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Major Victory for Open Source Software Industry

The remedies available to software licensors are often a make or break issue in litigation over rights to software. A federal court ruling on August 13, 2008 has expanded the scope of copyright infringement remedies for open source software licensors.

The case, Jacobsen v. Katzer and Kamind Associates, Inc. [PDF], is among the first real tests of remedies available in open source infringement cases. The Federal Circuit Court of Appeals reversed a trial court’s prior ruling and allowed an open source software vendor to pursue damages for copyright infringement rather than limiting the case to contract remedies. At the heart of this case is a question of whether someone who makes use of open source code, but does not abide by the open source license agreement, is in breach of the license or an infringer of the owner’s other rights in the software (i.e., patent and/or copyright rights). The open source vendor sought to recover damages for copyright infringement, but the defendant argued that such damages were barred by the fact that a license agreement existed that governed the parties’ relationship. In making its decision, the court focused on whether the user of the open source code had taken the necessary steps to become a licensee under the license. In this instance, the question revolved around whether the license restrictions acted as “conditions” or “covenants.” If the restrictions of the license are viewed as “covenants,” then if the licensee fails to abide by the license, he is only liable for breach of contract, not infringement. But, in this case, the court construed the license terms as “conditions,” meaning that if they are adopted and followed by the licensee then they are contractual in nature, but if they are not followed, then no license exists and the software vendor may bring suit for copyright infringement.

It all comes down to remedies. Typically, a plaintiff in a copyright case has more potential remedies than one in a contract case. For example, copyright plaintiffs have access to statutory damages and injunctions, which are not typically available under contract law. The availability of a copyright remedy makes open source licenses stronger and increases the licensor’s ability to adequately enforce its rights.

One of the questions that Jacobsen raises is whether parties to an open source license can structure the license so as to choose its remedy in advance. The Jacobsen decision does not address this point but, due to its reliance on the contract language, an open source license could be crafted to automatically grant the license rather than creating conditions for the license. Such construction may be desired in certain circumstances, especially if you are the licensee.

The Jacobsen decision has important implications for open source licensors, licensees, and the companies that buy products from them. After Jacobsen, licensors should evaluate whether they desire copyright remedies or contract remedies, and draft (or revise) their licenses accordingly. For instance, parties may consider whether liquidated damages, or provisions that specify the applicable measure of damages with particularity, are desirable. The parties may also consider specifying particular conditions that constitute breach.

Open source software users must continue to carefully consider the legal requirements of the open source resources they use and abide by the terms of the licenses. For many companies, complete avoidance of open source software is the answer, but for those who rely on such resources, a thorough understanding of these often complex licenses is necessary.

Submitted by:
James E. Schutz
John P. Hutchins
Troutman Sanders LLP
Atlanta, GA

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