Open Source Software (OSS) Representations and Warranties are an integral part intellectual property (IP) representations and warranties in mergers and acquisitions (M&A) transactions and financings, as M&A transaction documents routinely include requests for a seller to represent and warrant that it has implemented policies regarding the use of open source software, has provided these policies to the purchaser or investor, and has not deviated from these policies. These representations and warranties are important, but they are systematically and necessarily supported by the due diligence process.
Adequate due diligence helps “verify” representations and warranties, allowing a buyer (and its investors and financiers) to dig deeper and examine a seller’s use of open source software and determine the impact of ‘such use on the value of the object. Seller IP.
Another important legal consideration in connection with acquiring a business and assessing the value and proprietary nature of a company’s intellectual property is whether the open source software is generated through the seller’s use. of generative artificial intelligence (AI) platforms and whether this use is adequately disclosed to the potential buyer.
A standard OSS request regarding due diligence in an acquisition is: “Please describe the seller’s open source policy (if applicable) and provide information on whether the seller uses open source software and in particular any viral code in any product distributed by seller.”
Common answers to such a question would be “we do not have an open source policy”, “please see our open source policy”, “attached please find a list of open source software we use” or “we do not “We don’t have an open source policy.” I don’t use any open source software,” among other answers. This gives the buyer the information it needs to ask additional questions and/or determine whether the seller’s representations are adequate and/or whether the buyer’s intellectual property is at risk (in terms of ownership rights or value) due to its use of such free software.
These questions and answers have been quite common for years, but, in light of recent technological advances related to the creation of software code, a buyer should also ask whether a seller uses (or whether its open source policy permits use by the seller) of generative software. AI programs or platforms to write its software code, and whether the seller has a separate AI use policy or AI guidelines, as in some circumstances the generated code may include chunks free software or third-party code.
It is important to note that not all generative AI programs or platforms are the same or have the same usage parameters or results. It is therefore essential to understand how each program/platform works and whether it complies with information security and openness of the company. -source policies. Regardless, using generative AI to create software code could add additional potential risk of OSS existence that the vendor may not have considered as such since it was “created” by its engineers and therefore has not been adequately disclosed under the Representations and Warranties.
Summer associate Cooper J. Attig contributed to this post.