OK, here's the new first paragraph:
Copyright in the product produced as a result of the award shall remain with the successful Applicant subject to the terms of the Competition. Each Applicant must agree, however, that if it receives an award it will license the use of the product in accordance with a Creative Commons License (Creative Commons Attribution, Non-Commercial, ShareAlike) or be Open Source.
I think the underlying problem with what they're trying to do comes from the first sentence; giving the intellectual property rights to the grantee, but with ambiguous encumbrances. I don't, as a general point, see why the recipient of a philantropic grant (or a wage) should get copyright over paid work. As an American, I'm just used to not recognizing the "moral right of the author." More practically, I think a much cleaner route to the grant's apparent goals for IP would be for the grantors to retain the copyright and make the work available under a free content or software license to anyone.
The second sentence of the quoted paragraph is so imprecise that it is hard to believe they actually consulted with lawyers in making this revision, or, for that matter, it is hard to believe they spoke to anyone who knew anything about open source software licensing. Does the grantee have to choose the CC-by-nc-sa license? In the first version they clearly did, now it might be a suggestion. Perhaps other CC licenses are permissible?
The tacked on "or be Open Source" should be something like "or under an Open Source Initiative approved license." More importantly, there is a huge difference between the terms of the by-nc-sa license and an open source license. Specifically, the Open Source Definition explicitly disallows restrictions on commercial redistribution:
6. No Discrimination Against Fields of Endeavor
Thelicense must not restrict anyone from making use of the program in a specific field of endeavor. For example, it may not restrict the program from being used in a business, or from being used for genetic research.
Rationale: The major intention of this clause is to prohibit license traps that prevent open source from being used commercially. We want commercial users to join our community, not feel excluded from it.
If it is open source, you can't limit its commercial use. This contradicts the terms of the next section in the grant's IP terms, "Use of Revenues Generated By Distribution of Product." I'm not going to go into that section in detail, because it is just not clear to me how binding it all is. They state:
Applicable law and the policies of the MacArthur Foundation preclude the use of grant funds to further or benefit private interests in a manner that is more than incidental to a broader charitable purpose.
Do those laws apply to the recipient, or just the grantor? In particular, what if I have no intention of using the work commercially when I make the grant, but when it is completed I'm offered money to sell the IP? Can I do that, or is the IP encumbered indefinitely, despite the fact that I "own" it? If I can't sell it, is there any point in my owning it? Wouldn't it make more sense for the grantor to own it and just give me a non-commercial license to the work?
The first version of this IP policy struck me as an insulting, vaguely exploitative mess; they've improved it to the point where it is just a mess.
For the record, I think the smartest approach would be to say:
- The Foundation (or whatever institution is appropriate) owns the work;
- The Foundation will make the work available under the CC-by or, in the case of software, the BSD license.
And that's it. What's so tough about that?