Recently, it was announced that the
project, a software revision control program used by projects like
Xen and ALSA, among others, has become a member
of the Software Freedom
. Some people may be wondering: What is the Software
Freedom Conservancy? How do you become a member?
Why would you want to? What does the Conservancy do? Who besides Mercurial
are members? And what does it mean to be a member?
First of all, the Software Freedom Conservancy is fairly new, founded in
March of this year. It is a specialized legal project spun out of the Software Freedom Law Center,
which provides pro bono legal representation and other law-related services
to protect and advance Free and Open Source Software. The distinctive
purpose of the Conservancy, which exists as an entity distinct from the
Software Freedom Law Center, is to provide administrative and financial
services to its members so they can take advantage of the benefits of being
a corporate entity, without having to take on the filing, record-keeping and
legal work necessary for nonprofits, by coming under the Conservancy's
Wine, Samba, InkScape, BusyBox, uCLibc, SurveyOS, and Libbraille are also member
projects of the Conservancy.
I asked Karen M. Sandler, Counsel at the Software Freedom Law Center,
first about the Software Freedom Law Center. Who gets accepted as a client
by the Software Freedom Law Center and what does it mean for a project?
Clients are evaluated on a case by case basis depending on, among other
criteria, the nature of the software project, the legal needs of the
project and the availability of resources of SFLC. As a general matter,
we seek to give advice to nonprofit Free and Open Source Software
projects, developers and distributors to help protect and advance Free
and Open Source Software.
Once a software project is accepted as a
client of SFLC, SFLC is able to
provide legal representation to that project. That could mean assistance
with licensing, helping the project to form as a nonprofit corporate
entity or providing representation to assist with the resolution of a
dispute, depending on the needs of the client.
In Mercurial's case, for example, in addition to joining the Conservancy,
it has also retained SFLC as its legal counsel.
But what about the Conservancy? What are the advantages of becoming a
member? There are certain benefits that flow from the corporate form, such
as limiting ones personal liability. The Conservancy is in the process of
applying for federal tax-exempt status, which would then allow the
Conservancy's member projects to also receive tax deductible donations.
The Conservancy files a single tax return that covers all the member
projects, and it handles other corporate and tax related issues on behalf
of its members.
The question which may come into your mind at this point is: couldn't a
project do all that itself? Yes, it
could. But let me give you an idea of what is involved.
The paperwork in setting up a state nonprofit corporation, applying
for federal tax-exempt status, then actually running the corporation is quite
daunting in the US. There is corporate record-keeping ongoing, not to
mention a panoply of laws one must abide by or risk losing the corporate
structure. Just as one small example, here's the page of
forms to set up as a nonprofit in New York State. There are even
regulations on how the filings must be presented. See § 150.1 on this
page, which lists all the i's to dot and t's to cross if you are a New York
corporation. And of course you need to be familiar not only with the
state's Not-for-Profit Corporation Law (NPC), but also the Business
Corporation Law (BCL) and the General Business Law (GBL), all of which you
can find on the New
York State Legislature page, by clicking on the bottom link, Laws of
New York. Why government agencies make it so hard to link to information is
one of life's little mysteries, but many of them do, so I can't link to the
laws themselves. You'll have to find them for yourself.
Then, if you
want people who send you donations to be able to get a tax deduction, you
have to apply on the federal level under Internal Revenue Code Section
501(c)(3) and you need to satisfy certain requirements. You can find the
booklet on how to apply for federal nonprofit status on this IRS
page. Look on the list for Form 1023 and Inst 1023, the instruction
booklet. That's just to apply.
You can't mingle your personal funds with the corporate funds, for one
thing, so you'll need to set up a separate corporate account. The language
in your corporate charter and bylaws must satisfy certain regulations on
the federal level, and of course laws and regulations are forever changing,
so you have to keep up to date.
Here's a sample of bylaws. See how much fun
it is to read them. You'll notice that you need a board of directors and
officers, and that the secretary, for example, has multiple record keeping
duties to fulfill. Want the position? No? Do you have a really good buddy
willing to spend the rest of his life doing such tasks? Most programmers
would rather have root canal surgery. But even if you are willing, it's
time taken away from coding, and the odds of getting it wrong without legal
direction are, in my view, in the fairly-likely-to-certain range. Then
there's taxes, and of
course there are special forms and regulations for nonprofits.
The Conservancy does all of that paperwork for its members, so developers
working on member projects can devote their time to coding instead of
having to master all the legal aspects to becoming and acting as a
Another service it can provide is fund management. It can advise and
help set up a project to accept donations. The assets are held by the
Conservancy on behalf of its members, each in its own account, and it
disburses them as the project wishes, in accordance with IRS regulations,
of course. Copyrights and trademarks can also be held by the Conservancy,
again on behalf of the project. If your project has several members, the
Conservancy provides a vehicle through which copyright ownership in the
project can be unified, which makes enforcement easier. This is an optional
service, however. And any member can leave the Conservancy at any time, if
it wishes to form their own independent tax exempt nonprofit. The
Conservancy provides its services free.
If you want to find out if your project qualifies for membership, you can
Conservancy. There are, of course, certain requirements -- your project
must be developing free and open source software, for example, and it must
be consistent with the Conservancy's tax-exempt purposes and financial
requirements imposed by the IRS.
What if you can't get your project accepted and you have a legal issue?
Perhaps there is a licensing question but you don't know any lawyers, or
the ones you know have no clue about FOSS licenses, and your question
requires that type of specialized knowledge? I asked Sandler what a
project or developer in such a circumstance can do to find a competent
lawyer, and here's her answer:
Within the US, most states have referral services
where individuals and
organizations can call to find a lawyer with a relevant practice. There
are also a number of organizations, in addition to SFLC, that are
organized to provide legal services. Some Pro Bono programs organized to
help with legal matters relating to business issues are listed on the
Bar Association's website
For Free and Open Source Software specific issues, the Free Software
Foundation has a lot of good information up on its website
and we are also aware of another project to publish
information related to Free and Open Source Software but it hasn't
launched yet. Hopefully it will launch soon and when it does, we'll be
sure to point you to that too.
The Software Freedom Conservancy might not be a useful option for all
projects, but, in many cases, it has some valuable services to offer. And
the price is right.
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