Strong Court Ruling Upholds the Artistic License (fwd)

[dtemeles at nvalaw.com]

This is not legal advice...

As an attorney spending a great deal of time on software related IP  
licensing and litigation matters, I find the CAFC decision in the  
Jacobsen case to be troubling.  While I am sympathetic to the court's  
apparent desire to validate the concept of open source licensing and  
its alternative forms of consideration, I do not believe that the  
court's ruling justifies a euphoric response by the open source  
community.

First, the CAFC's decision is a clear repudiation of the "bare  
license" theory long espoused by Mr. Moglen and his followers.  The  
CAFC's decision reflects the fact that open source licenses, like any  
other form of software licenses, are contracts.  I agree with this  
aspect of the decision as it is well supported by precedent at all  
levels.  Neither Mr. Moglen, nor any of his followers have cited legal  
precedent in support of the bare license theory.  The CAFC's decision  
should serve as clear notice that the bare license theory is nothing  
more than Moglen's wishful thinking. The necessary implication of this  
finding by the court is that open source licenses must be interpreted  
in the context of applicable state law, and to an extent, the common  
law of the Federal Circuit in which the open source agreement is  
interpreted. (This is directly in conflict with the CAFC's willful  
failure to follow state law and Ninth Circuit precedent regarding the  
interpretation of restrictions as conditions precedent).

Second, the CAFC's opinion creates a great deal of uncertainty for  
software licensing (whether proprietary or open source).  Let's take  
the GPLv3 as an example.  As most peoople are aware, there are a  
variety of disagreements over exactly what is required of a licensee  
to comply with various provisions of the GPL. Section 2 of the GPL  
appears to "condition" the rights granted under the license on the  
licensee's compliance with the "conditions" stated in the license.   
Under the CAFC's decision in Jacobsen, it stands to reason that a  
licensee that fails to fully satisfy the "conditions" stated in the  
GPLv3 would infringe the licensor's copyrights rather than merely  
breaching the license.  Thus, even if the licensee unintentionally  
violated the terms of the GPLv3 because the meaning of the terms are  
not clear, the licensee would be liabile for infringement.

Why does this matter?  State courts, the federal circuit courts of  
appeal and the US Supreme Court have all uniformly and routinely  
interpreted license restrictions as covenants rather than conditions  
precedent.  In other words, the courts presume that the restrictions  
are covenants rather than conditions precedent unless the agreement  
clearly defines the restrictions as conditions.  the CAFC's decision  
wholly ignores this long held principle of law.

Most licenses, open source or proprietary, contain provisions whose  
meanings are open to viable debate.  In the past, parties to a  
software license have largely understood that a licensee that breaches  
a license agreement's terms is liable to the licensor for damages  
decided under contract law.  Proprietary licenses typically include  
provisions which define or otherwise limit the scope of damages that  
may be recovered in the event of a breach.  On the other hand, a party  
that is liable for infringement of a copyright is subject to  
injunctive relief and damages equal to the owner's actual damages  
(plus the infringer's profits not covered by the owner's actual  
damages) OR statutory damages of up to $150,000 per incidence of  
infringement.  Any contractually agreed limitations on damages would  
be irrelevant in the infringement setting.

The CAFC's Jacobsen decision unwittingly attempts to radically change  
the risks of licensing software.  The CAFC states that any failure to  
comply with a license provision that the license even generally calls  
a "condition" is an infringement rather than a breach.  Thus, any  
licensee that violates the "conditions" of a license, even if  
unintentional, is subject to infringement damages.  If the CAFC's  
decision stands and is generally followed in the Circuits and state  
courts, (which it should not be), every license from this point  
forward will need to clearly state which, if any, restrictions are  
"conditions precedent" and which restrictions are merely covenants  
(all other restrictions).  Moreover, the provisions that are  
conditions precedent will need to be defined with a high degree of  
care to minimize a licensee's risk of unintentionally infringing the  
copyrights as a result of miinterpreting the provisions.

Another side note - many licesne agreement issues are brought in state  
courts.  Section 301(a) of the Copyright Act, however, preempts any  
state court from hearing or deciding any cause of action which is  
equivalent to a copyright claim.  If the CAFC's position is indeed the  
law of the land, then any cause of action relating to a breach of a  
provision in a license agreement that merely mentions the word  
"condition" (or some synonym thereof), or that could conceivably be  
interpreted as a condition precedent, will need to be decided by a  
federal court.  Otherwise, the parties run the risk of going through a  
full trial in state court only to find that the state court has no  
jurisdiction to even hear the matter in the first place because the  
breach in fact constitutes an infringement.

Ultimately, the only people that will benefit from this decision are  
attorneys.  All open source licenses will need to be modified if the  
decision stands ....

   Quoting Ben Tilly <btilly at gmail.com>:

> On Wed, Aug 13, 2008 at 4:46 PM, Lawrence Rosen <lrosen at rosenlaw.com> wrote:
>> Ben Tilly asserted:
>>> Therefore it was through this list that they got connected with the
>>> legal help they needed.
>>
>> To make sure that credit goes where it is really due: the connection between
>> Mr. Jacobsen and his attorney was made on the EFF list. If anyone, the
>> Electronic Frontier Foundation should get credit for providing lots of pro
>> bono advice to people on the edge of technology.
>
> This I had not known.  Thank you for the further
> information/correction.  I only knew what I said, which is that I
> first heard of this case through an email here, and I tried to forward
> them on.  I have no idea how many other places they looked for and got
> help as well.
>
>> There are many EFF fans on this list. EFF does good work.
>
> Yes, and yes they do. :-)
>
> I should donate again...
>
> Ben
>