New Zealand: Open Source Licences in the Cloud

Last Updated: 22 July 2012

By Karen Ngan, Partners and Averill Dickson, Senior Associates

In our June 2011 x-tech article, ' Making Open Source an Asset, and Not a Liability, In Your Commercialisation Strategy', we discussed some of the basic types of open source licences, and steps to take to ensure open source materials do not jeopardise the commercial exploitation of proprietary products. In this article, we look at some of the implications of open source licences in the cloud environment and, in particular, whether the terms of some popular open source licences adversely impact the ability to commercialise cloud computing offerings.

Open Source Software as a Key Enabler of Cloud-Based Computing

The last few years have seen staggering growth in cloud-based computing which shows no sign of slowing down.

Last month, Gartner predicted the personal cloud will eclipse the PC as the hub of consumers' digital lives by 20141. On the enterprise side, Gartner predicts worldwide software-as-a-service (SaaS) revenue reaching $14.5 billion in 2012, and $22.1 billion in 20152. This represents, for enterprise application markets, a predicted 17.2% compound annual growth rate through to 2015, compared with a total application market growth rate of 7.9%3.

Cloud services can bring down the infrastructure costs involved in computing, and using open source software reduces the costs further. Dion Hinchcliffe of ZDNET stated in 2009 that "open source has become a key enabler for cloud computing by providing both cheap inputs (as in free) as well as rich capabilities to providers of cloud services"4.

Permissive Licences and the GPL in Cloud Environments

In our previous article, we pointed out that "permissive free software licences", such as the Apache 2.0 licence, the MIT licence and the BSD licence, permit users to impose different (and more business-friendly) conditions upon the distribution of derivative programs. This applies equally in a cloud environment as it does for distributed software.

As a result, in a number of software investment, acquisition and licensing arrangements we have recently been involved with, we have seen a move away from blanket prohibitions against the use of open source software, and an increased willingness to allow the use of the software licensed under "permissive" licence terms.

We have not seen the same degree of relaxation in respect of prohibitions against the use of software licensed under the common GNU General Public Licence (GPL) (statistics show that close to 50% of open source software projects either version 2 or version 3 of the GPL5). The reason for this is the requirement that, where a developer creates and distributes programs that incorporate GPL materials, the developer must licence those new programs on the terms of the GPL. Therefore, they must also make the source code for the new programs publicly available.

However, this requirement does not necessarily apply in a cloud environment.

Under version 2 of the GPL (GPL v2), the on-licensing requirements are triggered by the act of 'distributing' a derivative work. It is arguable that, where a cloud services provider makes software available via a cloud-based deployment, the provider has not 'distributed' the software: the provider has simply allowed users to interact with the software via the internet. This could be viewed as a loophole, in that it allows people to commercialise new software developed using source code licensed under the GPL, without that new software being subject to on-licensing requirements, where the new software is available only via the cloud.

Version 3 of the GPL (GPLv3) makes the position even clearer. The on-licensing requirements of the GPLv3 are triggered by the act of 'conveying' a derivative work, and the GPLv3 specifically provides that merely interacting with a user through a computer network, with no transfer of a copy, is not conveying.


A few months after the release of GPLv3, the Free Software Foundation released an alternative licence to the GPL, the GNU Affero General Public License, or GNU AGPL. The GNU AGPL includes an additional clause under which, where a developer has modified GNU AGPL-licensed software, the act of allowing users to interact with that modified version remotely through a computer network triggers an obligation to make the source code available. The GNU AGPL contains the same requirements in relation to 'linked' software as the GPLv3; so if the software deployed in a cloud application contains, in its entirety or modified form, any GNU AGPL-licensed software then the source code for the entire running application must be made available to the community.

The Free Software Foundation recommends6 that people wanting to ensure their software remains free consider using the GNU AGPL for any software which will commonly be run over a network. Despite this, the uptake of the GNU AGPL has been slow. Black Duck's statistics as at May 2012 show 13,785 GPLv3 projects as against 411 GNU AGPL projects; GNU AGPL does not even appear on the top 20 list of open source licences in use7. Even in the cloud computing area where the GNU AGPL is specifically targeted, prominent open source cloud computing toolkits such as OpenNebula, Eucalyptus and OpenStack are licensed under the Apache or GPLv3 licences.


As a result, the majority of open source software and tools are likely to be available under licence terms that allow cloud computing providers to develop proprietary (closed) cloud offerings. Developers can also avoid any need to distribute source code for GPL-derived software through appropriate use of a cloud environment. The key is to understand exactly what software is being used in a project, and the licence terms that apply to that software.


6 18 May 2012.
7 Retrieved 18 May 2012.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions