Free software may sound like a joke if you're used to making big money from writing important programs. But it's no laughing matter -- and the open-source movement just got the last laugh against one of the biggest names in technology.

Cisco Systems (NASDAQ:CSCO) has been selling its Linksys brand of consumer networking product for years, allegedly without following proper protocol for the GNU/Linux (henceforth known as Linux, with apologies to Richard Stallman) software inside them. Specifically, Cisco should have provided source code for the Linux-based portions of their software, under the terms of the open-source GPL and Lesser GPL licenses.

Years of bantering turned into a brief courtroom kerfuffle, and now Cisco has settled the matter with the Free Software Foundation (FSF). A new director to oversee free software concerns at Linksys will have to touch base with the FSF on a regular basis, making sure that everything is on the up-and-up. Cisco will give an undisclosed sum of money to the FSF for its legal troubles, and the Foundation has dismissed the lawsuit.

This is a show of strength for the open-source community in general, and the GPL licensing model in particular. Verizon (NYSE:VZ) butted heads with the same license a year ago -- and acquiesced. As a result of that scuffle I can download full source code for my FiOS router now, or replace the unit's software with community-developed versions.

Victories like these should make other companies sit up and take notice. It's becoming clear that American courts seem to respect the terms of the GPL, and that it's not OK to ship out Linux-based products without the proper documentation. That's potentially good news for companies like SourceForge, which helps users and businesses track and share their code -- and licenses.

On the flipside, Wind River Systems (NASDAQ:WIND) is another winner, because it can simply provide embedded Linux software for gadgets like the network routers in question here, with proper disclosures from the software provider. When these licenses are battle-tested in court and stand up to challenges by well-funded opponents like Verizon and Cisco, it's another signal that open-source software development is built on solid ground.

The Microsoft (NASDAQ:MSFT) model of proprietary development worked out great for the Redmond goliath, Adobe Systems (NASDAQ:ADBE), and many others. However, a large part of the future software market may belong to open development and selling professional support, in the Red Hat (NYSE:RHT) mold, versus proprietary software licenses. We just heard another shot in that worldwide battle. And I think the rebels are winning.

Further Foolishness in the foothills of the frontier:

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.