Docs: Clarify licensing information

Change-Id: Iaec2ccc317e1b17f5f12ceb8c7e04a8efa228d40
Signed-off-by: Kevin Peng <kevin.peng@arm.com>
diff --git a/readme.rst b/readme.rst
index 5f885e0..39df659 100644
--- a/readme.rst
+++ b/readme.rst
@@ -1,26 +1,44 @@
 ########################
 Trusted Firmware-M Tests
 ########################
-
 The Trusted Firmware-M(TF-M) Tests repo is meant to hold various tests for the
 `Trusted Firmware-M`_.
 The TF-M tests mainly focus on functionalities of various TF-M componentes such
-as the TF-M core and various secure partitions.
+as the TF-M SPM and various Secure Partitions.
 
 There is also the `psa-arch-tests`_ suite which mainly focuses on the
-implementation compliance of the Platform Security Architecture(PSA).
+implementation compliance of the Platform Security Architecture (PSA).
 
 ****************
 Folder Structure
 ****************
-
 - app - The application code that executes the testing, including both the TF-M
   tests and the `psa-arch-tests`_.
 - docs - The documents about test developments.
 - CMSIS - The libraries of RTX which is the Non-secure RTOS of the tests
 - test - The TF-M test codes including test framework, test suites and test
   services
+- lib/ext - 3rd party projects. May contain either imported source codes or CMake files to fetch the
+  projects.
 
+#######
+License
+#######
+The software is provided under a BSD-3-Clause :doc:`License </license>`.
+Contributions to this project are accepted under the same license with developer sign-off as
+described in the
+`TF-M Contributing Guidelines <https://tf-m-user-guide.trustedfirmware.org/contributing/contributing_process.html>`__
+
+This project contains code or pre-built binaries from other projects as listed below.
+The code from external projects is limited to ``CMSIS`` and ``lib`` folders.
+The original license texts are included in those folders.
+
+  - ``CMSIS`` - `Apache License <http://www.apache.org/licenses/>`__ Version 2.0 license
+  - The ``lib/ext`` folder may contain 3rd party projects and files with diverse licenses.
+    Here are some that are different from the BSD-3-Clause and may be a part of the runtime image.
+    The source code for these projects is fetched from upstream at build time only.
+
+    - ``erpc`` - `Modified BSD-3-Clause license <https://github.com/EmbeddedRPC/erpc/blob/develop/LICENSE>`__
 
 ####################
 Feedback and support
@@ -31,4 +49,4 @@
 .. _Trusted Firmware-M: https://git.trustedfirmware.org/TF-M/trusted-firmware-m.git/
 .. _psa-arch-tests: https://github.com/ARM-software/psa-arch-tests
 
-*Copyright (c) 2020-2022, Arm Limited. All rights reserved.*
+*Copyright (c) 2020-2023, Arm Limited. All rights reserved.*