Foundation Project

This Wiki is read-only for reference purposes to avoid broken links.

Introduction

At the Berlin Conference in May 2007, the group had a discussion about how to safeguard the Adempiere project from a legal perspective.

There had been a lengthy debate in the community regarding the necessity of protection and what form it might take. There was significant recognition that something must be done but some different views on what the solution might be.

Community Concerns

Some of the concerns were:

• the community might lose some rights or be exposed to some restrictions as a result of the foundation being created
• there was some concern about the motives of those parties who were advocates of the foundation
• uncertainty as to function of the foundation gave rise to potential conflicts between integrators, developers, end users and other groups within the community.

This is partially documented in the following wiki link European_ADempiere_Conference_Day2#Adempiere_Foundation

In order to find some resolution, as task force was nominated and asked to provide a solution to the community based on the principles established at the conference workshop within a fixed time frame.

One issue is that the idea of a foundation means many things to many people. It is clear that no one solution will solve all peoples expectations. Therefore, it would make sense to group certain issues together and solve the problem for those issues one by one.

Protecting Intellectual Property

The first of these issues relate to the protection of intellectual property of the community.

It is important to protect the IP of the community as people want to know when they contribute that their contribution will always be free to use and that it will stay in the community. They also want to know that no-one will profiteer from their contribution. We need to protect the IP not only for the community now - but for all those who might join the community in the future.

There will be people in various parts of the community - such as potential end user organisations - that will not join the project or use the software because of the question mark over the IP. Therefore, we need to engage in this issue and solve it in order to allow the community to grow. This also provides an opportunity to send a message to those people outside of the community that we are serious about making the project work and for this to be an enduring testament to how people can work together to make something great.

Foundation Principles

The principles might be expressed as follows:

• The Foundations actions and activities should be transparent to the community
• Conflicts of interest should be avoided by parties to the foundation or otherwise disclosed to the community
• The foundation parties should be accountable to the community
• The foundation should exist for the benefit of the community and to safeguard the intellectual property of the community on behalf of the community
• The foundation should be non-discriminatory (race, religion, country, gender, etc)
• The parties to the foundation should prevent the foundation from directly competing with the business of external providers
• If the foundation parties are remunerated, then this should be transparent and fixed at a reasonable rate - we should make any appointments purely honourary
• The foundation was to act as the caretaker of community's property - specifically the code base and documentation
• The parties to the foundation should be represented by parties from the communities factions such as (1) End Users, (2) Developers and (3) Implementors
• The foundation should be non-exclusive
• The foundation should be as simple to understand and administer and minimalist in it's remit to perform the role for which it is constituted
• The foundation should be everlasting
• The foundation should not be owned privately, but should exist for the community

Possible Solutions

The team looked at these principals and are currently investigating the following possible solutions:

Adoption of the Free Software Foundations Fiduciary License Agreement.

See more details regarding the the FLA Proposal

This proposal involves:

• adopting the FLA for any new contributions
• requesting contributors to sign the FLA allowing the FSF to managed the copyright issues
• where contributor agreements are not signed - over time re-write any necessary code

In order for this to be adopted, we will need to ensure that we satisfy the criteria under FLA Guidelines

Benefits include the complete independence and clarity of mission of the Free SOftware Foundation and the reduced administration and complexity for the community

Establishment of a minimalistic 'Foundation'

This proposal involves:

• establishing rules of the foundation
• assessing the costs and benefits of relevant geography
• appointing legal staff to draw up legal documents relevant to the geography and in line with the principals
• some guidance might be available by looking at other foundations such as Eclipse, Apache etc ....
• appointing 'trustees' to the foundation
• agreeing a budget and obtaining some funding for establishment and ongoing management & administration

Benefits including increased control over the community's intellectual property by people who understand the project.

What the Foundation Should Not Be

• a regular company - because that is owned by shareholders - the shareholders own shares and this determines the ownership and the people who are in and out - it also creates an administrative nightmare
• domiciled in an area that acknowledges software patents - we can simply write this out as a problem by choosing an appropriate jurisdiction
• a receiver of donations other than basic funding to support the administration - i.e. the only funds should be to deal with the basic objects of the legal entity
• a foundation - as this is a legal term specific to jurisdictions - but we should look for a not for profit entity - a social enterprise structure as these exist to look after a community rather than look after shareholders

What the Foundation Should Be

• restricted in purpose to own and protect the global IP of the project
• a legal entity that gives legal protection to the office holders - provided that they act in the appropriate way
• a legal entity that is owned by the community and exists to serve the community
• a jurisdiction where the administrative costs are low and the legal system is strong and well respected
• managed by 'trustees' with the remit of protecting the IP by honorary appointed people who must act in the best interests of the community at all times

When deciding on a minimalistic foundation - we will need to decide on a domicile. The following domiciles have been suggested including a legal form. A comparison is provided here:

[Legal Frameworks of Various European Countries]

German eingetragender Verein

From: Kai Schaeffer <ks@schaeffer-ag.de>

It is somehow owned by the members. They can change the bylaws or just close it. That might by an issue. But what does it mean that the members could kill it? If you construct it right members mean the community. So the community could kill its own entity? I brought the "Verein" into the discussion because very simple found. You don't need a lawyer and you don't need money at all. And it could fit to our needs. It's perhaps not the best we could get but it's definitely not the worst.

In order to analyse the "do it ourself option" - I think we need to decide on what questions are important and then seek out the answers to those questions for all of the options.

-- From Kai again: I am quoted here, so I think I have the right to correct myself. I was wrong with the statement, that it is own by it's member. Yes, they could close it, but all the IP has to go to another non-profit e.V. Meanwhile I think the German legal form "eingetragender Verein" could be a good option for an worldwide foundation. There are many good examples of projects who are using the e.V. for their global foundation: FSF Europe e.V., KDE e.V., OpenOffice.org Deutschland e.V. (not global), Open Source Business Foundation e.V., Greenpeace e.V. just to name a few.

Questions

Here is a summary of questions people have raised about the legal form (please add questions and answers):

1. What country is it domiciled in?
2. What is that country's laws regarding software patents?
3. What is that country's legal attitude towards litigation?
4. What does it cost to establish and maintain?
5. Who manages the foundation?
6. What are the rules?
7. Who owns the foundation ?
8. What is the process for administering the foundation?
9. Can people holding public offices in the foundation get remunerated?
10. What does the foundation own? Copyright - Code / Documentation, Patents, Trademark

Why not ...

So we have already tried to do some work on this issue - so why not use the ....

German ADev

The German eV is a legal entity of it's own (not owned by the members). The ADeV needs at least three members members to continue. The members must be defined (named) and they decided about the board and what is happening. The members could even close the society. But since it is a non-profit eV all assets have to go to another non-profit society in this case. Right now the FSF Europe e.V. is (pre)chosen. The German eV accepts donations so this raises the issue what funds are allocated to protecting the IP versus fund used for other purposes that the Society want to use to develop the local German market. It is better to have an organisation that does not accept donations from the public and the only job is to manage the IP - otherwise other issues and conflicts may arise.

US Foundation

The US Foundation is a not for profit company registered in California, USA. Foundation_FAQs. The USA recognises software patents and this increases the risks that need to be managed. Being in the USA, the foundation is within the jurisdiction and is unable to escape the US laws. A company is owned by shareholders and hence we have a problem with administration - relative ownership. It is proposed that the foundation also receive donations and be a party to contracts.

Local Communities

It is envisaged that people may form local communities that would accept donations and would promote and manage the community in each country. Here, the German people may decide to use the society to promote ADempiere in Germany and the American's might use the foundation. These entities should be not for profit but will vary from country to country according to the regulatory environment for legal entities and tax law. This is important because donations usually have the benefit of being a tax deduction to the person donating and in this way - donations from German people can be claimed in Germany when being made to a German not for profit. This is also a reason why we should not be collecting donations in one global entity as the tax status is jeopardised and often lost.

The IP owner would 'police' the local communities by publish a set of rules that they should abide with - such as supporting the project goals, being non-exclusive and open etc. Should a local community act inappropriately - the IP entity could disassociate from that local community. Otherwise - there should be no cross ownership of any kind. In this way - the IP entity is not conflicted, they act only to protect ADempiere and they do this for the community who are the ultimate benefactors and owners.

Proposal

I (Michael Judd) propose we use a Charitable Incorporated Organisation (CIO) based in the UK to own the global IP. A CIO is a special type of social enterprise regulated by the charities commission - it is a not-for-profit - it exists only to serve a community which is defined when you set it up. It is managed on behalf of the community and the community are the ultimate owners. Information of CIO's is available here.

The UK is a strong and stable jurisdiction outside of the Software Patent zone. It is inexpensive and relatively simple to administer.

Questions

Please add your questions here:

What is a CIO and what are the benefits ?

A CIO is a Charitable Incorporated Organisation regulated under the Charities Commission in the United Kingdom.

For charities that decide that a corporate structure is right for them, the CIO will have the following advantages over a company structure:

A single registration – a charitable company has to register with the Registrar of Companies at Companies House and the Charity Commission. A CIO will only need to register with the Commission Less onerous requirements for preparing accounts – the general regime in the Charities Act 1993 will apply, so small CIOs will be able to prepare receipts and payments accounts, whilst larger charities will prepare accruals accounts Less onerous reporting requirements – CIOs will only prepare an annual report under the Charities Act 1993. Under company law, companies have to prepare a directors’ report as well One annual return – charitable companies have to prepare an annual return under company law and, normally, a separate return under charity law Less onerous filing requirements – CIOs will only have to send accounts, reports and returns to the Commission. Charitable companies have to send these to us and the Registrar of Companies Less onerous requirements relating to reporting of constitutional and governance changes – CIOs will be subject to a less extensive range of reporting requirements than charitable companies and will only have to report to us Lower costs for charities – the Commission make no charges for registration and filing of information Simpler constitutional form – the Commission will produce model forms of constitution which will include fewer fixed governance provisions than is the case with companies More straightforward arrangements for merger and reconstruction – the Charities Act 2006 contains a number of provisions designed to facilitate merger and reconstruction which are not available to charitable companies An enforcement regime which does not penalise the charity for the conduct of its directors Codified duties for directors and members which reflect the charitable nature of the CIO EC company law directives will not apply to CIOs

What is "Asset Lock"

“Asset Lock” is a general term used to cover all the provisions designed to ensure that the assets of the CIO (including any profits or other surpluses generated by its activities) are used for the benefit of the community