Is distributing python source code in Docker secure?

Docker images are an open and documented "application packaging" format. There are countless ways to inspect the image contents, including all of the python source code shipped inside of them.

Running applications inside of a container provides isolation from the application escaping the container to access the host. They do not protect you from users on the host inspecting what is occurring inside of the container.

Python programs are distributed as source code. If it can run on a client machine, then the code is readable on that machine. A docker container only contains the application and its libraries, external binaries and files, not a full OS. As the security can only be managed at OS level (or through encryption) and as the OS is under client control, the client can read any file on the docker container, including your Python source.

If you really want to go that way, you should consider providing a full Virtual Machine to your client. In that case, the VM contains a full OS with its account based security (administrative account passwords on the VM can be different from those of the host). Is is far from still waters, because it means that the client will be enable to setup or adapt networking on the VM among other problems...

And you should be aware the the client security officer could emit a strong NO when it comes to running a non controlled VM on their network. I would never accept it.

Anyway, as the client has full access to the VM, really securing it will be hard if ever possible (disable booting from an additional device may even not be possible). It is admitted in security that if the attacker has physical access, you have lost.

TL/DR: It in not the expected answer but just don't. It you sell your solution you will have a legal contract with your customer, and that kind of problem should be handled at a legal level, not a technical one. You can try, and I have even given you a hint, but IMHO the risks are higher than the gain.