A squabble among model railroad enthusiasts has derailed some assumptions about the enforceability of “open source” licenses, generating a ruling by the U.S. Court of Appeals for the Federal Circuit that could expose users of free software to claims of copyright infringement.

Jacobsen v. Katzer (Fed. Cir. No. 2008-1001, issued 8/13/08), available at http://www. cafc.uscourts.gov/opinions/08-1001.pdf, supports the rights of computer programmers to control downstream use of open source programs, including distribution, modification, and reproduction of software. The ruling also signals potential liability of those who violate open source licensing agreements, establishing that when certain conditions of these agreements are breached, the violators are copyright infringers.

An open source license, also called by the court a “public license,” is one that dedicates a work for public use. Open source works are usually distributed online for free and have become a means of creative collaboration online, used by such sites as the GNU/Linux operating system and the web-based encyclopedia Wikipedia. Since the licenses are usually royalty free, misuse may not trigger actual damages under copyright law, but if copyright in the infringed software has been registered with the U.S. Copyright Office, violators of the license, regardless of their intent, may find themselves subject to liability for attorneys’ fees and costs and/or statutory damages under the Copyright Act.

Clients on both sides of open source licensing contracts are advised to reassess and, where necessary, redraft agreements in light of this ruling. Licensors would be prudent to include conditional language in their agreements, since under Jacobsen the inclusion of conditions (as distinguished from covenants) in licenses creates cognizable copyright infringement claims. Conversely, licensees should immediately review their licenses to ensure that they are in compliance with all conditions so as not to be vulnerable to infringement liability.

Case Background

Jacobsen v. Katzer involved the commercial misappropriation of an open source computer program by a software publisher that specializes in model railroad hobbyist software. Robert Jacobsen and his collaborators created DecoderPro, a program that allows hobbyists to use their computers to program decoder chips that control model trains. Jacobsen registered the copyright in DecoderPro and made the program available as a free internet download pursuant to the “Artistic License,” an open source license.

Some time later, source code for DecoderPro was incorporated into a commercial product called Decoder Commander. Jacobsen sued the product’s makers, Matthew Katzer and Kamind Associates, for copyright infringement under the terms of the Artistic License that accompanied the DecoderPro download. The U.S. District Court for the Northern District of California held that the open source Artistic License created an “intentionally broad” nonexclusive license that was unlimited in scope and thus did not create infringement liability. Furthermore, the court denied Jacobsen a preliminary injunction to stop distribution of Decoder Commander, finding that his only cause of action was for a contract breach of a nonexclusive license, a claim that (unlike copyright infringement) creates no presumption of irreparable harm.

Jacobsen appealed the order denying the preliminary injunction. Due to the existence of a related patent claim the dispute went to the Federal Circuit Court of Appeals, where it was heard by a three-judge panel that included Chief Judge Paul Michel. Absent the patent claim, the case would have been sent to the U.S. Court of Appeals for the 9th Circuit.

The Federal Circuit characterized the issue on appeal as a decision over “the ability of a copyright holder to dedicate certain work to free public use and yet enforce an ‘open source’ copyright license to control the future distribution and modification of the work.” The court stated:

The heart of the argument on appeal concerns whether the terms of the Artistic License are conditions of, or merely covenants to, the copyright license. Generally, ‘a copyright owner who grants a non-exclusive license to use his copyrighted material waives his right to sue the licensee for copyright infringement’ and can sue only for breach of contract. ... If, however, a license is limited in scope and the licensee acts outside the scope, the licensor can bring an action for copyright infringement. ... Thus, if the terms of the Artistic License allegedly violated are both covenants and conditions, they may serve to limit the scope of the license and are governed by copyright law. If they are merely covenants, by contrast, they are governed by contract law.

The court then analyzed the contract language, finding that because Jacobsen’s Artistic License on its face used the term “condition,” as well as the phrase “provided that” (which under California state law signifies a condition) the terms of the license were enforceable under copyright law.

Furthermore, the Federal Circuit wholly rejected Katzer’s arguments that because DecoderPro was offered for free public use, and anonymous users were invited to modify the program, there was no economic consideration protectable by copyright law. “The lack of money changing hands in open source licensing should not be presumed to mean that there is no economic consideration,” the court wrote. Among the “substantial benefits, including economic benefits” of open source licensing, the court recognized (1) generating market share by offering program components for free, (2) increasing the programmers’ national and international reputation, and (3) rapid improvement to a product, free of charge, by experts unknown to the copyright holder.

Recognizing that the terms of the Artistic License were enforceable copyright conditions, the Federal Circuit remanded the case for a new determination of whether Jacobsen’s claims warranted injunctive relief.

Analysis

In Jacobsen the Federal Circuit determined that the terms of an open source license – if the language of the license is appropriately crafted – may be enforced as conditions of use under copyright law. Furthermore, the court recognized inherent economic motives for open source licenses even where profit is not immediate. The ruling has rightly been hailed as a major victory for the open source movement.

The case serves as a strong signal to creators and users of open source software to reevaluate and, if necessary, modify their license agreements with the help of attorneys. Licensors would be wise to incorporate language of conditions into their nonexclusive, open source agreements, since this may enable them to better control downstream uses of their creations. On the other hand, business entities and individuals who use open source software should exercise additional caution when entering open source licensing contracts, since violation of this type of agreement now clearly carries with it the potential of a copyright infringement claim. Users of open source software should be aware of the legal remedies that may be available to a successful plaintiff in copyright infringement lawsuit, including statutory damages and reimbursement of reasonable attorneys’ fees – remedies that are not be available under contract law.