The Court of Appeals for the Federal Circuit (CAFC) has ruled in the much-watched case Jacobsen v. Katzer, No. 2008-1001 (Fed. Cir. Aug. 13, 2008), which turned on whether violating an open source licensing agreement should be considered copyright infringement. This ruling should prompt companies using open source software to carefully evaluates its use. Many companies use open source software --even those who think they don't. The temptation to incorporate it into a company's products is great because open source software is readily available via download and is free of charge. But there's a catch. Though free of charge, open source software is not free of terms and conditions. Virtually all open source software is subject to a license agreement.

There has been a debate related to whether violations of an open source license should be treated merely as a breach of contract, or whether it should be treated as copyright infringement as well. The difference is significant. If a violation is treated as copyright infringement, it is much more likely that the plaintiff will be granted injunctive relief. Irreparable harm, one of the ways to establish the need for an injunction, can be presumed in cases of copyright infringement. That presumption does not apply to contract breaches. In addition, the available damages are far more significant for copyright infringement than for breach of contract. Copyright infringement damages include statutory damages, attorneys' fees and disgorgement of profits. Moreover, the calculation of damages for a breach of contract claim involving open source licensing agreements is challenging because there is no monetary consideration for obtaining the software code.

In Jacobsen v. Katzer, the CAFC answered this question. Robert Jacobsen, the plaintiff, brought and action for copyright infringement and moved for a preliminary injunction. He holds a copyright to computer programming code that he makes available to the public free of charge under an open source license, the Artistic License. The defendants, Matthew Katzer and Kamind Associates, Inc., develop commercial software products for the model train industry and hobbyists. Jacobsen accused the defendants of copying certain material's from his software and incorporating these materials into their commercial software products without following the terms of the Artistic License. The District Court denied the motion for a preliminary injunction and Jacobsen appealed. To the CAFC.

The CAFC found that violations of open source licenses can constitute copyright infringement because the language in the licenses imposes "conditions" of use such as the notice and other requirements, not just merely covenants that are governed by contract law. As a result of this ruling, it is much more likely that open source developers will aggressively assert their rights and seek injunctive relief. And this should prompt companies using open source software to proactively establish licensing compliance plans. Though the license involved in the Jacobsen case was the Artistic License, not the General Public License, the most widely used open source license, the question of a contract or a license is equally applicable to the GPL, as the GPL contains similar requirements labeled as "conditions."

This is not the only recent case filed relating to the use of open source software. Since September, 2007, The Software Freedom Law Center, on behalf of the developers of BusyBox, has filed suits against seven defendants, including Monsoon Multimedia, Inc. and Verizon Communications, Inc. and most recently against Bell Microproducts, Inc., Extreme Networks, Inc. and Super Micro Computer, Inc. during the summer of 2008. All but two of these cases have settled. In addition, it is likely that the SFLC will be on the prowl for other cases. And its likely they will find them.

This decision should prompt companies who use or distribute open source software to vigilantly assess each piece of licensed intellectual property they use or distribute and establish a proactive licensing compliance plan. Some companies will be comfortable using open source software while others won't. The important thing is that each company thoughtfully evaluates its options when licensing new software, whether it be open source software or traditional commercial software.