Using Open Source Software in Commercial Products: Legal Considerations for Indian Startups
Open source software can reduce development time and allow startups to build on existing code, but “open source” does not mean that the software is free of legal conditions. FOSS remains subject to licence terms that determine how the code may be used, modified and redistributed. Startups incorporating open source components into commercial products should therefore understand those terms before the software becomes embedded in the product.
Modern software products are rarely built entirely from scratch. Developers frequently rely on existing libraries, frameworks and other software components to reduce development time and avoid recreating functionality that already exists. Free and open source software, commonly referred to as FOSS, plays an important role in this development model and can significantly reduce the resources required to build new products.
The legal issue is that open source software is still licensed software. Access to source code does not place that code in the public domain or allow a business to disregard the conditions attached to its use. A startup should therefore understand the licence governing each material open source component before incorporating it into a commercial product.
What Does Open Source Software Mean?
1. Open Source Gives Access to the Source Code
In a traditional closed-source model, users generally receive software in a form that allows them to run the program without accessing the underlying source code. Open source software takes a different approach by distributing software together with its source code under licences that permit activities such as examining, modifying and redistributing the code. This ability to build on existing software is one reason FOSS has become important to modern software development.
For startups, this can create significant development advantages. Existing software components can provide building blocks that would otherwise need to be developed internally, reducing duplication of technical work. SpicyIP has noted that this ability to reuse existing components can reduce research and development costs and support innovation, particularly for startups.
2. Open Source Does Not Mean Public Domain
One of the most important distinctions is between open source software and software that has entered the public domain. FOSS remains distributed under licences, and the user must comply with the conditions imposed by those licences. Public-domain software, by contrast, is not subject to the same licence obligations.
This distinction matters commercially because a startup may freely access the code while still being legally restricted in how it modifies or redistributes that code. The fact that the source code is publicly accessible therefore does not eliminate copyright or licensing considerations. “Free” in the context of free software primarily concerns freedom to use and modify the software rather than simply the absence of a price.
Why the Open Source Licence Matters
1. Copyright Still Applies to Software Code
Open source licensing operates against the background of copyright rather than replacing it. Software code can receive copyright protection as a literary work, which means that copying protected code ordinarily requires permission from the copyright owner. An open source licence provides that permission subject to the terms on which the author has made the software available.
The licence is therefore central to the developer's legal right to use the code. A startup should not treat open source code as ownerless simply because it can be downloaded from a public repository. The relevant question is what the licence permits and what conditions accompany those permissions.
2. Different Uses Can Engage Different Licence Conditions
Open source licences can permit users to study, reproduce, modify and redistribute software, but those permissions may be conditional. A startup using an open source component internally may therefore face a different practical situation from a company modifying and redistributing that component as part of a customer-facing product. The terms governing the particular software should be reviewed before assuming that every form of commercial use is unrestricted.
This becomes particularly important when software moves from experimentation into production. A developer may initially use a component while testing a product without considering how the final application will be distributed. Once that same code forms part of a commercial release, the licence position may become a business issue rather than merely a development issue.
Copyleft and GPL Licences
1. Copyleft Allows Use but Preserves Licence Freedoms
Copyleft is a licensing approach that permits reproduction, modification and distribution while requiring certain resulting works to continue to be distributed under the same or equivalent licence terms. The objective is to ensure that later recipients retain the freedoms provided with the original software. The GNU General Public License, or GPL, is a prominent example of this model discussed in SpicyIP's treatment of open source licensing.
This is different from placing software in the public domain. A copyleft licence continues to impose conditions even though it grants broad rights to use and modify the software. A startup that overlooks those conditions may misunderstand the rights it has received over the code.
2. Modified Software May Carry Continuing Obligations
Under the copyleft approach described by SpicyIP, a person distributing modified or derivative works can be required to distribute those works under the same or equivalent copyleft terms. This is designed to prevent someone from receiving software with broad freedoms and then removing those freedoms when distributing a modified version. The licence therefore affects not only access to the original software but potentially the manner in which modifications are later distributed.
For a commercial software company, this can be important where open source code becomes closely integrated with proprietary development. The startup should understand the relevant licence before deciding how the component will be modified and distributed. The practical consequences depend on the particular licence and the way the software is being used.
Key Risks for Startups Using Open Source Software
1. Developers May Use Components Without Recording Them
A startup can accumulate open source components quickly because developers can incorporate existing code during ordinary development. If there is no internal record, the company may later struggle to identify which components are present and which licences govern them. This becomes more difficult as the software grows and multiple developers contribute to the same product.
The problem is not necessarily the use of open source itself. FOSS is specifically designed to facilitate reuse and collaborative development. The risk arises when the business cannot identify the conditions governing software on which its commercial product depends.
2. “Free to Download” Can Be Mistaken for “Free of Conditions”
The availability of code without an upfront licence fee can create a misleading sense that no legal review is necessary. FOSS licences provide freedoms, but those freedoms operate under licence terms rather than through abandonment of copyright. A startup should therefore avoid equating zero acquisition cost with unrestricted legal use.
This distinction can become important when the software is modified or distributed to customers. A component that was simple to download may still carry conditions relevant to the company's intended commercial model. Reviewing the licence after the product has already been launched can leave the business with fewer practical options.
3. Code Reuse Can Create Hidden Dependencies
Open source development frequently involves software being built on top of existing components. SpicyIP notes that extensive code reuse can create dependencies that developers may not fully appreciate, particularly where underlying components themselves rely on other software. Changes or discontinued maintenance of foundational code can then affect software built on top of it.
For startups, this creates both technical and legal reasons to understand the software stack. The company should know which third-party components are important to its product and where they originated. A dependency that appears insignificant during early development can become critical once the product is deployed commercially.
A Practical Open Source Review Before Launch
1. Identify the Open Source Components
A startup should maintain a clear record of material third-party software incorporated into its product. The record should identify the component and the licence under which it was obtained. This makes it easier to determine which parts of the product are proprietary development and which depend on externally licensed code.
The exercise should not be postponed until fundraising or acquisition due diligence. Open source components can become deeply embedded in software architecture over time. Identifying them while the product is being built gives the business more flexibility if a licence raises concerns.
2. Read the Licence Before Modifying or Distributing the Code
The relevant licence should be reviewed before the company assumes that it can use the component in any manner it chooses. Particular attention should be given to what the licence says about copying, modification and redistribution. Where copyleft terms apply, the treatment of modified or derivative software may be particularly important.
This should form part of the development process rather than operate only as a legal review at the end. Developers deciding between technically similar components may need to understand that the licensing consequences can differ. The licence can therefore influence architecture and product decisions as well as legal compliance.
3. Review the Position Before Commercial Release
A product that works technically is not necessarily ready for commercial distribution. Before launch, the business should understand the open source software contained in the final product and whether its proposed distribution model is consistent with the applicable licences. Questions should be resolved before customers begin receiving the software.
The review becomes especially important where proprietary code has been combined with software subject to copyleft conditions. The company should determine the implications of that combination under the specific licence rather than relying on general assumptions about open source. Different software components should be considered on their own terms.
Frequently Asked Questions
1. Can Open Source Software Be Used in a Commercial Product?
Open source software can form part of commercial software development, and FOSS is widely used as a foundation on which developers and businesses build new products. However, the right to use, modify and redistribute the code comes from the applicable open source licence. Commercial use should therefore be assessed against that licence rather than assuming that all publicly available source code can be used without conditions.
The commercial nature of the product does not by itself answer the licensing question. The more important issue is what the startup proposes to do with the particular component and what the licence permits. This should be established before the component becomes essential to the product.
2. Is Open Source Software Free From Copyright?
No. Open source software generally operates through copyright licensing rather than outside copyright. The copyright owner permits others to use, examine, modify or redistribute the software subject to the relevant licence.
This is why open source software should not be confused with public-domain software. Public-domain material is not governed by the same continuing licence obligations. FOSS remains subject to the conditions under which the copyright owner has made it available.
3. What Is Copyleft?
Copyleft is a licensing approach that allows people to reproduce, modify and distribute a work while requiring specified resulting works to continue under the same or equivalent licensing conditions. It uses copyright licensing to preserve the freedoms provided with the original work rather than removing copyright altogether. The GNU GPL is one well-known example discussed in the open source context.
This continuing obligation is why copyleft should not be equated with the public domain. A public-domain work may be used without comparable licensing restrictions, while copyleft deliberately retains conditions governing redistribution. The distinction can be important for companies developing proprietary software.
4. Does Using GPL Software Mean a Startup Loses Ownership of All Its Code?
That conclusion should not be made simply from the fact that GPL-licensed software appears somewhere in a product. The relevant question is how the GPL software has been used, modified and distributed and what the specific licence requires in those circumstances. SpicyIP's discussion establishes the general copyleft principle that derivative works distributed under such a model may be required to preserve the same licensing freedoms.
A startup should therefore analyse the actual software arrangement rather than use broad statements such as “GPL makes everything open source.” The legal consequence depends on the licence and the relationship between the relevant code components. Where the distinction is commercially significant, the particular implementation should be reviewed before release.
5. Why Is Open Source Compliance Important During Fundraising or an Acquisition?
Open source software can form part of the technical foundation of a startup's product, making its licensing position relevant to what the company can commercially distribute. A buyer or investor assessing the product may therefore want to understand which parts were developed internally and which rely on third-party software. Clear internal records make that assessment substantially easier.
The issue is particularly relevant where the company's value depends heavily on proprietary software. The company should be able to explain which code it owns and which code it uses under licences granted by others. Addressing those questions during development is usually easier than reconstructing the software history during a transaction.
Conclusion
Open source software can allow startups to build faster by drawing on existing software components and collaborative development. The legal advantage does not arise because copyright disappears, but because copyright owners make their software available under licences granting specified freedoms. Those licences therefore remain central to the startup's right to use and distribute the code.
The practical approach is to identify open source components early, understand their licences and review the implications before commercial distribution. Copyleft software deserves particular attention where the company is modifying or redistributing code as part of a proprietary product. Treating open source review as part of product development can prevent licensing questions from becoming more difficult after launch.
About the Author
Shauree Gaikwad is the founder of Wayver and advises founders and businesses on corporate, commercial and intellectual property matters. Her practice includes technology agreements, software licensing, intellectual property ownership and commercialisation of technology-related assets. She also advises businesses on intellectual property issues arising during investment and commercial transactions.
This article is intended for general informational purposes and does not constitute legal advice. Open source licensing obligations depend on the particular licence, software component and manner in which the code is used, modified or distributed. Specific advice should be obtained after reviewing the relevant software and licence terms.
This article is published for general informational purposes about Indian law and practice. It is not legal advice, and nothing in it is intended to be, or should be construed as, advertising, solicitation, or inducement of any kind. No advocate–client relationship is created by reading this article, commenting on it, or otherwise accessing this website. Its contents are accurate to the best of our knowledge as of the date of publication and may not reflect subsequent changes in law. We accept no liability for any loss arising from reliance on this article. Please seek independent legal advice specific to your circumstances before acting on anything discussed here.