Increasingly, software licensors are opting to license their software under non-traditional license arrangements. These license agreements can take a variety of forms, but are most commonly marked by their tit-for-tat approach. For instance, the licensor may make the source code of the software freely available, but may then require licensees to provide attribution of the original licensor or author, to license any modifications made to the code under the same license, or any other requirement the licensor deems appropriate. This family of licenses and their myriad variants, including the General Public License (GPL), are typically referred to as “open source licenses” or “free licenses.”

Although the basic principle of freedom of contract gave these licenses some legitimacy, some licensees and licensors may have been reticent to license their software under new conceptual frameworks that had not yet been judged enforceable by a court of law. Two recent groups of cases, Jacobsen v. Katzer, 535 F.3d 1373 (Fed. Cir. 2008) (originating in California), and the BusyBox cases (originating in the United States Court of Appeals, Second Circuit), have shown that courts are increasingly more willing to uphold these licenses.

In Jacobsen, plaintiff Jacobsen designed software used by model train hobbyists, and licensed the software pursuant to an “Artistic License.” This license required the user of the software to provide several attributions to, and identifications of, the origin of the software if the user later integrated the software into his own product. Katzer created his own model train software, integrating Jacobsen’s software; he then failed to include the necessary attributions.

Jacobsen brought suit in the US District Court, Northern District of California, and filed for a preliminary injunction, claiming that violation of the Artistic License constituted copyright infringement. Under the United States Court of Appeals Ninth Circuit law, irreparable harm can be presumed in a copyright infringement case; however, a copyright owner who merely grants a non-exclusive license generally waives his right to sue the licensee for copyright infringement over a mere breach of the license. If, however, a license is limited in scope and the licensee acts outside that scope, the licensor can bring an action for copyright infringement.

The district court denied relief, holding that Jacobsen only had an action for breach of contract. It stated that the Artistic License was an “intentionally broad,” “nonexclusive license,” and the requirement of attribution did not “limit the scope of the license.” As such, Katzer’s “alleged violation of the conditions of the license may have constituted a breach of the nonexclusive license, but [did] not create liability for copyright infringement where it would not otherwise exist.” Thus, there could be no irreparable harm and a preliminary injunction was improper. Jacobsen appealed to the United States Court of Appeals for the Federal Circuit.

The Federal Circuit reversed and remanded, finding that the Artistic License contained enforceable copyright conditions. The court’s decision centered on whether the terms of the Artistic License were covenants or conditions. If they were covenants (i.e., actions the user promises to do or refrain from as part of their use of the software), then violation of those covenants would give rise only to an action for breach of contract. If, on the other hand, they were conditions (i.e., terms which define the scope of the license itself or are preconditions of effectiveness of the license), then violation of those conditions would constitute use outside the scope of the license, and thus an action for copyright infringement would be possible.

The court examined the plain language of the Artistic License, which stated that “the intent of this document is to state the conditions under which a Package may be copied” (emphasis added). The court also noted that the agreement used the “traditional language of conditions,” stating that the rights to copy, modify, and distribute were granted “provided that” the conditions were met.

Finally, the court noted that these conditions “are vital to enable the copyright holder to retain the ability to benefit from the work of downstream users” and that it is irrelevant that there is no direct economic benefit (i.e., because the software is free). The attribution requirements are their own kind of consideration, and “the choice to exact consideration in the form of compliance with the open source requirements of disclosure and explanation of changes, rather than as a dollar-denominated fee, is entitled to no less legal recognition.”

First and foremost, this ruling legitimizes open source licenses. The theory behind commonly-used open source licenses such as the GPL and Creative Commons licenses is that the license sets forth conditions, the violation of which results in unlicensed use of the work. Unlicensed use of the work by the licensee is an infringement of the licensor’s copyright, which then gives rise to a copyright infringement action. This ruling essentially affirms the theory upon which these open source licenses were crafted and gives licensors (and licensees) comfort in knowing that the arrangements under which they choose to license software can be enforced if litigated.

Second, the ruling provides important guidance to licensors who wish to license their work under a non-standard license. As the court looked closely at the plain language of the license, it is important for licensors to ensure that their licenses contain the “buzzwords” a court will be looking for — language setting forth the conditions under which the license is granted, or language stating that certain rights are granted “provided that” certain conditions are met, or are “conditioned on” or “subject to” specific terms.

Finally, the result on remand is instructive. The district court, in its original opinion, did not make any factual findings on the likelihood of irreparable harm; the Federal Circuit remanded with instructions to do so. The district court held that Jacobsen did not show that the harm he suffered was sufficiently “real, imminent, and significant, not just speculative or potential” to obtain injunctive relief, as required by Ninth Circuit jurisprudence. Although this ruling is both fact-specific and non-precedential, it suggests that licensors should be prepared to demonstrate actual harm they have suffered if they desire injunctive relief, and that conceptual arguments of potential harms may not be sufficient even if the license is otherwise conditioned on performance that did not occur.

The BusyBox cases followed from a series of complaints filed in 2007 and 2008 in the US District Court for the Southern District of New York. BusyBox is a software application that provides many standard UNIX tools compressed and optimized for use on mobile and embedded devices. BusyBox was released under the GPLv2 license, which requires that redistributors of the BusyBox software provide end users with access to the BusyBox source code.

The developers of BusyBox identified seven redistributors of the software who were not complying with the license terms. Specifically, these entities failed to make the BusyBox source code available to the end user. From September 2007 to July 2008, the BusyBox developers filed complaints against these redistributors in the Southern District of New York. The complaints were notable as being the first copyright infringement cases based on the GPL. The argument made by BusyBox was the same in each complaint. By failing to adhere to the terms of the license, the redistributor’s use of the BusyBox software was outside the scope of the license, and thus amounted to copyright infringement.

Each complaint was dismissed after the parties reached a settlement agreement. The settlements were substantially similar. In each case, the redistributor agreed to appoint an “Open Source Software Compliance Officer” to monitor potential licensing issues, to publish the source code and inform their customers of its availability, to pay an undisclosed sum to the plaintiffs, and in one case, agreed to cease for agreement to cease distribution of the offending article until the source code was published. Several interesting results come out of the BusyBox cases. Although no court actually ruled on the matter, it does seem likely that the logic of Jacobsen would apply if a claim were to reach that stage. The GPLv2 uses conditions, not covenants; it permits redistribution “provided that” the user meets a list of “conditions.” The holding in Jacobsen would, therefore, likely lead to a favorable result for BusyBox.

Second, it is important for licensees to become familiar with exactly what obligations are imposed upon them by a licensor’s chosen license. For example, the GPLv2 license requires that a licensee not only make source code available, but also associated definition files and scripts used to control installation and compilation of the executable. Failure to comply fully with the license terms may lead to the same result as would failure to comply at all. Given that there are a variety of free software licenses available for use by licensors, any potential licensee should look before it leaps.

These cases also highlight the importance of internal communication between various business units. If a software developer uses open source code, it is essential that all relevant parties (legal, corporate communication, and other groups) be aware of this choice in order to avoid potential legal and public relations issues. As shown by the settlement agreements reached in the BusyBox cases, failure to do so can result in monetary settlements, temporary cessation of production or shipping, and other business disruptions.

Finally, a common theme throughout the BusyBox cases suggests that the licensors attempted to discuss the issue with each licensee prior to filing the complaint; in each case, their attempts at discussion were rebuffed or ignored, leaving litigation as the only remaining option. Licensees should consider engaging in informal discussions before a licensor feels compelled to pursue litigation, given the Jacobsen decision. The risks of ignoring the license are genuine and significant.

Jacobsen and the BusyBox cases both reflect a gradual acceptance of non-standard (and, compared to the status quo, radically different) licenses. Both licensors and licensees should obtain some comfort from these cases; licensors know they have the freedom to license their works on terms which reflect their principles (and that those terms will be enforced by a court), and licensees know that this regime will provide a construct on which to base their conduct. Judicial acceptance of these licenses also threatens to spawn additional litigation, and therefore heightens the need for licensees to be sure they know what terms they are agreeing to, and to coordinate internal compliance prior to being targeted for litigation.