Open Source and Closed Source

Software licenses dictate the terms under which software can be used, modified, and distributed. Choosing the right license is a critical decision that can impact your project’s adoption, legal obligations, and business model. In this comprehensive guide, we’ll explain the different types of software licenses—both open source and closed source. We’ll cover major open source licenses like MIT, Apache 2.0, GPL (v2 and v3), LGPL, BSD (2-clause and 3-clause), MPL, AGPL, and even touch on Creative Commons for creative works. We’ll also discuss closed-source licenses (proprietary EULAs, SaaS terms) and dual licensing models. Finally, we’ll help you understand how to choose the right license based on your goals, whether it’s maximizing adoption, protecting intellectual property, enabling community contributions, or avoiding legal risks.

Open Source Licenses

Open source licenses are those that comply with the Open Source Definition – they allow software to be freely used, modified, and shared. Open source doesn’t mean “no license” or public domain; it means the software is licensed with certain conditions that preserve user freedoms. Open source licenses generally fall into two categories:

Permissive licenses: These impose minimal restrictions. You can use the code in almost any way (including in proprietary projects) as long as you fulfill basic conditions like attribution.
Copyleft licenses: These share-alike licenses require that if you redistribute the software (especially in modified form), you must release your derivative work under the same license. In other words, you can “borrow my code, but if you share your version, it must remain open source too.” Copyleft licenses range from strong (GPL, AGPL) to weak (LGPL, MPL) in how far this requirement extends.

Let’s break down the major open source licenses one by one, explaining their terms in simple terms, their legal/commercial implications, and use-case suitability.

MIT License (MIT)

Type: Permissive open source license (very minimal restrictions).

Summary of Terms: The MIT License basically says, “Do whatever you want with this software, just include my copyright and license notice in any copy or distribution.” It grants broad rights to use, copy, modify, merge, publish, distribute, and sublicense the software, even as part of a proprietary (closed-source) product. The only condition is preserving the original copyright notice and license text in copies or substantial portions of the software. It also includes a clause that the software is provided “as is” without warranty, protecting the author from liability.

Implications: MIT is one of the most popular and permissive licenses. It allows commercial use and proprietary relicensing, so long as attribution is given. There’s no requirement to open-source your own code even if you use or modify MIT-licensed components. This makes it business-friendly – companies can integrate MIT code without fear of being forced to reveal their source. However, as the author, using MIT means you’re not retaining much control: others could even sell your code or incorporate it into closed software without contributing back (they just can’t remove your copyright notice).

Use Case & Examples: The MIT license is ideal if you want maximum adoption of your code/library and are not concerned about controlling how it’s used. It’s common for frontend frameworks, libraries, and tools (e.g. React, Ruby on Rails, jQuery, and many others) to use MIT. For a startup releasing a developer library or tool to build ecosystem and usage, MIT is often a safe choice. Developers know that MIT-licensed code can be integrated anywhere with minimal fuss. For instance, the Jenkins automation server’s code is MIT-licensed, meaning anyone can use Jenkins or embed its code in other systems as long as they keep the MIT license notice. If your goal is to make your project as easy as possible to use or embed (even in closed-source products), MIT provides that freedom.

BSD Licenses (2-Clause and 3-Clause BSD)

Type: Permissive open source licenses (similar spirit to MIT).

Summary of Terms: BSD licenses come from the Berkeley Software Distribution. The two common variants are:

BSD 2-Clause (FreeBSD license) – This has two main clauses: (1) you must preserve the copyright notice in source code or binary redistributions, and (2) a disclaimer of warranty/liability. This is effectively as permissive as MIT (you can use/modify/redistribute freely, including in proprietary software, just keep the notice and don’t sue the author for damages).
BSD 3-Clause – This is the “New BSD License” or “Modified BSD License.” It has the same two clauses as above plus a third clause: “No endorsement”, meaning you cannot use the name of the original project or contributors to advertise or promote your derivative without permission. This prevents confusion or implied endorsement. (Older BSD had a 4th clause requiring acknowledging the software in ads, but that was removed due to being too burdensome.)

Implications: Both BSD variants are very permissive. Like MIT, they allow proprietary use of the code with virtually no obligations beyond attribution. The 3-clause BSD’s extra condition is minor (it just keeps people from using your name to promote their product). There is no copyleft effect – you are not required to open source any modifications or combined work. Also, BSD licenses (like MIT) do not explicitly mention patents, although by using the code some implicit patent license may be inferred, it’s not as explicit as Apache’s clause. In practice, MIT and BSD are functionally very similar for most users.

Use Case & Examples: BSD licenses are often used in system libraries and academic or corporate releases where maximum reuse is desired. For instance, parts of BSD Unix operating systems are under BSD license (hence Microsoft could use TCP/IP stack code from BSD in Windows long ago). Many C libraries or components use BSD. If you’re releasing code and want it to be as usable as possible with minimal strings attached (like MIT) but perhaps prefer the wording or the no-endorsement clause of BSD, it’s a fine choice. A startup might choose BSD for an open-source component if they’re comfortable with others possibly commercializing the code. Practically, there’s little difference from MIT – in fact, MIT is sometimes described as a simplified BSD license. Both are GPL-compatible (they can be included in GPL projects without conflict).

Apache License 2.0

Type: Permissive open source license, but with some additional protections compared to MIT/BSD.

Summary of Terms: The Apache License 2.0 also allows you to use, modify, and distribute the software freely, including for commercial purposes. Like MIT, it does not require derivative works to be open source (no copyleft on combined works). However, it has extra conditions:

You must include a copy of the Apache 2.0 license in any redistribution (source or binary) and give recipients a notice of any modifications you made (e.g. in the file headers or a NOTICE file).
It provides an explicit patent license from contributors to users. That is, contributors grant a royalty-free patent license for any patents they own that read on their contributions. If a user of the software files a patent lawsuit against the project for patent infringement, they lose the patent rights granted by the license. This clause protects both contributors and users from patent litigation related to the code.
It has a provision that you cannot use the names of the project or contributors to promote your derivative products without permission (similar to the BSD “no endorsement” clause).

Implications: Apache 2.0 is also very permissive for commercial use – you can include Apache-licensed code in proprietary software. The major advantages over MIT are the explicit patent grant and the requirement to document your changes. The patent clause is important in industries with patent concerns: it assures users that they have rights to any patented technology in the code, and deters patent trolls. Many companies prefer Apache 2.0 for this reason. The requirement to state changes and include a NOTICE file ensures credit and transparency for significant use of the code.

Use Case & Examples: Use Apache 2.0 if you want permissive use but also want to safeguard against patent risks or ensure attribution. The license is famously used by the Apache Software Foundation for projects like Apache HTTP Server, Hadoop, Kafka, etc., and by many other big projects (for example, Android kernel parts, Kubernetes, and numerous Google open source projects are under Apache 2.0). If you’re open-sourcing a project and anticipate corporate adoption or contributions, Apache 2.0’s protections can encourage companies to participate (they get patent safety). From a startup perspective, if you have technology in a space with potential patent minefields (say, codecs, algorithms), Apache 2.0 offers your users clarity that you’re granting necessary patent rights. It’s a bit more effort for users to comply (they need to keep LICENSE/NOTICE files intact), but that’s a small trade-off for the added legal robustness.

GNU General Public License (GPL v2 & v3)

Type: Copyleft open source license (strong copyleft). GPL comes in version 2 and version 3, which have some differences, but both enforce that the software (and any derivative works) remain under the GPL if distributed.

Philosophy: The GPL was created to ensure software freedom is preserved. The idea is “You can use and modify my code freely, but if you distribute changes or something that incorporates my code, you must also share your source code under the same GPL license.” This prevents someone from taking GPL code and making a proprietary product out of it; any improvements must be open as well.

GPLv2 (1991): Under GPL version 2, if you distribute a binary or modified version of GPL’d code, you must provide the source code to recipients under GPL as well. You also can’t impose additional restrictions beyond the GPL terms. However, GPLv2 didn’t address certain issues like patent guarantees or using GPL software over a network (see AGPL for that) or “tivoization” (where a device uses GPL software but locks it down so users can’t run modified versions).

GPLv3 (2007): GPLv3 builds on v2 and addresses those gaps. Key updates in GPLv3:

It explicitly includes a patent license from contributors to users (similar to Apache’s idea) to protect against patent litigation.
It has anti-“tivoization” provisions: if a device is distributed with GPLv3 software, you cannot lock it with hardware keys to prevent modified versions from running. In other words, users must be able to run modified GPL software on devices they own.
It is more compatible with other licenses and allows certain additional permissions or exceptions. It also explicitly forbids using GPLv3-covered code in DRM (digital rights management) systems to prevent blocking user modifications.
GPLv3 is not automatically compatible with GPLv2 unless the GPLv2 code had an “or later version” clause. (So some projects stuck on v2 cannot mix with v3 code without re-licensing.)

Implications: Using GPL code in your project has a big implication: if you distribute your software (e.g., sell it or even give to users) and it includes or is derived from GPL code, you must release your whole combined source under GPL as well. This is why GPL is sometimes called “viral” (though enthusiasts prefer “protective”) – it “infects” the larger work with copyleft. For example, if you statically link a GPLv2 library into your application, your application would need to be GPL too when distributed. This ensures the community gets improvements back, but it deters companies from mixing GPL code into proprietary products (since that would force them to open source their product, which they may not want).

It’s important to note GPL does allow commercial use – you can sell GPL software or services around it. But you can’t turn it closed-source. Anyone who receives the binary can request the source. Also, anyone can redistribute your GPL software (either free or for a fee) as long as they maintain the license.

GPLv2 vs GPLv3 Adoption: Many older projects (Linux kernel, MySQL, etc.) use GPLv2. The Linux kernel famously stayed GPLv2-only, whereas many GNU Project tools (GCC, Bash, etc.) moved to GPLv3. For most end-users, both v2 and v3 enforce the share-alike requirement; the differences matter more to manufacturers (v3’s anti-lockdown stance) and in patent-heavy industries (v3’s patent clause).

Use Case & Examples: Choose GPL if you want to ensure that all modifications and extensions of your code remain open source. This is common for end-user applications or frameworks where open collaboration is the goal and you don’t want proprietary forks. For instance, WordPress is GPL-licensed, which forces plugins or derivatives to also be GPL (WordPress’s developers chose GPL to align with the philosophy of sharing). Linux is GPLv2, ensuring that any modified kernel distributed (e.g., by an Android phone maker) must have source released. If you’re a startup building software that you want to give to users but also want to prevent a competitor from taking it private, GPL is a powerful tool. Keep in mind, though, that GPL licensing can reduce adoption by companies — e.g., a library under GPL will likely not be used in a closed-source app. So GPL is suitable if your priority is maintaining open-source purity and user freedom over maximum corporate adoption.

Caution: If you use GPL code within your project, you must adhere to its terms. For example, if you incorporate a GPL component into your software and plan to distribute it to customers, you’ll need to open source your whole software under GPL. This is a legal obligation, not just a preference. Many companies carefully avoid GPL components in proprietary products to avoid this contagion. However, using GPL code internally (without distribution) is fine – the license obligations trigger upon distribution. (Services have a loophole here, which AGPL addresses next.)

GNU Lesser General Public License (LGPL)

Type: Weak Copyleft open source license, primarily for libraries. The “Lesser” GPL is more permissive than GPL in that it allows linking to the library in non-GPL software under certain conditions.

Summary of Terms: LGPL is like GPL with an exception: if an application links to an LGPL-licensed library, the application itself does not have to be GPL. It can remain proprietary or under any license. However, if you modify the LGPL-covered library itself, you must release those modifications under LGPL. Also, you must allow the end user to relink your application with a modified version of the LGPL library (to preserve the freedom to improve the library). In practice, this usually means you should use dynamic linking or provide object files for relinking if you static link.

0In simpler terms: using an LGPL library does not infect your whole program, as long as the library remains a separate component that can be updated independently. The freedom is focused on the library – any changes to the library must be shared, but your own code can remain closed. LGPL v3 is framed as GPLv3 plus additional permissions for linking.

Implications: LGPL is great for allowing broad use of a library without forcing everything it touches to be open. Many companies are comfortable using LGPL libraries in their products, whereas they would avoid a GPL library. The trade-off for the library author is that a company could improve or fix the library and not necessarily share it — except if they modify the library itself, in which case they must contribute back those changes under LGPL. If they only use it as-is, they don’t need to reveal their own source. LGPL is often seen as a compromise between GPL and permissive: it guarantees the core library stays free and improvable by the community, but doesn’t scare away proprietary software developers from using it.

Use Case & Examples: LGPL is commonly used for software libraries and frameworks. For example, GLibc (the GNU C Library) is LGPL – which is crucial, because it allows proprietary software on Linux to use the C runtime without being forced open source. Many Linux libraries (GTK, etc.) are LGPL for the same reason. Qt (a GUI framework) was historically available under LGPL, allowing closed-source applications to use it, which greatly expanded its adoption in commercial software. If you’re a developer of a library and you want others (including companies) to use it freely but you’d like to ensure any improvements to the library itself come back to the community, LGPL is a suitable choice. Startups building an SDK or library might choose LGPL to get widespread usage but still prevent someone from taking the library, tweaking it, and releasing a proprietary improved version without contributing changes back.

One caveat: compliance with LGPL when static linking can be a bit complex (providing relink mechanism), so some avoid LGPL in favor of even simpler MIT/Apache. Still, it strikes a balance. Think of LGPL as saying: “You can use my engine in your car, even a commercial car, but if you improve the engine, you must share those improvements. Your car’s design can remain proprietary.”

Mozilla Public License (MPL 2.0)

Type: Weak Copyleft open source license (file-level copyleft).

Summary of Terms: The MPL (version 2.0) was created by Mozilla for their projects (like Firefox). It has a copyleft mechanism that is file-based: any file in the codebase that is MPL-licensed and that you modify or extend, must be released under MPL when you distribute your software. However, you can combine MPL files with your own proprietary files in a larger project. In that case, you only need to open source the MPL-licensed parts (and any of your modifications to them), not your entire codebase. The copyleft does not cross file boundaries. This means MPL is more permissive than GPL: it’s compatible with being included in proprietary projects, as long as the MPL-licensed components remain open and separable.

The MPL also includes a patent grant similar to other modern licenses and allows MPL code to be used in combined works with other licenses (MPL 2.0 is GPL-compatible, and MPL code can be dual-licensed under GPL in certain scenarios if needed).

Implications: MPL is often described as a middle-ground license. It ensures improvements to the specific open-source code are shared, but doesn’t force the entire program open. For example, if you use an MPL-licensed library or code file in your application, you can keep the rest of your application closed-source. But if you modify that MPL-covered file, you must publish your modified version of that file under MPL. This provides a level of protection for the open source component itself, while remaining palatable to commercial use (since companies can compartmentalize the open source part).

Use Case & Examples: Mozilla’s own products are an example: Firefox and Thunderbird are MPL-licensed. If someone takes Firefox’s code (MPL) and builds their own browser, they must share changes to any MPL files (ensuring improvements to Firefox’s code are public). But they could add their own new files (say a proprietary UI module) and keep those private, as long as they don’t incorporate Firefox’s code into those files. Other projects that want a lenient copyleft sometimes pick MPL. For instance, LibreOffice uses MPL (combined with LGPL/GPL tri-license for flexibility), and some corporate-backed open projects choose MPL so that they can integrate with proprietary systems. If you are a startup that wants to open source a core component to foster community improvements but still want the option to build proprietary add-ons or combine with proprietary services, MPL is attractive. It’s also easier for others to adopt than GPL because it won’t “infect” their whole project.

GNU Affero General Public License (AGPL)

Type: Strong Copyleft (Network Edition) open source license.

Summary of Terms: AGPL is a version of GPL specifically designed to close the “cloud service loophole.” Under regular GPL, if you run modified GPL software on a server and let users interact with it over a network (but you don’t distribute the software to them), you have no obligation to provide source – GPL’s requirements are triggered by distribution of the software itself. This meant companies could take GPL code, run a web service with it, and never release their changes because they never technically distributed the software. AGPL fixes that: it adds a clause that network use is treated like distribution. If you modify an AGPL-licensed program and provide it as a service to users over a network, you must offer those users access to the source code of your modified version. Essentially, users interacting with an AGPL web application have the right to get the source, just as if the software was installed on their machine.

If you simply use an unmodified AGPL program on a server, you can just provide the original source (since no modifications). But any changes, you must publish for your service’s users.

Implications: AGPL is the most restrictive/popular copyleft license for web-based software. It ensures that SaaS providers can’t hide improvements. This is very appealing for authors who fear that a big company might take their open-source web app or database, improve it internally, and offer it as a paid service without contributing back (a common concern with cloud providers). With AGPL, if, say, a company like Google or Amazon used your AGPL code in their service and tweaked it, they’d be obliged to release those tweaks. In fact, some companies have policies to avoid AGPL software entirely because they don’t want that obligation (e.g., Google has treated AGPL as disallowed internally).

For users of AGPL software: if you are just hosting it internally (not allowing outside users), then it’s similar to GPL (no distribution = no obligation). But the moment it’s publicly accessible, the copyleft triggers.

Use Case & Examples: AGPL is common for open source web applications, servers, and databases where the author wants to ensure open source ethos even in cloud deployments. For example, Nextcloud (a web-based file sharing platform) is AGPL to ensure any hosted versions remain open. Some database projects adopted AGPL (older versions of MongoDB were AGPL before they moved to a stricter license) to prevent cloud providers from offering them as a service without contributing. Another example is Rocket.Chat, an open source chat server under AGPL, meaning if you modify and host it, you should release your mods. If you are an open source developer concerned that your software (especially one that could be offered “as a service”) might be taken by others who then never share improvements, AGPL is a strong deterrent to that. From a startup perspective, releasing under AGPL can protect your project from being “cloudified” by a competitor without collaboration. However, it will also dissuade some potential corporate users or contributors (as they might fear accidentally triggering the copyleft). It’s a trade-off favoring community reciprocity over ease of commercial adoption.

Creative Commons Licenses (for Non-Code Assets)

Not exactly “software” licenses, the Creative Commons (CC) licenses are widely used for content: documentation, articles, images, music, etc. It’s worth mentioning them because software projects often have documentation, websites, or other content that might use CC licenses. (Generally, Creative Commons licenses are not recommended for source code, except CC0, because they weren’t designed for software and lack some provisions like patent rights.)

The main Creative Commons licenses are:

CC BY (Attribution): This allows others to use, share, and modify your work freely, even commercially, as long as they give credit to you for the original. It’s a very permissive content license, essentially the content equivalent of MIT (with the added explicit requirement of attribution).
CC BY-SA (Attribution ShareAlike): This is a copyleft license for content. Others can use and modify the work (including commercially) but if they distribute derivative works, they must license them under the same CC BY-SA terms. This is analogous to GPL but for creative works (used by Wikipedia, for example).
CC BY-NC (Attribution, NonCommercial): Others can use and modify the work but not for commercial purposes. (Note: “NonCommercial” makes it not an open license in the free software/open source sense, because it restricts a field of use—commercial use.)
CC BY-ND (Attribution, NoDerivatives): Others can use the work (even commercially) but cannot distribute modified versions. They must keep it as-is. (This also is not considered “open” because it forbids creating derivative works.)
These can combine (e.g., CC BY-NC-SA: non-commercial + share alike, or CC BY-NC-ND: the most restrictive, non-commercial and no mods).

Additionally, CC0 (CC Zero) is a public domain dedication tool: the creator waives all rights and allows anyone to use the work for any purpose with no conditions (essentially equivalent to putting it in the public domain).

Implications: For documentation or media, using a CC license can clarify how others can use your content. For instance, a startup might release its API documentation or a developer guide under CC BY, allowing others to copy or redistribute it with attribution. If you want any improvements on your documentation to also be shared, you might choose CC BY-SA. If you want to provide some whitepaper but don’t want others selling it, you might choose CC BY-NC (though that limits outreach). Importantly, Creative Commons NC and ND variants are not open source/free software licenses by the usual definition, because they impose use restrictions. They are fine for content if that’s your intent, but you wouldn’t use those for code. Code is almost always better under one of the dedicated software licenses we’ve discussed.

Use Case & Examples: Use CC BY or CC0 for things like blog posts, documentation, or design assets if you want maximum reuse. For example, many technical blogs use CC BY licenses so that others can republish articles with credit. CC BY-SA is used by Wikipedia and Stack Overflow content, ensuring that derivative works of that content remain freely licensed. If your project includes images or music (say, game assets) that you want to share but not allow commercial exploitation, CC BY-NC might be chosen – though be aware, it then wouldn’t be considered “open” in the strict sense. In short, CC licenses are a toolbox for creative works. For code, stick to the software licenses (MIT, Apache, etc.), but for your non-code assets, CC licenses are appropriate.

Now that we’ve surveyed open source licenses, let’s switch to closed source licensing and other models.

Closed Source Licenses and Models

“Closed source” (proprietary) software licenses are those that do not grant the public rights to inspect, modify, or freely redistribute the source code. With closed licenses, the vendor typically retains all rights and gives the end-user a limited permission to use the software under certain conditions. Here are prominent forms of closed source licensing:

End User License Agreement (EULA)

When you install commercial software (like Microsoft Windows, Adobe Photoshop, or a video game), you’re typically required to accept an End User License Agreement. A EULA is a contract between the software provider and you, the user, detailing what you can and cannot do with the software.

Typical Terms in a EULA:

Grant of License: The EULA grants you a right to use the software, often a non-transferable, non-exclusive license. For example, you might be allowed to install the software on one device for personal use. You do not own the software; you only have permission to use it as allowed.
Restrictions: EULAs usually forbid activities like reverse engineering, decompiling, or disassembling the software’s code. They also prohibit redistributing copies to others, using the software to create derivative works, or using it in unlawful ways. Essentially, you cannot peek under the hood or repurpose the software beyond its intended use.
Intellectual Property: It clarifies that the software’s copyright (and any patents/trademarks) remain with the vendor. Sometimes, there’s a clause that if you provide feedback or plugins, the vendor might own those or have rights to them.
Warranty Disclaimer and Liability Limitations: Almost always, EULAs include an “AS IS” warranty disclaimer – the software is provided without guarantee that it will work perfectly. Also, they limit the vendor’s liability – if the software crashes or causes loss, the company typically isn’t liable beyond maybe a refund. (Many EULAs explicitly state they are not responsible for any damages arising from use).
Termination: If you violate the license terms, your license can be terminated. You’d then have to stop using and possibly uninstall the software.
Updates/DRM: Some EULAs cover how updates are provided, or that the license may be tied to a hardware ID. Some include clauses allowing the software to enforce license restrictions (like checking a license key or using DRM).
Governing Law: They specify which country’s laws apply if there’s a dispute.

In short, a EULA defines very narrow usage rights. For example, a typical clause might say: “You are granted a limited license to install and run one copy of the software on a single computer for personal, non-commercial use. You may not rent, lease, or sell the software. Reverse engineering or modifying the software is strictly prohibited.” It’s a one-sided document favoring the vendor’s control.

Implications: As a user, you must comply or you risk copyright infringement. Often you can’t even see the source code under a EULA, so modifications are practically impossible. For businesses using third-party closed software, careful attention to licensing terms (like how many users or devices are allowed, or if it can be used for commercial purposes) is important to avoid breaching the contract.

Examples: EULAs are ubiquitous – from the checkbox “I Agree” when installing applications, to enterprise software license contracts. Video games often have clauses preventing cheating or commercial use. Some EULAs also have quirky clauses (there have been jokes like “you may not use this software for operating nuclear facilities”). While enforceability of every clause can vary by jurisdiction (overly restrictive or hidden terms might be challenged), generally if you agree to a EULA, it’s binding.

For a developer or startup selling proprietary software, the EULA is your tool to protect your IP. You’d craft it to prevent users from copying your software freely or reselling it, and to shield yourself from lawsuits. Many companies reuse standard EULA templates adjusting the specifics.

Software as a Service (SaaS) Terms of Service / Cloud Licenses

In the modern world, a lot of software isn’t shipped as binaries at all – it’s provided as an online service (SaaS). In these cases, the user typically doesn’t get a copy of the software; they just access it via web or API. Instead of a traditional software license, users agree to Terms of Service (ToS) or a subscription agreement.

Key aspects of SaaS terms:

Access Rights: The user is granted the right to use the service (usually via an account). This isn’t a license to software copy, but a license to use the platform functionality.
Usage Restrictions: ToS will outline acceptable use (e.g., no using the service for illegal activities, no trying to hack or overload the service). For example, a cloud platform’s terms might forbid using it to send spam or to attempt to reverse engineer the service.
Data and Privacy: Since SaaS involves user data on the provider’s servers, terms cover how data is handled, who owns user-uploaded data, confidentiality, etc. (Not so much a software license issue, but important.)
Fees and Subscription: If it’s a paid service, the terms will include payment obligations, what happens if you don’t pay, etc.
Availability and SLA: Sometimes includes promises (or more often disclaimers) about uptime. Many have clauses that the service is provided “as is” and can be modified or discontinued.
Termination: The provider can terminate or suspend your account for violations. Users can stop using the service, but often no code is handed over (since it’s not licensed to them in the first place).
Intellectual Property: Usually clarifies that the provider owns the software/platform IP, and the user isn’t getting any ownership of it. Users may get a limited license to some client software or to their own data outputs.
No Reverse Engineering: Even though you don’t have the code, terms often explicitly say you can’t attempt to derive the source or create competing services by cloning parts.

One notable difference: since the software isn’t distributed, open source licenses (like GPL) do not directly compel SaaS providers to reveal source (except AGPL as we discussed). This is why many companies choose SaaS – they can use open source components internally without having to open source their whole stack, because they never “distribute” the software. (This is exactly what AGPL attempts to counteract.)

From a user’s perspective, SaaS terms are usually non-negotiable click-through agreements. They might not think of it as a “license,” but legally it is a license to use the service. For example, when you use Google Docs, you agree to Google’s terms which allow you to use their software through a browser, but you have no right to obtain the Google Docs source code or to run it on your own servers.

Implications: SaaS agreements strongly favor the provider. They maintain full control over the software environment. Users benefit from not worrying about installation or maintenance, but they relinquish control over the software itself (and sometimes their data portability). For a startup offering a SaaS product, these terms are crucial to limit liability (cloud outages, data breaches, etc.), and to protect your proprietary technology.

Dual Licensing Model

Dual licensing is a business model where software is offered under two different licenses – typically one open source and one proprietary. The idea is to leverage the best of both worlds: community collaboration via open source, and commercial revenue via proprietary licensing.

How it works: The software owner (usually a company or individual owning all the code IP) releases the software under an open source license (often a strong copyleft like GPL) and simultaneously offers a separate proprietary license to customers who want to use the software in ways the open license would not allow. In practice, it often means: “Our software is free under GPL for open source use. But if you want to use it in a closed-source project or don’t want to comply with GPL terms, you can purchase a commercial license from us.”

Implications and Benefits:

The GPL (or other open license) encourages community adoption and contributions. It builds an ecosystem and reputation.
The copyleft nature of GPL ensures that commercial entities can’t just take the code private without consequence – they either play by GPL rules or come to you for a commercial license. This creates a monetization channel. Companies unwilling to open source their own derivative work will pay for a proprietary license to use your code in their closed product.
For the company, it’s a way to “have your cake and eat it too.” You gain open source community goodwill and improvements, but also reserve a way to make money from those who require proprietary terms.

Requirements: Dual licensing only works if you have the rights to all the code (or all contributors sign off). Many dual-licensed projects require contributor license agreements (CLAs) so that the company can relicense contributions commercially. If a project gets lots of external contributors who don’t sign CLAs, the company might not legally be able to offer the whole project under a different license. So dual-licensed projects often keep tight control (e.g., requiring contributors assign copyright or agree their code can be dual-licensed).

Examples:

MySQL (before it was bought by Oracle) was a classic example: it was GPL-licensed for the community, but they sold commercial licenses to companies who wanted to embed MySQL in proprietary products without the copyleft requirement.
Qt (the GUI framework): Qt was available under GPL/LGPL for open source development, but a commercial license was sold to those who wanted to develop proprietary software without the LGPL obligations (especially back when it was GPL-only).
Ghostscript (PDF interpreter library) has long used a dual license: it releases under GPL for free, but sells licenses to those who want to incorporate it into closed software (like printers or PDF tools).
Many modern companies use a variant of this model, sometimes with modified licenses (e.g., MongoDB moved to a “Server Side Public License” which is not OSI-approved open source, but the idea is similar – forcing either contribution or requiring a paid license for commercial use).

Pros and Cons: For the company, dual licensing can be a win-win: you build community adoption (fame, wide user base) and also get revenue. However, it can also create tension. Some open source purists might be cautious contributing to a project knowing the company will turn around and sell their contributions under a proprietary license. There’s also the risk that a purely open competitor could fork your GPL code and undercut your model (though without your trademark or maybe with less support). Additionally, managing two licenses requires clarity so customers know what terms they’re under.

From a customer perspective, a company may choose to buy the proprietary license for peace of mind or additional benefits (sometimes the proprietary license comes with support or extra features, not just an exemption from GPL). For example, a small startup might use the GPL version of a product during development, but when they decide to embed it in their commercial SaaS, they purchase the commercial license to avoid any AGPL or GPL obligations.

Use Case: If you are developing an open source project but also need a way to monetize it, and your project is something companies might want to use internally or in products, dual licensing is an option. It works best if your project is fairly unique or high demand (so that companies can’t easily find an alternative and will be willing to pay). It’s been used successfully in databases, frameworks, and developer tools.

In summary, dual licensing leverages open source distribution and community while preserving a proprietary option for those who need one. As Black Duck summarized, it lets licensors gain “the economic benefits of commercial licensing while leveraging the community benefits of open source”.

How to Choose the Right License

Choosing a license for your own project (or understanding a license of a third-party component) comes down to your goals and how you envision the software being used. Here are some considerations to help guide the decision:

Do you want maximum adoption and integration, even at the cost of others not contributing back?
Choose a permissive license (MIT, BSD, Apache). Permissive licenses lower barriers for anyone (individuals or companies) to use your code in any context. This is great for libraries, frameworks, or tools where you want to become a standard. Example: A JavaScript library aiming for widespread use would typically go MIT or Apache so that it can be included in any website or product. The downside is someone could fork or improve it and not share with you, but the upside is you’ll get far more adoption. If you’re an early-stage startup open-sourcing a helper library or SDK to build credibility or ecosystem, permissive licenses encourage uptake.
Do you want to ensure improvements to your code must be shared and that your code can’t be relicensed closed by others?
Choose a strong copyleft (GPL or AGPL). This is ideal for applications or software where the value is in keeping it free and building a community around that freedom. If, for instance, you’re creating a new programming language or a developer tool and you want all enhancements to remain open, GPL ensures that (as long as the enhancements are distributed). AGPL goes further for network services; choose AGPL if your software is likely to be run as a service and you want to force service operators to contribute back their changes. Keep in mind this choice will limit commercial adoption — companies might shy away from using your code if they aren’t comfortable open-sourcing their combined work. This approach is often chosen for ethical or strategic reasons when the community aspect is paramount (e.g., GNU projects, activist software, or core infrastructure like compilers where you want a level playing field).
Do you want a balance: allowing commercial/proprietary use but ensuring your component itself stays open source?
Choose a weak copyleft (LGPL or MPL). These licenses let your code be used even in closed-source projects, but any modifications to your code must be released under the same terms. This is great for libraries: you won’t trap users in copyleft for their whole program, but you still require that they contribute improvements to the library. For example, if you develop a data processing engine and you want companies to use it internally (perhaps even embed in products) without fear, LGPL or MPL gives them that flexibility. If they enhance the engine, though, those enhancements remain open. This can attract corporate users more than GPL would, while still protecting your project’s evolution. Remember that LGPL specifically requires allowing relinking – so if ease of compliance is a concern, MPL (file-based) might be simpler for others to follow.
Are you concerned about patents or legal safety?
Consider Apache 2.0 or GPLv3. These licenses have explicit patent grants which can protect both you and users from patent litigation issues. If your project is in a field with potential patent minefields (audio/video codecs, encryption algorithms, etc.), using Apache 2.0 or GPLv3 signals that contributors automatically extend patent usage rights. This can give downstream users confidence that they won’t be sued by a contributor later for patent infringement on that code. On the flip side, if you as the developer hold patents and want to assert them, you might avoid these and go with MIT (which doesn’t explicitly license patents). But generally, for broad adoption in tech, a patent-friendly license is beneficial.
Is your project not code, but rather content, documentation, or media?
Use an appropriate Creative Commons license or similar. For documentation or a website, many projects choose CC BY (allowing reuse with credit) or CC BY-SA (to require sharing under same license). If you want your docs to be freely usable in commercial and open contexts with credit, CC BY is great. If you’re writing a tutorial and want to ensure no one publishes a modified version without also giving others the same rights, CC BY-SA would do that. Remember not to use NC or ND if you want the content to be “open” in an OSS sense (NC and ND restrict use and derivatives, which limits usefulness).
Is your software going to be offered as a service (SaaS) by you, and you want to avoid sharing source while still using open components?
If you are the service provider and are deciding on a license for your code: sometimes companies choose not to open source at all (keeping it proprietary) or use a source-available but not open license. But if you do open source a portion, consider who might use it. Some companies keep core code proprietary but open source ancillary tools to build community goodwill. If you open source a part of your SaaS, you might go permissive to maximize plugin contributions, etc. However, be mindful if you incorporate others’ open source into your service: avoid AGPL code if you don’t intend to share source, because AGPL would force you to open your modifications if users interact with it. Many SaaS companies stick to permissive or LGPL dependencies to avoid license compliance issues, precisely because GPL could obligate code release even if the software itself isn’t shipped.
Do you plan a dual licensing commercial strategy?
If so, a strong copyleft open source license (like GPL or AGPL) is typically used for the community version, to create the incentive for commercial users to pay for an alternative license. You would then offer a paid proprietary license for customers who want to use your software without the copyleft requirements. When choosing this path, be prepared to manage contributor agreements and be clear in governance. This model works when your software is valuable enough that businesses will pay rather than adopt an open competitor. It has worked for companies behind databases, developer libraries, etc., but requires a careful balancing act between open community and paying customers.
License Compatibility Considerations:
If your project includes or combines other open source components, ensure your license choice is compatible. For instance, if you want to integrate a GPLv3 library into your project, your project effectively needs to be GPLv3-compatible (so you might license your code as GPLv3 as well). If you prefer permissive but you rely on a GPL code, you have a problem – you can’t redistribute that combination under a purely permissive license. On the other hand, permissive components can generally be used within copyleft projects or other permissive projects without issue. Consider a table of compatibility or consult resources if you’re mixing licenses. As a rule: GPL and Apache 2.0 have a known incompatibility with GPLv2-only (Apache 2.0 code can’t go into a GPLv2 project unless that project is “GPLv2 or later”). LGPL code can be used in Apache or MIT projects as a dynamic library without infecting, but if you modify LGPL code, you’d have to release those changes. If you want your code to be used everywhere, MIT/BSD is most compatible. If you want to incorporate code from others easily, choosing a license that many libraries use can help (that’s why a lot of open projects just go MIT – it’s unlikely to conflict with anything).
Community and Philosophy:
Sometimes the choice is philosophical. If you strongly believe software should be free and fear misuse by companies, you might lean copyleft despite the potential cost in adoption. If you care more about getting credit than controlling usage, maybe Apache 2.0 or BSD 3-Clause (for the no-endorsement clause) appeals to you. If you want to join an existing community or ecosystem, use the license common in that community (for example, WordPress plugins are expected to be GPL to be compatible with WordPress’s GPL license; many Node.js libraries are MIT because that’s common in npm ecosystem). Aligning license with user expectations can smooth adoption.

In summary, ask yourself: “What is my primary goal?”

If it’s maximize usage (and you don’t mind what others do with it): go permissive (MIT/BSD/Apache).
If it’s maximize openness and ensure the code remains free forever: go strong copyleft (GPL/AGPL).
If it’s somewhere in between (foster collaboration but allow broader use): weak copyleft (LGPL/MPL) can be a good middle ground.
If it’s monetization while still being open: consider dual licensing or an open core model.

It often helps to look at similar projects or ask the community. There are also tools and wizards (like GitHub’s choosealicense.com or GNU’s license guide) that ask a few questions and suggest a license.

Finally, when in doubt, MIT License is a safe default for many projects because it’s short, well-understood, and unlikely to cause any trouble for users. But now that you understand the landscape, you can make a more targeted choice that fits your strategic needs.

Conclusion

Software licenses might seem dry or legalistic, but they have profound effects on collaboration, innovation, and business. An open source license can be the difference between your project becoming a world-wide standard or remaining a niche curiosity; a wrong license mix-up can even derail product releases or acquisitions due to legal risks. On the other hand, a well-chosen license can protect your intellectual property in the way you intend – whether that means keeping it truly free or enabling a commercial business model.

For developers and students, understanding licenses helps you be a good open source citizen and avoid pitfalls (like accidentally using copyleft code in a closed project). For startup founders, license savvy is key to leveraging open source safely and deciding when to open source your own code. Always remember: licenses are about trust and expectations. They set the ground rules for how others interact with your creation. Be clear on what you want, and choose a license that aligns with that goal.

Ultimately, there’s no one-size-fits-all answer. But armed with the knowledge of how MIT differs from GPL, or what an Apache license offers, you can make an informed decision. And if ever in doubt, consult the community or legal experts – the consequences of license choices are long-lasting. By thoughtfully choosing and complying with licenses, you contribute to a healthier software ecosystem where innovation and rights are balanced.

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