Review of Common FOSS Organizational Issues

This chapter gives an overview of ways that a FOSS organization can limit their individual liability, primarily through various means of incorporation. It serves as a guide to the various options available and clairifies some general (but not case specific) requirements to maintain a nonprofit status.

Who:,

• Richard Fontana (lawyer, worked on GPLv3, LGPLv3, AGPL, director of OSI),

• Bradley M. Kuhn (free software activist, president of Software Freedom Conservancy, previously worked for the SFLC and FSF),

• Eben Moglen (law and legal history professor at Columbia University and director-counsel and chairman of the SFLC),

• Matthew Norwood (IP lawyer, previously was counsel at the SFLC),

• Daniel B. Ravicher (lawyer and law professor),

• Karen Sandler (executive director of the SFC, former director of the GNOME Foundation, former general counsel at the SFLC),

• James Vasile (director of Open Internet Tools Project),

• Aaron Williamson (IP lawyer for Tor Ekeland).

What: Chapter 5 of the book A Legal Issues Primer for Open Source and Free Software Projects put out by the Software Freedom Law Center (SFLC).

Where: available for free on RIT’s Business and Legal issues in FOSS course website

When: Latest edition (1.5.2) published June 2008

The Good

• The Software Freedom Conservancy is an awesome organization, I love that they don’t charge their member projects anything to join and don’t restrict projects to any one FOSS license or require reassigning copyright.

• The IRS has regularly organizations created for the promotion of free and open source software projects as having charitable purposes.

  Which means that not only do 501c3 FOSS projects get tax exemption at the federal and state level, but people can make deductions off of their own taxes for any donations made to one of these organizations.

• Some Formation Documents mentioned in the text:

  • A certificate of incorporation, a standard document describing how the incorportation will be formed, most FOSS organizations will organize as a non-stock nonprofit corporation, meaning no one will ‘own’ the organization.

  • A set of by-laws, which describe facts about the organization like membership, board of directors, officers, and what all their roles will entail.

  • An Employer Identification Number, or EIN, from the IRS, which is required in order to have employees and open a bank account, sort of like a SSN for corporate entities.

The Bad

• New York treats out of state corporations as if they were incorporated in a foreign country! And along with it comes all the added requirements, fees, and administrative hoops to jump through.

• Apparently IRC may not qualify as a board meeting in a lot of states (legally ambiguous at least). Once again the law is struggling to keep pace with technology.

• All of the work and cost required for an organization or developer to limit their liability puts larger corporations in a much safer position just because they can afford these things as part of their operational costs.

Questions

• What protections does incorporation give compared to say the final liability clause in the BSD or MIT licenses?

• With all this incorporation information being so US, and even further, state specific, how does one deal with the inherently global nature of open source projects? I’m thinking in particular of projects like Ruby and Rails which have major contributors on every continent minus Africa.

Final Thoughts

Covers the material as thoroughly as can be expected for a topic that varies so much from state to state. Personally I think that this chapter really drove home the importance of umbrella organizations to handle all the hassles of incorporation for these FOSS projects. Personally I don’t forsee any of my projects getting to that stage anytime soon, but its nice to have an overview anyways.

7/10