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I have come across a web application project on GitHub that uses AGPLv3 as it's primarily licensed, but a sub-folder of the project is provided under a proprietary license. This contains the code for certain "enterprise"/paid-for features. This sub-folder is not dual-licensed, just provided under a custom proprietary license (Preventing production use).

As far as I can tell from looking at the code, since I have not downloaded & built the application, the AGPLv3 portion appears to rely on the sources in the proprietary sub-folder.

I respect that they can license code as they'd like, being the copyright holder, but is such a required proprietary section compatible with the freedoms provided in the AGPLv3? I'm not sure how the AGPLv3 applies to the application as a whole vs as parts of source code.

Reading the AGPLv3, this looks most relevant (Section 7, paragraph 1):

If additional permissions apply only to part of the Program, that part may be used separately under those permissions, but the entire Program remains governed by this License without regard to the additional permissions.

Based on that you could argue the AGPLv3 would apply to that sub-folder, being part of "the entire Program", but it could also be argued that everything but the proprietary section was provided as "the entire Program", albeit an incomplete one. If it provides context, the application is actively marketed as "Open Source".

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If the entire work is written by a single copyright holder (or multiple copyright holders working together in concert) then there is no problem. It may be the case that you, as a recipient, cannot further redistribute the application, because distribution of an AGPL-licensed app with AGPL-incompatible components would cause an AGPL violation. But this is only a problem for you because the set of rights granted to you do not allow the inclusion of proprietary components in an overall AGPL work. The copyright holder was free to do so because their distribution did not rely on any license grant.

You can still make use of your AGPL rights by removing the proprietary components and including the AGPL-licensed parts in your own AGPL-licensed application (which may in some way resemble the original or do something else entirely).

Section 7, paragraph 1 says that if there is a section of code that is more permissively licensed (e.g., under an MIT/Expat or BSD license) then that permissive code's inclusion within a larger AGPL work does not diminish those more permissive rights for that particular part. This is not the case you have here, which concerns a less-permissively licensed component.

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