26 October 2017

Does open source software eliminate the need for the deposit of source codes?

Open source software can contain proprietary modules
Many open source licenses provide for strict copyleft rules. This means that all versions of the software are subject to the same license as the original license, and combinations with proprietary software modules are not possible under normal license conditions. In the case of open source licenses with strict copyleft rules, the conclusion of a deposit agreement with an independent escrow agent is actually unnecessary as the customer can request the source code from the provider at any time. If open source licenses only have weak copyleft rules, there will continue to be a need for the source code to be deposited for the proprietary software modules.

Open source does not necessarily mean the source code is always available
The basic idea of open source software is to distribute software in a form humans can read and comprehend, usually in a common high-level programming language. With open source software, full access to the source code is promised by definition, but not yet delivered. Most open source licenses allow open source software, like proprietary software, to be distributed only in compiled, machine-readable form, provided that it is clearly communicated how, on re-quest, a copy of the source code can be purchased at cost price. If the source code is neither provided directly as part of the product nor freely accessible on the internet, that can mean that, apart from the provider, no one, or only very few people, have access to the latest version of the source code. This can be the case particularly if the software is frequently updated or extended.

Effects of the opening of bankruptcy proceedings
All intellectual property rights of a software provider in bankruptcy are part of its bankruptcy estate. This applies to registered intellectual property rights such as patents, designs, or trademarks, but also to non-registered intellectual property rights such as copyrights. According to Art. 2 para. 3 of the Federal Act on Copyright and Related Rights (CopA), computer programs are also deemed as works and enjoy copyright protection. This applies irrespective of whether the computer program has been marketed as proprietary software, as open source software, or not at all. The rights to the open source software developed by a bankrupt software provider therefore form part of its bankruptcy estate.

If an open source provider goes into bankruptcy, Art. 211 para. 1 of the Debt Enforcement and Bankruptcy Act (DEBA) applies: All non-monetary receivables will be converted into monetary reveivables. Everyone has the right to demand the provision of the current source code based on the open source license, and that claim is not considered a monetary claim. The same applies to all other provisions of the open source license which concern the software provider. These are converted into monetary claims pursuant to Art. 211 para. 1 of the DEBA. Accordingly, the provisions of the open source license can no longer be enforced after the opening of bankruptcy proceedings. A customer of the open source provider can thus claim his financial damage in the form of a claim arising from bankruptcy. By contrast, he is not in a position to force the bankruptcy administration to produce the source code.

Even with open source, prevention is better than cure
According to Art. 211 para. 1 DEBA, after the opening of bankruptcy proceedings against an open source provider, the bankruptcy administration is not obliged to fulfil the obligation to produce the source code under the open source license. Therefore, the customer should provide for this potential scenario. Just like with proprietary software deposited with an escrow agent, it is important to regularly check that the customer has the complete, properly documented, and up-to-date source code. If necessary, the customer must actively request this from the open source provider. The involvement of a third party, i.e., an escrow agent, is not necessary because the customer has the right to receive the source code directly due to the open source license.

Our insolvency team and information and communication technology team are at your disposal to answer any questions you might have on this topic.

Author: Christian Wyss

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