docs: Add License complience design docs

Signed-off-by: Ronald Caesar <github43132@proton.me>

design_docs/DESIGN_DOC_LICENSE_COMPLIENCE.md

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+**Design Document: Developer-Managed License Compliance Process**
+
+**Author:** GloriousTacoo, Lead Developer
+**Status:** FINAL   
+**Version:** 1.0  
+**Date:** 2025-09-20
+
+*Disclaimer: This document was mostly written by AI. I'm not a good technical writer.
+
+### **1. Problem Statement**
+
+We require a systematic, defensible process for evaluating the license compatibility of third-party code in the Pound Virtual Machine project without access to legal experts. As developers without legal training, we face the challenge of making informed decisions about license compliance while minimizing legal risk to the project and its users. The current approach lacks structure and documentation, potentially exposing the project to license violations that could result in legal action, forced code removal, or project termination. We must establish a clear, conservative process that developers can follow to evaluate third-party licenses, document their decisions, and know when to seek outside help or reject potentially problematic dependencies.
+
+### **2. Glossary**
+
+License compatibility refers to the ability to combine software under different licenses without violating the terms of any license. Permissive licenses are licenses that impose minimal restrictions on how software can be used, modified, and redistributed, such as MIT, BSD, and Apache licenses. Copyleft licenses are licenses that require derivative works to be distributed under the same license terms, with varying degrees of strength, such as GPL, LGPL, and MPL. License proliferation refers to the complexity that arises when a project includes many different licenses, making compliance difficult. License audit is the process of reviewing all third-party code in a project to ensure license compliance. FOSS (Free and Open Source Software) refers to software that is both free to use and open source, with licenses that meet specific criteria for freedom and openness. SPDX (Software Package Data Exchange) is a standard format for communicating license information, including standardized license identifiers.
+
+### **3. Breaking Changes**
+
+Implementing a structured license compliance process will require immediate changes to how third-party code is evaluated and included in the project. All existing third-party dependencies must undergo retroactive license review using the new process, with non-compliant dependencies either removed or replaced. The project documentation will need to include a comprehensive license inventory and attribution file. Developer workflows will be modified to include license review as a mandatory step before any third-party code can be integrated. The build system may need updates to include license information in generated binaries or distributions. These changes represent a significant shift in project governance and will require strict enforcement to be effective.
+
+### **4. Success Criteria**
+
+A successful license compliance process must ensure that all third-party code included in the project has been reviewed for license compatibility and documented appropriately. The process must be simple enough for developers without legal training to follow consistently while still providing reasonable protection against license violations. All third-party inclusions must be accompanied by clear license information and attribution in a standardized format. The process must include clear guidelines for handling ambiguous or complex license situations, with conservative defaults that favor exclusion when in doubt. The project must maintain a complete and up-to-date inventory of all third-party licenses that is easily accessible to users and contributors. Developers must be able to quickly determine whether a potential dependency meets the project's licensing requirements through a clear, documented decision tree.
+
+### **5. Proposed Design**
+
+Our philosophy must be that license compliance is a non-negotiable aspect of software development that requires the same rigor and attention as technical correctness. We will implement a conservative approach that prioritizes legal safety over technical convenience, excluding any third-party code that presents unclear or incompatible licensing. The process will be designed to be followed by developers without legal expertise, relying on clear guidelines, standardized tools, and conservative decision-making. We will maintain a whitelist of pre-approved licenses that have been determined to be compatible with our project's license, with any license not on this list requiring exceptional scrutiny and justification. The process will emphasize thorough documentation of all license reviews and decisions, creating an audit trail that demonstrates due diligence in compliance efforts.
+
+### **6. Technical Design**
+
+The license compliance process will be built around a standardized workflow that all developers must follow when considering third-party code. The process begins with identifying the license of any potential dependency using automated tools and manual verification. The identified license is then compared against our project's whitelist of approved licenses, with any deviation requiring additional scrutiny. For licenses not on the whitelist, developers will follow a structured decision tree that evaluates specific compatibility concerns based on predefined criteria. All license reviews must be documented in a standardized format, including the license text, compatibility analysis, and justification for the decision. The project will maintain a central inventory of all third-party licenses, updated automatically as new dependencies are added or removed. This inventory will be included in project distributions to ensure proper attribution and compliance with license terms.
+
+### **7. Components**
+
+The license compliance process consists of several key components that work together to ensure systematic evaluation of third-party code. The license whitelist serves as the primary filter, containing only licenses that have been pre-approved for use in the project based on their compatibility with our project's license. The license review workflow provides a step-by-step process for developers to follow when evaluating new dependencies, including specific questions to answer and documentation requirements. The license inventory is a comprehensive record of all third-party licenses in the project, maintained in a standardized format and included in project distributions. The license compatibility guidelines document provides detailed information about how different license types interact and what restrictions they impose, written in terms accessible to developers without legal training. The escalation process defines clear paths for seeking additional guidance when encountering complex or ambiguous licensing situations beyond the expertise of the development team.
+
+### **8. Dependencies**
+
+This license compliance process depends on several critical elements to be effective. Developers must have access to reliable tools for identifying and categorizing software licenses, such as FOSSology, licensee, or similar automated license detection tools. The project must maintain clear, accessible documentation of the license compliance process, including the whitelist of approved licenses and the review workflow. Development leads must be trained in the license review process and empowered to enforce compliance requirements. The project must establish relationships with open-source legal resources or communities that can provide guidance on complex licensing questions. The version control system must support the documentation requirements of the process, allowing for clear attribution and tracking of license information alongside the code that uses it.
+
+### **9. Major Risks & Mitigations**
+
+The primary risk is that developers without legal training may misinterpret license requirements or overlook important restrictions, leading to unintentional license violations. This will be mitigated through comprehensive training, clear guidelines, and conservative decision-making that favors exclusion when there is any doubt about license compatibility. Another significant risk is that the process may be perceived as too burdensome, leading developers to bypass it or cut corners to save time. This will be addressed by streamlining the process as much as possible while maintaining its effectiveness, and by integrating license review into the existing development workflow rather than treating it as a separate, onerous task. There is also a risk that the whitelist of approved licenses may be too restrictive, limiting the availability of useful third-party libraries. This will be managed by periodically reviewing and expanding the whitelist based on careful analysis of additional licenses that demonstrate clear compatibility with our project's requirements.
+
+### **10. Out of Scope**
+
+This license compliance process does not provide legal advice or guarantee protection against legal action. It is designed to demonstrate due diligence and minimize risk, but it cannot replace professional legal counsel when needed. The process does not address patent issues, which are a separate and more complex area of intellectual property law that requires specialized expertise. The process does not cover the licensing of the Pound project itself, which is already established as GPL-2.0. International licensing variations and jurisdiction-specific legal requirements are beyond the scope of this process, which focuses on widely recognized open-source licenses and their general compatibility. The process also does not address trademark issues, which may arise separately from copyright licensing concerns.
+
+### **11. Alternatives Considered**
+
+The primary alternative considered was hiring legal counsel to review all third-party licenses, which would provide the highest level of protection but is not feasible given our resource constraints. Another alternative was to use only public domain or permissively licensed software, which would simplify compliance but would severely limit the available third-party code and potentially exclude valuable libraries. A third alternative was to ignore license compliance entirely, which would expose the project to significant legal risks and is fundamentally incompatible with responsible open-source development. Each of these alternatives was rejected as either impractical or contrary to the project's commitment to responsible software development practices.
+
+### **12. Recommendation**
+
+After careful consideration of available options, implementing a structured, developer-managed license compliance process represents the most practical approach for ensuring license compatibility in the Pound project. This process balances the need for legal protection with the reality of operating without access to legal experts. The implementation should begin immediately with the establishment of a license whitelist based on clearly defined criteria, followed by the development of standardized documentation and tools to support the review workflow. All developers must be trained in the license compliance process and empowered to enforce its requirements. The process should be integrated into the existing development workflow, with license review becoming a standard part of evaluating any third-party dependency. While this approach cannot provide the same level of protection as professional legal counsel, it demonstrates a good-faith effort to comply with license obligations and significantly reduces the risk of unintentional violations. This process represents the best possible approach to license compliance given our constraints and resources.