Open source software is everywhere—from the operating systems that power data centers to the libraries that enable rapid development of web and mobile apps. For companies building digital products, leveraging open source software (OSS) is not just convenient; it's essential. Yet with this reliance comes a set of legal and operational responsibilities that are often overlooked—especially in the context of mergers, acquisitions, and other high-stakes transactions.
This article explores the critical importance of open source compliance, particularly in the context of technical due diligence. We'll look at the legal landscape, licensing implications, the risks of non-compliance, and how best-in-class diligence processes address these concerns. We'll also show how AI-powered due diligence platforms like Sure can help de-risk your deals.
The Ubiquity—and Risk—of Open Source Software
The modern software development lifecycle is heavily dependent on open source components. It's not uncommon for 70-90% of a product's codebase to consist of third-party packages, many of them open source. While this accelerates development and reduces cost, it also introduces legal complexity.
OSS components are governed by licenses that dictate how software can be used, modified, and redistributed. These licenses vary significantly—from permissive ones like MIT and Apache 2.0, to more restrictive ones like GPL and AGPL, which can impose "copyleft" obligations that propagate through derivative works.
What Is Open Source Compliance?
Open source compliance means adhering to the terms of the licenses associated with any open source software used in a product. This involves:
- Identifying all OSS components in the codebase
- Understanding and documenting the licenses attached to each
- Ensuring usage complies with license requirements
- Maintaining records and attribution files
- Mitigating or removing risky components
Failure to comply can lead to lawsuits, forced open-sourcing of proprietary code, or blocked product launches—any of which can be catastrophic during an M&A process or investment round.
The Legal Landscape of OSS Licensing
There are thousands of OSS licenses, but most fall into two broad categories:
- Permissive Licenses: Licenses like MIT, BSD, and Apache 2.0 allow software to be used, modified, and distributed freely, with minimal requirements such as attribution or notice of license terms.
- Copyleft Licenses: Licenses like GPL, LGPL, and AGPL require derivative works to also be open source under the same license. These obligations can "infect" proprietary codebases if not handled carefully.
Ignorance of these distinctions can lead to serious consequences. For instance, using a GPL-licensed library in a proprietary application without complying with its terms can lead to forced code disclosure or legal injunctions.
Why Open Source Compliance Is a Due Diligence Imperative
When investors or acquirers evaluate a company, they are not just buying a business—they're acquiring IP. If that IP is compromised by open source compliance issues, the value of the deal can be diminished or the deal can fall apart entirely.
Key concerns during diligence include:
- Undisclosed or improperly licensed OSS in core products
- Use of copyleft code that could force source code disclosure
- Absence of a Software Bill of Materials (SBOM)
- No formal OSS compliance policy or procedures
- Use of abandoned or insecure OSS components
Discovering these red flags late in the process can lead to price renegotiation, delays, or complete deal failure. For acquirers, the legal and reputational risks are real—and growing.
Case Study: The Cost of Non-Compliance
In 2009, a company called Best Buy was sued by the Software Freedom Conservancy for violating the terms of the GPL license by distributing GPL-licensed software in its products without providing source code or attribution. The result was not only legal costs but also reputational damage.
More recently, M&A deals have been delayed or altered due to due diligence teams uncovering unknown or unvetted OSS usage—sometimes involving critical system dependencies or outdated packages with known vulnerabilities.
Building a Culture of Compliance
Open source compliance isn't a one-time event—it's an ongoing discipline that should be integrated into the software development lifecycle (SDLC). This includes:
- Maintaining an OSS inventory using automated scanning tools
- Reviewing license terms during component selection
- Training developers on licensing basics
- Establishing governance and approval workflows for OSS usage
- Keeping accurate records of all OSS and their licenses
Leading organizations even appoint dedicated OSS compliance officers or include it under legal counsel responsibilities.
What to Expect in Open Source Due Diligence
A robust technical due diligence process will assess OSS compliance across several dimensions:
- Does the company maintain a Software Bill of Materials (SBOM)?
- Have they conducted recent OSS audits or scans?
- Are there documented policies for OSS selection and use?
- What is the process for vetting new packages?
- Are there any known violations or ongoing remediation efforts?
Diligence teams may also run static and dynamic analysis tools to scan the codebase for OSS components and their associated licenses. Modern tools like FOSSA, Black Duck, and Snyk provide detailed license tracking and risk analysis.
The Role of SBOMs (Software Bill of Materials)
The SBOM is a critical asset during diligence. It lists every third-party component in a codebase, along with version numbers and licenses. An accurate SBOM helps legal, compliance, and engineering teams:
- Validate license compliance
- Monitor for vulnerabilities
- Ensure traceability and auditability
As regulatory requirements like the U.S. Executive Order on Cybersecurity begin to mandate SBOMs for government software procurement, their importance will only grow.
Best Practices for Open Source Compliance in M&A
- Start early. Don't wait for diligence to begin reviewing OSS practices.
- Automate inventory and license scanning with reliable tools.
- Maintain up-to-date SBOMs and license disclosures.
- Establish internal policies for OSS usage, review, and remediation.
- Include legal counsel and compliance teams in technical decisions.
- Vet new OSS dependencies before incorporating them.
These actions not only reduce risk—they signal to investors and acquirers that your organization takes IP hygiene seriously.
How Sure Helps Teams Stay Compliant and Confident
At Sure, we understand that open source compliance isn't just a technical concern—it's a strategic imperative. Our AI-powered technical due diligence platform provides automated OSS license detection, SBOM generation, and risk flagging to help teams:
- Identify licensing conflicts in minutes, not weeks
- Track OSS usage across repositories and deployments
- Assess potential legal and integration risks in real-time
- Generate compliance documentation to support M&A processes
- Collaborate with legal and engineering teams on remediation plans
By leveraging advanced analysis and machine learning, Sure makes it easier than ever to move from reactive to proactive OSS governance—without slowing down development.
Conclusion
Open source software is a powerful enabler, but with it comes responsibility. In an M&A environment, OSS compliance can be the difference between a clean deal and a costly surprise. Organizations that take it seriously position themselves as trustworthy, mature, and ready to scale.
Whether you're preparing for investment, acquisition, or internal audit, integrating open source compliance into your due diligence and development lifecycle is no longer optional—it's non-negotiable.
Sure helps you uncover the full picture—faster, smarter, and with less risk.
