The Decision All Of Open Source Has Been Waiting For

As has been widely publicized in the industry, legal and even mainstream media, on August 13, 2008 the U.S. Court of Appeals for the Federal Circuit (CAFC) issued its decision in the closely-watched case of Jacobsen v. Katzer. In its decision, the CAFC confirmed one of the core legal assumptions upon which the entire open source world is based — namely that open source licenses are legally enforceable as licenses under U.S. copyright law. Perhaps more importantly, the CAFC’s decision also validated the ability of open source licensors to seek injunctive relief under copyright law to stop violations of open source licenses, in addition to merely being able to seek monetary damages in compensation for those violations. While the decision itself totals only 12 pages, it has potentially far-reaching implications for both users and distributors of free and open source software (and has instantly become required reading for anyone with interest or involvement in open source software licensing or compliance issues).

District Court Case

Interestingly, the Jacobsen case was originally filed as a patent infringement case in the U.S. District Court for the Northern District of California. In the case, Matthew Katzer (through his company Kamind Associates Inc. d/b/a KAM Industries) alleged that the DecoderPro model railroad software developed and distributed by Robert Jacobsen infringed U.S. Patent No. 6,530,329 (for a “model train control system”) owned by Katzer. Jacobsen responded to these allegations by, among other things, seeking to invalidate the Katzer patent on the basis of fraud. In particular, Jacobsen asserted that significant portions of the software covered by Katzer’s patent, and marketed by Katzer under the name “Decoder Commander,” were in fact comprised of code taken from Jacobsen’s own DecoderPro software. Jacobsen also brought a counterclaim against Katzer asserting copyright infringement on the basis of Katzer’s unauthorized use of the portions of DecoderPro in Decoder Commander.

The DecoderPro software is distributed by Jacobsen under the Artistic License, a well-known open source license. Jacobsen’s counterclaim alleged that Katzer distributed the portions of DecoderPro included in Decoder Commander in violation of the Artistic License by failing to comply with the attribution provisions of the license. In particular, the Artistic License requires that all original copyright notices and disclaimers on the software received under the license be preserved in any distribution of software and that any changes made by the licensee be distinguished from the software originally received under the license. Jacobsen asserted Katzer’s failure to adhere to these provisions of the Artistic License constituted an infringement of Jacobsen’s copyright in DecoderPro, reasoning that the use of DecoderPro outside of the scope of the applicable license constituted copyright infringement.

On this basis, Jacobsen moved for a preliminary injunction to enjoin Katzer from infringing the copyright in DecoderPro. However, in a decision issued on August 17, 2007 the district court surprised many by denying Jacobsen’s motion.

Conditions vs. Covenants

It is well-settled that the grant of a license to copyrighted material effectively constitutes a waiver of the licensor’s right to sue for copyright infringement, so long as the licensee complies with the conditions placed on the scope of that license. If a licensee does not remain within the scope created by those conditions, it thus follows that the licensee is infringing the copyright of the licensor and that the licensor may seek an injunction against the licensee to stop the infringing activity. A condition on the scope of a license is, however, treated differently from a separate covenant placed on the license. Rather than giving rise to the right to seek an injunction for copyright infringement, the violation of a separate covenant is treated more akin to a breach of contract and thus gives rise only to a right to seek monetary damages for that breach.

The district court in Jacobsen found that the Artistic License has a very broad scope, placing very few actual conditions on a licensee’s right to copy, distribute, and create derivative works of software provided under the license. The court found that even the use by Katzer of portions of DecoderPro in Decoder Commander did not exceed the scope of these conditions. Separate and apart from these conditions, the court found that the attribution provisions of the Artistic License instead constitute a separate covenant between the parties to the license. As a result, Katzer’s use of portions of DecoderPro without providing the required attribution to Jacobsen constituted only a violation of a separate covenant to the license and not a violation of a condition of the license itself. Thus, though Jacobsen may be subject to monetary damages for breach of these covenants, the court found that his actions did not constitute copyright infringement. As a result, the court held that it had no basis upon which to issue an injunction for copyright infringement.

Appeal to the CAFC

The decision of the district court in Jacobsen surprised many in the open source community who had long assumed that a failure to comply with the terms of an open source license such as the Artistic License would constitute a violation of the conditions on the scope of the license and thus give rise to a claim for copyright infringement and the right of the licensor to seek an injunction to stop the infringement. The decision caused concern that the court had effectively foreclosed the option of an injunction as a remedy for the violation of an open source license, leaving aggrieved open source licensors with only the far less attractive (and often far more difficult to obtain) remedy of monetary damages. The decision of the CAFC in the appeal of the district court’s finding, however, serves to calm many of these concerns.

Stating that “Copyright holders who engage in open source licensing have the right to control the modification and distribution of [their] copyrighted material,” the CAFC found that the “clear language” of the Artistic License creates conditions, and not covenants, to protect the rights of the licensor at issue under the license. These conditions, the court noted, include not only the provisions regarding the copying, distribution, and modification of the software subject to the license but also the relevant attribution provisions. In justifying its conclusion, the CAFC noted that the conditions on distribution, modification, and attribution in the Artistic License serve to create significant and direct economic benefit to the licensor under the Artistic License. The conditions are thus necessary to accomplish the objectives of the licensor and therefore must be enforced. Interpreting the provisions of the Artistic License otherwise would, according to the decision of the CAFC, render them “meaningless” by foreclosing the ability to enforce those provisions through injunctive relief.

The CAFC thus vacated the decision of the district court and remanded the case back to the district court for further consideration in accordance with the decision of the CAFC.

The Impact

While Jacobsen is focused on the language of the Artistic License, the decision of the CAFC is broadly worded and seemingly also applicable to the language of many other popular open source licenses, such as the widely used GNU General Public License (GPL) and GNU Lesser General Public License (LGPL). As a result, the decision should be viewed as a ringing endorsement of the validity of not just the Artistic License but of open source licenses in general. In addition, the decision opens the door for open source licensors under all open source licenses to seek injunctive relief for copyright infringement as a remedy for license violations.

It is also significant to note that a finding of copyright infringement gives rise not just to the option of injunctive relief, but to additional remedies as well. Under U.S. copyright law, copyright holders may in many cases also seek statutory damages (without the need to prove actual monetary damages) in the case that the infringement involves a registered copyright. Likewise, registered copyright holders can also make a claim for the recovery of attorney’s fees for copyright infringement. Depending on how Jacobsen is interpreted in future contexts, the case thus has the potential to provide open source licensors with strong additional powers to enforce their rights.

For companies that have already taken steps to comply with the open source licenses to which they are subject, the CAFC’s decision in Jacobsen should not have a significant impact. However, Jacobsen has the potential to significantly increase the risk of noncompliance with open source licenses. For those companies that have elected not to comply with open source licenses or, as is the case with many companies, have chosen to remain unaware of the open source software licenses to which they may be subject, Jacobsen should be all the incentive that is necessary to adopt and implement a sound open source license compliance program.

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How Do I Build an Enforceable Online Agreement? — Not (Always) the Way SalesForce.com or Google Would

The issue comes up on an increasingly frequent basis. A client is preparing to begin delivery of a new service (or product) through their web site. As part of their preparations, the client involves me (or, let’s say “an attorney”) to help them implement an online (“click-through” or “click-to-accept”) contract covering the terms under which the new service (or product) will be provided to their users. While almost all clients understand that this will entail the preparation of an online “terms of service” contract, not all also appreciate that the contract document itself is really only part of the equation. Creating a legally enforceable online agreement is also dependent on how that contract is implemented and whether the implementation is sufficient to create a legally binding agreement with each user. Examples of how to implement online contracts certainly abound — and in addition to contacting legal counsel many clients will also naturally look to major web sites for guidance on how to implement their own online contracts. However, it is not always a given that even these larger players have made the best decisions in designing their online contracting practices. As a result, simply asking “What would SalesForce.com and Google Do?” is not always the best approach.

At last year’s American Bar Association (ABA) Annual Meeting in San Francisco a panel hosted by the ABA Committee on Cyberspace Law discussed the results of a year-long working group on legal best practices for electronic contracting. Given the increasing frequency with which all companies (technology vendors or otherwise) must deal with online contracting issues, the findings of the working group are likely to be of interest to many companies (particularly if the alternative involves simply relying on whatever practices have been adopted by other web sites). While the current law in the area of online contracting is certainly still developing and in places resembles more of a patchwork of seemingly inconsistent legal decisions, the working group found that certain basic principles have emerged for establishing legally enforceable online agreements. In particular, the panel indicated that the working group had identified four “bottom line” steps for forming legally binding online agreements:

1. The user must have adequate notice that the proposed terms exist;
2. The user must have a meaningful opportunity to review the terms;
3. The user must have adequate notice that taking a specified, optional action manifests assent to the terms; and
4. The user must, in fact, take that action.

Among these four steps, adequate notice of the existence of the proposed terms is among the most important. The concept here is nothing new. Online contracts are not different from traditional paper contracts when it comes to notice of terms. As the panel indicated, the standard here asks quite simply whether a reasonable user entering into the agreement would understand what the terms were. The panel suggested that this generally means making the terms immediately visible to the user before assent is given — for example, through an on-screen window with a button that the user must click before moving on to the next screen. While there are many examples of what would be deemed “reasonable” under the circumstances, the more the notice of the terms is not straightforward, the greater the risk that the notice will not be deemed reasonable to form a binding agreement.

Despite the urging of counsel, the panel noted (and I would concur) that this simple step is often abused or simply not followed. Many times, it is a failure to provide the terms of the contract or at least a functioning hyperlink to a separate page containing the terms. Sometimes it is more subtle in that certain terms are only presented after the transaction has been completed on a confirmatory screen or email. Recently, I was working with a client who was reluctant to present the terms of their online contract as in fact being part of a “binding” agreement. Instead, the client wanted to present the terms merely as a request (or suggestion) to the users of their web site. As the panel noted, not only must the terms be presented to the user, but it must also be explicit and clear that the terms form a binding agreement between the parties.

While notice is a continual hot-button issue, the other “bottom line” steps are also important. It is of note that providing a “meaningful opportunity” to read the terms of the contract does not necessarily require that the user actually read the terms of the contract, only that they be given the opportunity to read the terms (you can lead a horse to water, but you can’t make it. . . ). The discussion by the panel specifically cautioned against using separate pop-up windows for purposes of accomplishing this step. As someone who has a pop-up blocker set on his own browser, I would agree that there is definitely a risk in this practice.

The issue of assent is also not to be overlooked. While the now ubiquitous “I Agree” button is the norm, I have reviewed sites that instead allow the use of standard browser navigation buttons to manifest assent. The panel noted this issue and stated that assent must be through some action that the user would not otherwise take automatically (like using the buttons on their browser to navigate to the “next” page of the web site). Instead, assent should be through an “optional action manifesting assent” to the terms of the contract.

In addition to the four bottom line steps, the panel also noted that the ultimate issue in any contracting situation is one of proof — can the party seeking to enforce the contract prove that the necessary steps were followed to form a binding agreement? The situation is no different in the context of online contracting. This means proving that a user either clicked a box (or was presented with a set of terms and continued forward anyway). While many web sites are set up to help provide this proof, it is worth considering what you would do if your agreement was challenged by a user and you had to prove that your web site implemented these four “bottom line” steps when the user accessed the site. While not always an easy task, the panel noted that particularly where a web site has gone through multiple updates or revisions (and what web site hasn’t), retaining records of the prior iterations of the site can be a valuable aide in helping to prove that users of the previous versions of the site did in fact enter into a binding agreement.

As I have mentioned in prior posts, the law in this area continues to evolve. The “bottom line” steps provided by the working group of the ABA Committee on Cyberspace Law are certainly of assistance — particularly, as noted above, when the alternative involves relying on whatever practices have been adopted by other web sites. However, best practices for online contracting are likely to continue to change as the law of online contracting continues to evolve. As a result, continued periodic review and update of online contracts and contracting practices will continue to be a must to help ensure continued legal compliance.

Free (as in free beer) Free and Open Source Licensing Webinar follow-up

Thank you to those of you who attended this morning’s free (as in free beer) free and open source licensing webinar. As a number of you have requested a copy of the slides, I have posted a copy here. The audio from the webinar was recorded as well and should be posted shortly (feel free to contact me if it is not).

[UPDATE: Matt Asay has the audio for the webinar and instructions on how to get it on his blog]

We hit on a number of interesting topics during the webinar. Not the least of these was the recent interim decision in the Jacobsen v. Katzner case and the issues open source licensors and courts will continue to face regarding the interpretation of open source licenses and the language used in those licenses. Of course, we also hit on GPLv3 and the current happenings around open source software and software patents. We had a great Q&A after the webinar (which was also recorded). As is usually the case when I do a presentation like this one, I ended up coming away from the Q&A feeling like I had benefited as much as the audience.

Special thanks to Matt Asay for creating the opportunity for this webinar and helping to make it happen. Even though neither Matt nor his company Alfresco sponsored the webinar, it was through Matt’s suggestion, and with assistance from him and members of his team at Alfresco, that the webinar happened. Thanks again Matt.

There was at least one suggestion during the Q&A, and several following the webinar, for future webinar topics. If there are legal issues around open source licensing that you would like to see covered in future presentations, please let me know (either through a comment to this site or via email). And, stay tuned for information on upcoming webinars and presentations. With all that is going on legally in open source at present I will likely be speaking again soon.