Judges: Michel, Prost, Hochberg (District Judge sitting by designation; author)

[Appealed from N.D. Cal., Judge White]

In Jacobsen v. Katzer, No. 08-1001 (Fed. Cir. Aug. 13, 2008), the Federal Circuit vacated and remanded the district court’s denial of Robert Jacobsen’s motion for preliminary injunction, holding that the district court erred in dismissing Jacobsen’s copyright infringement claim based on violations of his open source copyright license.

Jacobsen holds a copyright to computer programming code, which he makes available to the public pursuant to the Artistic License, an “open source” or public license. Jacobsen manages an open source software group called Java Model Railroad Interface (“JMRI”), which created a computer programming application called DecoderPro. DecoderPro allows model railroad enthusiasts to use their computers to program the decoder chips that control model trains. DecoderPro fi les are available for download at an open source website called SourceForge and contain copyright notices that refer users to a “COPYING” fi le, which sets forth the terms of the Artistic License.

Matthew Katzer and Kamind Associates, Inc. (collectively “Katzer/Kamind”) offer a competing software program, Decoder Commander, which is also used to program decoder chips. During the program’s development, one of Katzer/Kamind’s predecessors or employees allegedly downloaded the decoder defi nition fi les from DecoderPro and used portions of the fi les in the Decoder Commander software without complying with the terms of the Artistic License. Jacobsen moved for a preliminary injunction, arguing that the violation of the terms of the Artistic License constituted copyright infringement, which, under Ninth Circuit law, created a presumption of irreparable harm. The district court denied the motion, fi nding Jacobsen did not have a cause of action for copyright infringement.

On appeal, the Federal Circuit examined the history and purpose of open source licenses, describing them as “a widely used method of creative collaboration that serves to advance the arts and sciences in a manner and at a pace that few could have imagined just a few decades ago.” Slip op. at 6. The Court noted the economic difference between free open source licensing and traditional copyright licensing, in which copyright owners sold their copyrighted material in exchange for money, stating that the lack of money changing hands in open source licensing should not be presumed to mean there is no economic consideration. The Court went on to note the substantial benefi ts of the creation and distribution of copyrighted works under open source licenses, including many economic benefi ts that go beyond the traditional copyright royalties.

The Federal Circuit held that Jacobsen established a prima facie case of copyright infringement because (1) Jacobsen was the undisputed owner of copyrights in the DecoderPro software; and (2) Katzer/Kamind admitted copying portions of the DecoderPro software. Accordingly, the question of Jacobsen’s entitlement to injunctive relief turned on whether the terms of the Artistic License were conditions of, or merely covenants to, the license. If the terms were both covenants and conditions of the license, then they may serve to limit the scope of the license and are governed by copyright law. On the other hand, if the terms were merely covenants of the license, then they were governed by contract law.

The Court noted that the Artistic License stated on its face that the document creates conditions. The conditions explicitly restricted a downloader’s right to modify and distribute the copyrighted work. The Court held that copyright holders who engage in open source licensing have the right to control the modifi cation and distribution of copyrighted material. The Court also noted that copyright licenses are designed to support the right to exclude, and that money damages alone do not support or enforce that right. The choice to exact consideration in the form of compliance with the open source requirements of disclosure and explanation of changes, rather than a dollar-denominated fee, is entitled to no less legal recognition.

The Court held that the clear language of the Artistic License creates conditions to protect the economic rights at issue in the granting of a public license. The Court then vacated the district court’s order and remanded to determine whether Jacobsen demonstrated either a likelihood of success on the merits and a presumption of irreparable harm, or a fair chance of success on the merits and a clear disparity in the relative hardships tipping in his favor.