Some comments about how GCC could have avoided this made me think that this is a setback for free software, but why isn't this just a rising tide benefiting both free and proprietary software?

The NCSA license explicitly allows sublicensing, so both the GNU project and Microsoft can create derivatives under free and proprietary licenses respectively, for example.

[I am not a lawyer, but this is the reasoning of the accepted answer to a stackexchange question applied to the NCSA license: http://programmers.stackexchange.com/questions/105912/can-yo...]