The intellectual property rights will be retained by award winners; however, as a condition of being funded, the award winner must agree to license such rights in accordance with the terms of the Creative Commons Attribution, Non-Commercial, ShareAlike License. If a project results in commercial use and profit to the award winner, then fifty (50) percent of any such profit will accrue to the University of California Humanities Research Institute to be used for future awards or other charitable purposes.
Have they required open licensing in the past? If not, this is a nice step forward. I know Tom Hoffman has been lobbying for a similar requirement to be placed on MacArthur funded software projects. Some will find this particular license a bit restrictive--and they don't seem to offer a choice--but I'm inclined to save that issue for another day.
One important thing to keep in mind in these situations is the distinction between copyright and licensing. The copyright holder can apply as many licenses to his or her content as he or she pleases. In this case, if the grant winner retains the copyright to the work, he or she must release the work under CC-by-nc-sa, but, in the absence of specific language to the contrary, he or she can also issue it under a commercial license or a less restrictive free content or software license. In this case, what the CC-by-nc-sa license is doing is providing a veneer of "openness" without substantially reducing the commercial value of the content.
Of course, the interesting bit here is not the first sentence of their statement, but the second, giving them 50% of any profits gained from the work by the award winner. So, this is as much investment as philanthropy, if not moreso. They put up $100,000 or $250,000, you produce something, they help you shop it to vendors or VC's ("Winners will be invited to showcase their work at a conference that will include venture capitalists, entrepreneurs, educators and policy makers..."), and they take 50% of anything you get for your work. Note of course that they don't get 50% of any subsequent profit from the work.
This isn't evil, but I find it dubious. Probably the biggest threat to their virtue is the temptation to pick grantees based on investment potential rather than educational or social value. I won't be surprised if potentially marketable games get chosen over work on open source collaborative writing tools.
There is an opportunity for corruption as well. Give a $250,000 grant to one friend, sell the work at a discount to another friend at below market value, taking a cut back to the Collabatory's coffers toward pulling the same trick again.
Beyond that, it simply galls me as the latest in a long string of ostensibly "open," collaborative, philanthropic gestures from academia to those of us in primary and secondary education that contains some subtle provisions which somehow sneakily assert their power and treat us like a bunch of hoopleheads. I doubt there is a single example of a foundation offering a deal like this to academics or established commercial firms (what's MacArthur's cut of the future profits of Gamestar Mechanic, eh?). Every single time something like this comes up I find myself digging around some consortium website trying to figure out what the fine print means. They just won't play straight with us.
Also, the whole 50% of the profits made by the "award winner" seems so ripe for exploit. How about if I sell the rights to my wife for a dollar and then she makes a million off it? What if I combine this work with other work in the future? How do I determine which fraction of my profits to give up? Are we talking gross or net?
If they want to encourage wide reuse of this content, which they should as a philantropic venture, they should require that it be issued under a permissive license, like CC-by or BSD. If they want to balance free access and the possibility of making back some money that they can reinvest in more grants, I'd propose that the Collaboratory retain the copyright on the work, issue it under a free, viral license like CC-by-sa or GPL, and offer commercial licenses to any buyer (including the grantee) at a fixed price (equal to the value of the grant, or some fraction thereof more or less, for example).
On top of everything else, this grant's approach is just old school. It is still more about using IP to make money than taking a commons-based approach to create innovation. This is the kind of thing we should be leaving behind.