorrectly attributed an open-source software component. They swiftly updated the documentation and notified their customers, demonstrating accountability and avoiding further escalation.
7. Regular Updates and Evolution: The OSS landscape evolves rapidly, with new licenses, tools, and best practices emerging constantly. For instance, the rise of licenses like SSPL or Fair Source has prompted many companies to revise their compliance strategies.

Scaling Compliance with Growth

For small companies, OSS compliance might seem like an added burden. However, as your company grows, the complexity of your software projects will inevitably increase. By building a foundational compliance program early, you’re setting the stage for seamless scaling.

For example, when a mid-sized software company prepared for acquisition, their comprehensive open-source software inventory allowed the due diligence process to proceed smoothly, avoiding delays and strengthening their valuation.

Leveraging Tools and Expertise

Numerous tools can streamline OSS compliance, from SCA tools to legal management platforms. Investing in the right technology can save time and reduce the risk of human error. Additionally, consulting with experts—whether external legal advisors or OSS compliance auditors—can provide clarity and confidence as you navigate complex scenarios.

The Bigger Picture

An effective open-source software compliance program isn’t just about avoiding risks; it’s about creating opportunities. By demonstrating a commitment to ethical and responsible software practices, your company can build stronger relationships with partners and attract talent who value transparency and accountability.

Note: The preceding text is provided for informational purposes only and does not constitute legal nor business advice. The views expressed in the text are solely those of the writer and do not necessarily represent the views of any organization or entity.

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