Definitions
Every defined term, in plain words and in the words that govern.
Sixteen sections rest on twenty definitions, and almost every dispute about a licence is really a dispute about one of them. Each term below gives you the plain meaning first, then the exact clause text, then what it expressly leaves out. Where a definition reliably catches people out, that is called out rather than left for you to discover.
- Defined terms
- 22
- Groups
- 7
- Named traps
- 18
- Instruments
- All four
Read this first
Two revenue numbers do two different jobs.
This is the misreading that costs the most, so it is worth thirty seconds up front.
Annual Gross Revenue
Section 1.5Your whole group's total gross revenue over the trailing twelve months. This number, and only this number, decides whether you are Root or Canopy.
Decides which tier you are in.
The attributable portion
Section 5.1The part of that revenue directly attributable to products or services that depend on the work. Usually far smaller, and often zero.
Decides what a Canopy Licensee pays.
A Root Licensee pays nothing under Section 5.1 whatever the attributable figure is. Above the threshold the rate is half a percent of the attributable portion, and the ceiling of $250,000 per Legal Entity per calendar year starts to bind once attributable revenue reaches $50,000,000.
Worked through
What that actually costs, at six real sizes.
Every figure below is computed from the Section 5.1 rule rather than written by hand, so the table cannot drift from the text.
| Who | Group gross | Attributable | Tier | Owed per year |
|---|---|---|---|---|
Solo developer, consulting on the side Under the threshold, so Root. Nothing is owed however much of the revenue depends on the work. | $180,000 | $180,000 | Root | Nothing |
Eight-person agency Still under the threshold. Root, and no royalty. | $1,400,000 | $900,000 | Root | Nothing |
Funded startup, one product built on the work Canopy. The whole product depends on the work, so the whole gross is attributable. | $4,000,000 | $4,000,000 | Root | Nothing |
Scale-up where the work powers one feature Canopy, but only revenue from products that depend on the work sits in the base. | $30,000,000 | $2,000,000 | Canopy | Nothing |
Large company, above the cap The cap binds. Half a percent of ninety million would be far more, so the ceiling applies instead. | $400,000,000 | $90,000,000 | Canopy | $250,000 |
Two-person team owned by a large group Canopy from day one. Section 1.4 measures the whole group, not the team, so the tier follows the parent. | $900,000,000 | $300,000 | Canopy | Nothing |
The threshold itself is $20,000,000, re-indexed every first of January by the change in the United States Consumer Price Index for All Urban Consumers. Figures here use the unindexed base, so treat them as the shape of the calculation rather than as this year's exact line.
Who the licence is talking about
Four terms decide which obligations land on whom.
Licensor
Whoever owns or controls the rights in the work and has published it under this licence. That can be an individual or an entity.
The words that govern
Licensor means the individual or entity that owns or controls the rights in the Work and has published it under this Licence.
You, or Licensee
Any individual or Legal Entity exercising a right this licence grants. You become a Licensee by exercising a granted right, not by signing anything.
The words that govern
You, or Licensee, means any individual or Legal Entity exercising rights granted here.
Status follows conduct rather than paperwork. Exercising a granted right is what makes you a Licensee under this clause.
Legal Entity
The acting entity, plus every entity that controls it, that it controls, or that is under common control with it. Control means more than fifty percent of the voting interest, or otherwise directing that entity's management.
The words that govern
Legal Entity means the acting entity together with every entity that controls it, is controlled by it, or shares common control with it. Control means owning more than fifty percent of the voting interest, or otherwise directing the management of that entity.
This is the definition most people miss. It sets the group, and Section 1.5 then measures revenue across that whole group, so a subsidiary is assessed on its own revenue plus its parent and siblings, not on its own alone.
Contributor
The Licensor, plus any person or Legal Entity that intentionally submits a Modification for inclusion, by pull request, patch or any other means, where the Licensor then incorporates it.
The words that govern
Contributor means the Licensor and any person or Legal Entity that intentionally submits a Modification for inclusion in the Work, whether by pull request, patch, or any other means, and whose Modification is incorporated by the Licensor. The Licensor is a Contributor in respect of the Work as first released.
Between the author and the submitter, the clause names the submitter. And because Legal Entity is itself defined in Section 1.4, a submission made by a company brings that company's control group with it. Section 9 attaches the patent grant to Contributors, so who counts here reaches past attribution.
What is actually being licensed
The boundary between the work, a change to it, and a new thing built on it.
The Work
The thing being licensed, including every Modification the Licensor or a Contributor distributes as part of it.
The words that govern
The Work means the code, dataset, model weights, or agent skill made available by the Licensor under this Licence, including every Modification the Licensor or a Contributor distributes as part of it.
Modification
Any addition to, deletion from, or change in the substance or structure of the work, and works derived from the work.
The words that govern
Modification means any addition to, deletion from, or change in the substance or structure of the Work, and works derived from the Work.
Derivative Work
A work based on the work that incorporates a Modification, and that would infringe copyright in the work if it were made without permission.
The words that govern
Derivative Work means a work based on the Work that incorporates a Modification, and that would infringe copyright in the Work if made without permission. Mere aggregation with a separate and independent work on the same medium or in the same distribution is not a Derivative Work.
What it does not cover
Mere aggregation. A separate and independent work carried on the same medium or in the same distribution is not a Derivative Work.
Aggregation only holds where the two things genuinely stay separate and independent. Sharing a repository or a distribution does not by itself make them separate.
Which tier you are in
Two different revenue figures do two different jobs. Confusing them is the expensive mistake.
Annual Gross Revenue
Total gross revenue, not profit, of the Legal Entity and every entity under common control with it, measured on a trailing twelve month basis and converted to United States dollars at the rate published on the last day of the period.
The words that govern
Annual Gross Revenue means the total gross revenue of the Legal Entity and every entity under common control with it, measured on a trailing twelve month basis and converted to United States Dollars at the rate published on the last day of the period.
This figure decides your tier. Section 5.1 then charges a Canopy Licensee on the portion of that revenue directly attributable to products or services that depend on the work. Two figures, two jobs, and reading one for the other is the costly mistake.
Threshold Amount
Twenty million United States dollars unless the project schedule states a different figure, which may not be below two million, adjusted every first of January by the change in the United States Consumer Price Index for All Urban Consumers over the preceding calendar year.
The words that govern
Threshold Amount means Twenty Million United States Dollars, unless the Licensor states a different figure in the project schedule, in which case that figure governs every release the schedule accompanies. A schedule may not state a Threshold Amount below Two Million United States Dollars. The figure applying to a release is adjusted each first of January by the change in the United States Consumer Price Index for All Urban Consumers over the preceding calendar year.
The threshold is not a fixed number. The schedule accompanying a release may set it anywhere at or above two million, and whichever figure applies is re-indexed each January by the preceding year's CPI change. Read the schedule before assuming the default.
Root Licensee
A Licensee at or below the Threshold Amount, and additionally any Licensee that is a natural person, nonprofit organisation, educational institution or government body, at any size.
The words that govern
Root Licensee means a Licensee at or below the Threshold Amount, and additionally any natural person, nonprofit organisation, educational institution, or government body, provided that entity is not acting as a reseller or intermediary for a Legal Entity above the Threshold Amount.
What it does not cover
The size-free carve-out does not apply where that entity is acting as a reseller or intermediary for a Legal Entity above the Threshold Amount.
An otherwise size-exempt entity cannot be used as a pass-through for any Legal Entity above the threshold. The proviso closes that route on its own terms, whatever the parties intended.
Canopy Licensee
Any Legal Entity that is not a Root Licensee. The two definitions are complementary, so every Legal Entity is one or the other.
The words that govern
Canopy Licensee means any Legal Entity that is not a Root Licensee.
Compute is not a third revenue tier. Section 6 removes AI Training Use from the base grant at every tier, so a Root Licensee needs a Compute licence just as a Canopy Licensee does.
What counts as use
Four terms decide whether a royalty is owed and whether a use competes.
Production Use
Using the work, in whole or in part, in a system made available to a third party, either internally at operating scope or externally to customers or the public.
The words that govern
Production Use means using the Work, in whole or in part, in a system made available to a third party, whether internally at operating scope or externally to customers or the public. Development, testing, evaluation, research, and personal non-revenue use are not Production Use.
What it does not cover
Development, testing, evaluation, research, and personal non-revenue use are expressly not Production Use.
Internal does not by itself put a Canopy Licensee outside Section 5.1. The clause reaches a system made available to a third party, whether that happens internally at operating scope or externally to customers, so what the system is exposed to decides rather than the word internal. Note also the words in whole or in part, which mean using a portion of the work still counts.
Commercialization
Offering, selling, sublicensing, reselling, distributing for consideration, hosting for consideration, or otherwise monetizing access to the work, or to a product or service whose value derives entirely or substantially from the work.
The words that govern
Commercialization means offering, selling, sublicensing, reselling, distributing for consideration, hosting for consideration, or otherwise monetizing access to the Work or to a product or service whose value derives entirely or substantially from the Work.
Competing Offering
A product or service, other than your own larger independent product, that sells, sublicenses, redistributes, hosts, ports, packages or exposes the work or a Derivative Work of it, where its value derives entirely or substantially from the protected substance of the work, and a reasonable buyer would treat it as a substitute for the work or for something the Licensor operates or authorizes.
The words that govern
Competing Offering means a product or service, other than the Licensee's larger independent product, that sells, sublicenses, redistributes, hosts, ports, packages, or exposes the Work, or a Derivative Work of it, in a manner whose value derives entirely or substantially from the functionality, components, design, corpus, weights, prompts, workflows, or other protected substance of the Work, and that a reasonable buyer would treat as a substitute for the Work or for a product or service operated or authorized by the Licensor.
What it does not cover
Your own larger independent product is written out of this definition by its opening words.
The definition has two limbs and both have to be met. Value deriving substantially from the work is not enough on its own, and neither is substitutability on its own. A port is named in the list, and it still has to satisfy both limbs before it is a Competing Offering.
Substantial Independent Functionality
Functionality, content, data, model capability, workflow value, user experience or service value supplied by you, where what you supply is not merely one of the excluded treatments of the work.
The words that govern
Substantial Independent Functionality means functionality, content, data, model capability, workflow value, user experience, or service value supplied by the Licensee that is not merely configuration, restyling, renaming, format conversion, wrapping, bundling, hosting, or porting of the Work.
What it does not cover
Configuration, restyling, renaming, format conversion, wrapping, bundling, hosting and porting do not count on their own.
The operative word in the clause is merely. Your contribution is allowed to build on the work, and those activities are not disqualifying in themselves. They are simply not enough on their own, so something you actually supply has to sit alongside them.
AI training
Three terms cover the act, the dataset it travels in, and what comes out the other side.
AI Training Use
Using the work, or any Derivative Work, Corpus Inclusion or Extracted Fragment of it, as input to the training, fine-tuning, distillation, reinforcement, retrieval augmentation, embedding generation or evaluation of a machine learning model.
The words that govern
AI Training Use means using the Work, or any Derivative Work, Corpus Inclusion, or Extracted Fragment of it, as input to the training, fine-tuning, distillation, reinforcement, retrieval augmentation, embedding generation, or evaluation of a machine learning model, whether the Work is used directly by You or reaches the model through a scraped, mirrored, aggregated, or third-party dataset.
It applies whether you used the work directly or it reached your model through a scraped, mirrored, aggregated or third-party dataset. Routing it through someone else's corpus does not clear the requirement.
Corpus Inclusion
Including the work in any dataset, archive, index or corpus compiled, maintained or distributed for the purpose of AI Training Use, or with actual knowledge that it will be used for AI Training Use.
The words that govern
Corpus Inclusion means including the Work in any dataset, archive, index, or corpus compiled, maintained, or distributed for the purpose of AI Training Use, or with actual knowledge that it will be used for AI Training Use.
Maintaining or distributing such a corpus counts, not only compiling one. The purpose or actual-knowledge condition still has to be met, so what matters is what you do with the dataset rather than who first built it.
Extracted Fragment
Any portion of the work reproduced word for word or substantially so within a model's weights, embeddings or outputs, including by memorisation.
The words that govern
Extracted Fragment means any portion of the Work reproduced, word for word or substantially so, within a model's weights, embeddings, or outputs, including by memorisation, and whether or not the reproduction was intended by any party.
It applies whether or not the reproduction was intended by any party. Intent is not an element of this definition.
Reporting and payment
Who you report to, and what the report is.
Canopy Report
The quarterly self-certified revenue disclosure described in Section 5.
The words that govern
Canopy Report means the quarterly self-certified revenue disclosure described in Section 5.
Section 5.2 carries the mechanics. The report goes to the Clearinghouse within thirty days of each calendar quarter end, stating in good faith your Annual Gross Revenue, the attribution method you applied, and the amount remitted. Section 5.3 makes good-faith self-certification the default and lets the Licensor or the Clearinghouse request supporting documentation no more than once in any twelve month period, absent a documented reason to suspect misstatement.
Clearinghouse
The collection and metering body that receives Canopy Reports and Compute Fees and remits payment, whether the Licensor administers it directly or a shared collecting body does.
The words that govern
Clearinghouse means the collection and metering body, whether self-administered by the Licensor or a shared collecting body, that receives Canopy Reports and Compute Fees and remits payment. The Clearinghouse for this Work is named in Exhibit A. Where no Clearinghouse is named, the Licensor is the Clearinghouse and shall publish an address for reports and payment at the canonical address of the Work. An obligation to report or remit is suspended, and no default arises, for so long as no address is published.
It is not global. The Clearinghouse for a given work is named in Exhibit A of that work's own licence file, so check the file you actually adopted rather than assuming a central one.
Risk and corporate group
Two terms added in 2.0. One decides where the safety assessment sits, the other decides how the threshold is counted.
High-Risk Use
Any use where a failure of the work could reasonably lead to death, injury, serious property damage, or severe environmental harm. Section 18.1 lists the settings, from clinical decision support to aircraft to critical infrastructure.
The words that govern
High-Risk Use has the meaning given in Section 18.1.
The licence does not forbid this use. It states that the work was never designed, tested, or certified for it, so the validation, clearance, and oversight all sit with the party that deploys it, together with an indemnity back to the licensor under Section 18.3.
Affiliate
Any entity that controls you, that you control, or that sits under common control with you, where control means more than fifty percent of the voting interests or the power to direct management.
The words that govern
Affiliate has the meaning given in Section 22.1, and revenue is measured across a Licensee and its Affiliates on the combined basis stated in Section 22.2.
Revenue is counted across the whole group, and Section 22.2 catches restructuring by effect as well as by purpose. Splitting an entity to stay under the threshold does not work, and an acquisition re-tiers you from the date it closes.
Next
Where to go once a term is clear.
A definition tells you what a word means. These three tell you what it does to your situation.
Scenarios
Your case, resolved
Pick your artifact, role and situation and get the answer without reading the sections yourself.
Legalcode
The full text
Every clause of all four instruments, with the reasoning attached to each one.
FAQ
The common questions
Cost, AI training, competing use and compatibility, answered straight.