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February 1, 2017
This article was contributed by Matija Šuklje
Last year, three new umbrella organizations for free and open-source
software (and hardware) projects emerged in Europe. Their aim is to
cater to the needs of the community by providing a legal entity for
projects to join, leaving the projects free to focus on technical and community
tasks. These organizations
(Public Software CIC, [The Commons Conservancy],
and the Center for the Cultivation of Technology)
will take on the overhead of actually running a
legal entity themselves.
Among other services, they offer to handle donations, accounting,
grants, legal compliance, or even complex governance for the projects that
join them. In my opinion (and, seemingly, theirs) such services are useful to
these kinds of projects; some of the options that these three organizations
bring to the table are quite interesting and inventive.
The problem
Disclaimer:
At the time of writing, I am working closely with two of the
organizations — as the General Counsel of the Center for the
Cultivation of Technology, and as co-author of the legal and governance
documents of [The Commons Conservancy]. This article does not constitute
the official position of either of the two organizations nor any other I
might be affiliated with.
As a free/open-source software (FOSS) or open-source hardware
project grows, it is likely to reach a
point where it requires a legal entity for
better operation — whether to
gather donations, pay for development, handle finances, organize events,
increase license predictability and flexibility by consolidating rights,
help with better governance, or for other reasons.
For example, when a project starts to hold assets — domain names,
trademarks, or even just receives money through donations — that should not
be the responsibility of one single person, but should, instead, be handled
by a legal entity
that aligns with the project’s goals.
A better idea is to have an entity to take over this tedious,
but needed, overhead from the project and let the contributors simply carry
on with their work.
So far, the options available to a project are either to establish
its own organization or to join an existing organization, neither of which may fit
well for the project.
The existing organizations are either specialized in a
specific technology or one of the few technology-neutral umbrella
organizations in the US, such as Software
in the Public Interest, the Apache
Software Foundation, or the Software Freedom Conservancy (SFC).
If there is already a technology-specific organization
(e.g. GNOME Foundation, KDE e.V., Plone Foundation) that fits a project’s needs,
that may well make a good match.
The problem with setting up a separate organization is that it takes
ongoing time and effort that would much better be spent on the project’s
actual goals. This goes double and quadruple for running it and meeting
with the annual official obligations — filling out tax forms, proper
reporting, making sure everything is in line with internal rules as well as
laws, and so on. To make matters worse, failure to do so might result in
personal
liability for the project leaders that can easily reach thousands or
tens of thousands of euros or US dollars.
Cross-border donations are tricky to
handle, can be expensive if a currency change is needed, and are rarely
tax-deductible. If a project has most of its community in Europe, it would
make sense to use a European legal entity.
What is common between all three new European organizations is that none
demand a specific outbound license for the projects they
manage (as opposed to the Apache Software Foundation, for example), as long as it
falls under one of the generally accepted free and open licenses. The
organizations must also have internal
rules that bind them to act in the public interest (which is the closest
approximation to FOSS you can get when it comes to government
authorities). Where they differ is the set of services they offer and how
much governance oversight they provide.
Public Software CIC
Public Software CIC
incorporated in February 2016 as a UK-based Community Interest Company. It
is a fiduciary sponsor and administrative service provider for free and
open source projects — what it calls public software — in Europe.
While it is
not for profit, a Community
Interest Company (CIC) is not a charity organization; the other two new
organizations are charities. In the opinion of
Public Software’s founders, the tax-deductibility that comes with a
charitable status does not deliver benefits that outweigh the limitations
such a status brings for smaller projects. Tax
recovery on cross-border charitable donations is hard and expensive even
where it is possible. Another typical issue with charities is that even
when for-profit activities (e.g. selling T-shirts) are allowed, these
are throttled by law and require more complex accounting — this situation
holds true both for most European charities and for US 501(c)(3) charitable
organizations.
Because Public Software CIC is not a charity, it is allowed to trade and
has to pay taxes if it has a profit at the end of its tax year. But as
Simon Phipps, one of the two directors, explained at a panel at QtCon /
FSFE Summit in September 2016, it does not plan to have any profits in
the first place, so that is a non-issue.
While a UK CIC is not a charity and can trade freely, by law it still
has to strictly act for public benefit and, for this reason, its assets and
any trading surplus are locked. This means that assets (e.g. trademarks,
money) coming into the CIC are not allowed to be spent or used otherwise
than in the interests of the public community declared at
incorporation. For Public Software, this means the publicly open
communities using and/or developing free and open-source software
(i.e. public software). Compliance with the public
interest for a CIC also involves approval and monitoring by the
Commissioner for Community Interest Companies, who is a UK government
official.
The core services Public Software CIC provides to its member projects
are:
- accounting, including invoicing and purchasing
- tax compliance and reporting
- meeting legal compliance
- legal, technical, and governance advice
These are covered by the base fee — 10% of project’s
income. This percentage seems to have become the norm (e.g. Software
Freedom Conservancy charges the same). Public Software will also offer
additional services
(e.g. registering and holding a trademark or domain name), but for these
there will be additional fees to cover costs.
On the panel at QtCon, Phipps mentioned that it would also handle grants,
including coordinating and reminding its member projects of deadlines to
meet. But it would not write reports for the grants nor would it give loans
against future payments from grants. Because many (especially EU) grants only
pay out after the sponsored project comes to fruition, a new project that
is seeking these grants should take this restriction into consideration.
Public Software CIC already hosts a project called Travel Spirit as a member and has a
few projects waiting in the pipeline.
While its focus is mainly on newly starting projects, it remains open to
any project that would prefer a CIC. At QtCon, Phipps said that he feels it
would be the best fit for smaller-scale projects that need help with
setting up governance and other internal project rules.
My personal (and potentially seriously wrong) prediction is that Public
Software CIC would be a great fit for newly-established projects where a
complex mishmash of stake holders would have to be coordinated — for
example public-private collaborations.
A distinct feature of Public Software CIC is that it distinguishes between
different intangible assets/rights and has different rules for them. The
basic premise for all asset types is that no other single organization
should own
anything from the member project; Public Software is not interested in
being a “front” for corporate open source. But then the
differences begin. Public Software CIC is perfectly happy and fit to hold
trademarks, domain names, and such for its member projects (in fact, if a
project holds a trademark, Public Software would require a transfer). But on the
other hand, it holds a firm belief that copyright should not be aggregated
by default and that every developer should hold the rights to their own
contribution if they are willing.
Apart from FOSS, the Public Software CIC is also open to open-source
hardware or any
free-culture projects joining. The ownership constraint might in practice
prove troublesome for hardware projects, though.
Public Software CIC does not want to actively police
license/copyright enforcement, but would try to assist a member project
if it became necessary, as far as funds allowed. In fact when a project
signs the memorandum of understanding to join the Public Software CIC, the
responsibility for copyright enforcement explicitly stays with the project and is not
transferred to the CIC. On the other hand, it would, of course, protect the
other assets that it holds for a project (e.g. trademarks).
If a project wants to leave at some point, all the assets that the CIC held for it have
to go to another asset-locked organization approved by the UK’s
Commissioner of CICs. That could include another UK CIC or charity, or an
equivalent entity elsewhere such as a US 501(c)(3).
If all goes wrong with the CIC — due to a huge judgment against one of its
member projects or any other reason — the CIC would be wound down and all
the remaining member projects would be spun out into other
asset-locked organization(s). Any remaining assets would be
transferred to the FSFE, which is also a backer of the CIC.
[The Commons Conservancy]
[The Commons Conservancy]
(TCC) incorporated in October 2016 and is an Amsterdam-based
Stichting, which is a foundation under Dutch law. TCC
was set up by a group of technology veterans from the FOSS, e-science, internet-community, and digital-heritage fields. Its design and philosophy reflects
lessons learned in over two decades of supporting FOSS efforts of all sizes
in the realm of networking and information technology. It is supported by a number of experienced organizations such as
NLnet Foundation (a grant-making
organization set up in the 1980s by pioneers of the European internet)
and GÉANT (the European association of
national education and research networks).
As TCC’s chairman Michiel Leenaars pointed out in the QtCon panel, the
main goal behind
TCC is to create a no-cost, legally sound mechanism to
share responsibility for intangible assets among developers and
organizations, to provide flexible fundraising capabilities, and to ensure
that the projects that join it will forever remain free and open. For that
purpose it has invented some rather ingenious methods.
TCC concentrates on a limited list of services it
offers, but wants to perfect those. It also aims at being lightweight and
modular. As
such, the basic services it offers are:
- assurance that the intangible assets will forever remain free and open
- governance rules with sane defaults (and optional additions)
- status to receive charitable donations (to an account at a different organization)
TCC requires from its member projects only that
their governance and decision-making processes are open and verifiable, and that
they act in the public benefit. For the rest, it allows the member projects
much freedom and offers modules and templates for governance and legal
documents solely as an option. The
organization strongly believes that decisions regarding assets and money
should lie with the project, relieving the pressure and dependency on
individuals. It promotes best practices but tries to keep out of
the project’s decisions as much as possible.
TCC does not require that it hold intangible assets (e.g. copyrights,
trademarks, patents, design rights) of projects, but still encourages
that the projects transfer them to TCC if they want to make use of the
more advanced governance modules. The organization even allows the project
to release binaries under a proprietary license, if needed, but under the
strict condition that a full copy of the source code must forever remain FOSS.
Two of the advanced modules allow for frictionless sharing of intangible
assets between member projects regardless whether the outbound licenses of
these projects are compatible or not. The “Asset Sharing DRACC”
(TCC calls its documents “Directives and Regulatory Archive of [The Commons
Conservancy]” or DRACC) enables developers to dedicate their
contributions to several (or all) member projects at the same time. The
“Programme Forking DRACC” enables easy sharing of assets between
projects when a project forks, even though the forks might have different goals
and/or outbound licenses.
As further example, the “Hibernation of assets DRACC” solves
another common issue — namely how to ensure a project can flourish even
after the initial mastermind behind it is gone. There are countless
projects out there that stagnated because their main
developer lost interest, moved on, or even died. In this module there are
special rules in place to handle a project that has fallen dormant and
how the community can revive a project afterward to simply continue the
development.
There are more such optional rule sets available for projects to adopt;
including rules how to leave TCC and join a different
organization.
This flexibility is furthered by the fact that by design TCC does not tie
the project to any money-related services. To minimize risks, [The Commons
Conservancy] does not handle money at all — its statutes literally even
forbid it to open a bank account. Instead, it is setting up agreements with
established charitable entities that are specialized in handling
funds. The easiest option would be to simply use one of these charities to
handle the project’s financial back-end (e.g. GÉANT has opted for NLnet
Foundation), but projects are free to use any other financial back-end if
they so desire.
Not only is the service TCC offers compatible with
other services, it is also free as in beer, so using TCC’s services in
parallel
with some other organization to handle the project’s finances does not
increase a project’s costs.
TCC is able to handle projects that receive grants, but will not manage
grants itself. There are plans to set up a separate legal entity to handle
grants and other activities such as support contracts, but nothing is set
in stone yet. For at least a subset of projects it would also be possible
to apply for loans in anticipation of post-paid (e.g. EU) grants through
NLnet.
A project may easily leave TCC whenever it wants, but there are checks and
balances set in place to ensure that the project remains free and open
even if it spins out to a new legal entity. An example is that a spun out
(or “Graduated” as it is called in TCC) project leaves a
snapshot of itself with TCC as a backup. Should the
new entity fail, the hibernated snapshot can then be revived by the
community.
TCC is not limited to software — it is very much
open to hosting also open hardware and other “commons” efforts
such as open educational resources.
TCC does not plan to be involved in legal
proceedings — whether filing or defending lawsuits. Nor is it an interesting
target, simply because it does not take in or manage any money. If anything
goes wrong with a member project, the plan is to isolate that project into
a separate legal entity and keep a (licensed) clone of the assets in order
to continue development afterward if possible.
Given the background of some of the founders of TCC (with deep roots
in the beginnings of the internet itself), and the memorandum of
understanding with GÉANT, it is not surprising that some of the first projects
to join are linked to research and core network systems (e.g. eduVPN and FileSender). Its offering seems
to be an interesting framework for already existing projects that want
to ensure they will remain free and open forever; especially if they have
or anticipate a wider community of interconnected projects that would
benefit from the flexibility that TCC offers.
The Center for the Cultivation of Technology
The Center for the Cultivation of
Technology (CCT) also incorporated in October 2016, as a German gGmbH, which
is a non-profit limited-liability corporation. Further, the CCT is fully
owned by the Renewable Freedom
Foundation.
This is an interesting set-up, as it is effectively a company that has
to act in public interest and can handle tax-deductible donations. It is
also able to deal with for-profit/commercial work, as long as the profit is
reinvested into its activities that are in public benefit. Regarding any
activities that are not in the public interest, CCT would have to pay
taxes. Of course, activities in the public interest have to represent the lion’s
share in CCT.
Its owner, the Renewable Freedom Foundation, in turn is a German
Stiftung (i.e. foundation) whose mission is to “protect and preserve
civil liberties, especially in the digital landscape” and has already
helped fund projects such as Tor,
GNUnet, and La Quadrature du Net.
While a UK CIC and a German gGmbH are both limited-liability
corporations that have to act in the public interest, they have somewhat
different legal and tax obligations and each has its own specifics.
CCT’s purpose is “the research and development of free and open
technologies”. For the sake of public authorities it defines
“free and open technologies” as developments with results that are
made transparent and that, including design and construction plans, source
code, and documentation, are made available free and without licensing costs
to the general public. Applying this definition, the CCT is inclusive of
open-source hardware and potentially other technological fields.
Similar to the TCC, the CCT aims to be as lightweight by default as
possible. The biggest difference, though, is that the Center for the
Cultivation of Technology is first and foremost about handling money — as
such its services are:
- accounting and budgeting
- financial, tax and donor reporting
- setting up and managing of donations (including crowd-funding)
- grant management and reporting
- managing contracts, employment and merchandise
The business model is similar to that of PS CIC in that, for basic
services, CCT will be taking 10% from incoming donations and that more
costly tasks would have to be paid separately. There are plans to
eventually offer some services for free, which would be covered by grants
that CCT would apply for itself. In effect, it wants to take over the
whole administrative and financial overhead from the project in order to
allow the projects to concentrate on writing code and managing
themselves.
Further still, the CCT has taken upon itself automation, as much as
possible, both through processes and software. If viable FOSS solutions are
missing, it would write them itself and release the software under a FOSS
license for the benefit of other FOSS legal entities as well.
As Stephan Urbach, its CEO, mentioned on the panel at QtCon, the CCT is
not just able to handle grants for projects, but is also willing to take over
reporting for them. Anyone who has ever partaken in an EU (or other) grant probably
agrees that reporting is often the most painful part of the grant
process. The raw data for the reports would, of course, still have to be
provided by the project itself. But the CCT would then take care of
relevant logistics, administration, and writing of the grant reports. The
company is even considering offering loans for some grants, as soon as
enough projects join to make the operations sustainable.
In addition, the Center for the Cultivation of Technology has a
co-working office in Berlin, where member projects are welcome to work
if they need office space. The CCT is also willing to facilitate
in-person meetings or hackathons. Like the other two organizations, it
has access to a network of experts and potential
mentors, which it could resort to if one of its projects needed such
advice.
Regarding whether it should hold copyright or not, the Center for the
Cultivation of Technology is flexible, but at the very beginning it would
primarily offer holding other intangible assets, such as domain names and
trademarks.
That being said, at least in the early phase of its existence, holding
and managing copyright is not the top priority. Therefore the CCT has
for now deferred the decision regarding its position on license enforcement
and potential lawsuit strategy. Accounting, budgeting, and handling
administrative tasks, as well as automation of them all, are clearly where
its strengths lie and this is where it initially wants to pour most effort
into.
Upon a dissolution of the company, its assets would fall to Renewable Freedom
Foundation.
Since the founders of CCT have deep roots in anonymity and privacy
solutions such as Tor, I imagine that from those corners the first wave of
projects will join. As for the second wave, it seems to me that CCT would
be a great choice for projects that want to offload as much of financial
overhead as possible, especially if they plan to apply for grants and
would like help with applying and reporting.
Conclusion
2016 may not have been the year of the Linux desktop, but it surely is
the year
of FOSS umbrella organizations.
It is an odd coincidence that at the same time three so different
organizations have popped up in Europe — initially oblivious of each other
— to provide much-needed services to FOSS projects.
Not only are FOSS projects spoiled for choice regarding such service
providers in Europe, now, but it is refreshing to see that these organizations
get along so well from the start. For example, Simon Phipps is also
an adviser at CCT and I help with both CCT and TCC.
In fact, I would not be surprised to see, instead of bitter competition,
greater collaboration between them, allowing each to specialize in what
it does best and allowing the projects to mix-and-match services
between them. For example, I can see how a project might want to pick TCC
to handle its intangible assets, and at the same time use CCT to handle its
finances. All three organization have also stated that, should a project
contact them that they feel would be better handled by one of the others,
they would refer it to that organization instead.
Since at least the legal and governance documents for CCT and TCC will
be available online under a free license (CC0-1.0 and CC-By-4.0
respectively), cross-pollination of ideas and even setting up of new
organizations would hereby be made easier.
It may be early days for these three umbrella organizations, but I am
quite optimistic about their usefulness and that they will fill in the gaps
left open by the older US siblings and single-project organizations.
If a project comes to the conclusion that it might need a legal entity,
now is a great time to think about it. At FOSDEM 2017 there will be another
panel with CCT, TCC, PS CIC, and SFC that will be a perfect
opportunity to pose any and all questions and comments you may have in
person.
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