In August 2008, the U.S. Court of Appeals for the Federal Court rendered its decision in the case of Robert Jacobson v Matthew Katzer and Kamind Associates, Inc. (doing business as KAM Industries). The question at the heart of the case was whether a licensee that has not complied with the terms and conditions of an open source license had acted outside the scope of the license, giving rise to claim for copyright infringement and injunctive relief, or whether it had merely breached a covenant of the licensee, thereby limiting the licensor’s remedy to the recovery of damages.

Jacobson’s allegation that portions of his "DeCoder Pro" software, licensed under the terms of the Artistic License, were copied, modified, and distributed as part of the defendants’ competing software known as, "Decoder Commander ", was not in dispute. Also not in dispute was the fact that in copying, modifying and distributing the DeCoder Pro software, the defendants did not comply with the attribution and identification requirements set forth in the Artistic License.

Jacobson brought an action before the United States District Court for the North District of California for copyright infringement and moved for a preliminary injunction. In denying the motion for a preliminary injunction, the District Court held that the Artistic License was a license intentionally broad and unlimited and:

"[t]he condition that the user insert a prominent notice of attribution does not limit the scope of the license. Rather, Defendants’ alleged violation of the conditions of the license may have constituted a breach of the nonexclusive license, but does not create liability for copyright infringement where it would not otherwise exist."

In the opinion of the District Court, the conditions set out in the license were merely covenants of the licensee that fell outside of, and did not affect, the scope of the license. Defendants’ breach of such covenants gave rise to a claim for breach of contract, and such a breach does not give rise to a presumption of irreparable harm, one of the required elements for a preliminary injunction to be granted.

In vacating the decision of the District Court, the U.S. Court of Appeals concluded that the conditions in the Artistic License are to be regarded as restrictions on the scope of the license and not merely covenants of the licensee. In explaining its decision, the Court stated that "[c]opyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material…..Copyright licenses are designed to support the right to exclude; money damages alone do not support or enforce that right." The Court further stated that "because a calculation of damages is inherently speculative, these types of license restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief."

The decision has been widely celebrated by the open source community, as the threat of an injunction is regarded as a key means by which to ensure that open and collaborative development is maintained. As noted by the U.S. Court of Appeals, where the economic benefit derived by licensors of open source software is typically not measured in terms of license fees or royalties, the threat of a claim for damages will often be a weak deterrent to non-compliant licensees. While the decision is limited to a consideration of the Artistic License as interpreted under California law, it is sure to be cited by holders of copyright in open source software who wish to obtain injunctions against those who do not comply with the terms of open source licenses.