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September 20, 2011 Articles

The Impact of Recent Case Law on Copyleft Agreements

R. Scott Rhoades and Jon Rastegar

Open-source software is one of the fastest-growing areas in the software industry. In the past decade, both the number of open-source projects and the total lines of open-source code have grown exponentially. Amit Deshpande & Dirk Riehle, "The Total Growth of Open Source," In Proceedings of the Fourth Conference on Open Source Systems (OSS 2008). In addition, the number of corporations employing open-source software has grown dramatically. A recent survey found that 85 percent of companies employ open-source software in their business. David Meyer, Gartner: 85 Percent of Companies Using Open Source, cnet. This rapid growth led the Federal Circuit Court of Appeals to note that "open-source licensing has become a widely used method of creative collaboration that serves to advance the arts and sciences in a manner and at a pace that few could have imagined just a few decades ago." Jacobsen v. Katzer, 535 F.3d 1373, 1378 (Fed. Cir. 2008). This substantial growth is in part attributable to the open-source community's increased use of reciprocal licensing agreements, sometimes referred to as copyleft agreements.

Copyleft agreements are used to control the availability of open-source software. The agreements are designed to allow a copyright holder to make a software program available to the public for no fee, while also requiring all modified and extended versions of the program to be freely available to the public. The intent of copyleft agreements is to prevent an individual from converting a freely available open-source program into proprietary software.

One of the most common copyleft agreements is the GNU General Public License (GPL), which was devised by the Free Software Foundation. Authors who distribute their works under the GPL "authorize not only copying but also the creation of derivative works," while prohibiting the user from "charging for the derivative work." Wallace v. Int'l Bus. Machs. Corp., 467 F.3d 1104, 1105 (7th Cir. 2006). The GPL allows users to "make and distribute derivative works if and only if they come under the same license terms as the original work." Id.; see GNU General Public License, § 5, "Conveying Modified Source Versions." "The GPL propagates from user to user and revision to revision: neither the original author, nor any creator of a revised or improved version, may charge for the software or allow any successor to charge." Wallace, 467 F.3d at 1105. While the GPL is not the only copyleft agreement available, some commentators estimate that 65 to 70 percent of all open-source software is licensed under the GPL. See Sapna Kumar, "Enforcing the GNU GPL," 2006 U. Ill. J.L. Tech. & Pol'y 1, 1 (2006).

Despite the growing frequency of the GPL and open-source software, there are surprisingly few cases that analyze copyleft agreements. This lack of analysis by the courts has led some to speculate whether copyleft agreements, like the GPL, effectively accomplish the goal of making derivative works available on the same terms as the original work. See, e.g., Kumar, supra, at 1. Critics point out that copyleft agreements like the GPL are unenforceable for a myriad of reasons—ranging from arguments that copyleft agreements amount to price-fixing schemes to arguments that copyleft agreements are unlimited licenses. Jacobsen and Wallace, the two recent appellate decisions previously mentioned, address these criticisms and resolve some of the uncertainty surrounding the GPL and similar copyleft agreements.

One of the more creative attacks raised against copyleft agreements was the argument that the agreement violated the Sherman Act because it amounted to a price-fixing scheme to "eliminate competition in the operating system market." Wallace, 467 F.3d at 1106. In Wallace, a software developer alleged that he could not compete in the open market if software was still available free of charge. The developer further alleged that "nothing could be a more effective deterrent to competition." Id. The Seventh Circuit required only a "quick look" before strongly rejecting the developer's claims, stating that "the GPL and open-source software have nothing to fear from the antitrust laws." Id. at 1108. The strong words of the Seventh Circuit have seemingly put to rest the criticism that a copyleft agreement could constitute an antitrust violation.

Another criticism of copyleft agreements looks at whether a copyright infringement claim may be brought against a software provider who violates the agreement. Specifically, the issue is whether the underlying copyright in the software remains enforceable; that is, whether a copyright holder can use a copyleft agreement to dedicate certain work for public use and still enforce the copyright. A copyright holder cannot pursue a copyright-infringement claim against someone who is acting within the scope of his or her license. Thus, if the scope of the license is limitless, the copyright holder could not bring an infringement claim against a licensee. However, if the scope of the nonexclusive license is limited, actions beyond the license limits would be copyright infringement. With regard to copyleft agreements, the scope of the license granted by the copyright holder must be determined. Typically, a determination that a limited scope has been granted to the licensee turns on whether the specific provisions of the license are conditions or merely covenants. See S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir. 1989). If the provisions of the license are conditions and the user violated those provisions, then the user is outside the scope of the license and the copyright holder can sue for copyright infringement. Id. On the other hand, if the provisions are merely covenants, then the copyright holder did not limit the license scope; therefore, the only remedy available to the copyright holder is a breach of contract claim. See Graham v. James, 144 F.3d 229, 236–37 (2d Cir. 1998).

The Federal Circuit recently addressed this issue, holding that failure to comply with the attribution and modification transparency requirements in an open-source software license could constitute copyright infringement. See Jacobsen, 535 F.3d at 1382. In Jacobsen, a copyright holder sued a software developer for copyright infringement based on the developer's failure to abide by the terms of an open-source licensing agreement. The agreement granted users the right to copy, modify, and distribute the software

provided that [the user] insert a prominent notice in each changed file stating how and when [the user] changed that file, and provided that [the user] do at least ONE of the following:

a) place [the user's] modifications in the Public Domain or otherwise make them Freely Available, such as by posting said modifications to Usenet or an equivalent medium, or placing the modifications on a major archive site such as, or by allowing the Copyright Holder to include [the user's] modifications in the Standard Version of the Package.

b) use the modified Package only within [the user's] corporation or organization.

c) rename any non-standard executables so the names do not conflict with the standard executables, which must also be provided, and provide a separate manual page for each nonstandard executable that clearly documents how it differs from the Standard Version, or

d) make other distribution arrangements with the Copyright Holder.

Id. at 1380.

The district court held that the scope of the license was "intentionally broad" and that the above attribution and modification requirements did not "limit the scope of the license." Jacobsen v. Katzer, 2007 WL 2358628 at *7 (N.D. Cal. 2007), rev'd, 535 F.3d 1373 (Fed. Cir.). Accordingly, the district court held that because the scope of the licenses was unlimited, the user was necessarily within the scope of the licensing agreement and the attribution and modification requirements could only be viewed as covenants. Based on this reasoning, the court held that the copyright holder could not recover for the alleged copyright infringement.

The Federal Circuit reviewed the copyleft licensing agreement and reversed the district court's holding, stating that the contract's intent was to create a condition rather than a covenant. 535 F.3d at 1382. To support this conclusion, the Federal Circuit cited the use of the phrase "provided that" in the licensing agreement and noted that, under the relevant state law, such a phrase typically denoted a condition. Id. at 1381. Ultimately, the Federal Circuit held that the terms of the copyleft licensing agreement were "enforceable copyright conditions," not covenants, and for that reason, the agreement could support a copyright infringement claim. Id. at 1383.

It should be noted that the Federal Circuit's holding in Jacobsen does not stand for the proposition that all open-source licensing agreements allow a copyright holder to bring a claim for copyright infringement based on failure to comply with the agreement. Rather, Jacobsen supports the proposition that an open-source licensing agreement can have conditions that limit the scope of the license and that a copyright holder can bring a claim for copyright infringement based on actions outside the scope of the copyright license. Id.; see also Nimmer on Copyright § 1015[A] (1999).

Whether the scope of a particular agreement has limits depends on the precise language in the agreement and the applicable state law. For example, the GPL provides as follows:

[A user] may convey a work based on the Program, or the modifications to produce it from the Program, in the form of source code under the terms of section 4, provided that [the user] also meet all of these conditions:

a) The work must carry prominent notices stating that [the user] modified it, and giving a relevant date.

b) The work must carry prominent notices stating that it is released under this License and any conditions added under section 7. This requirement modifies the requirement in section 4 to "keep intact all notices."

c) [The user] must license the entire work, as a whole, under this License to anyone who comes into possession of a copy. This License will therefore apply, along with any applicable section 7 additional terms, to the whole of the work, and all its parts, regardless of how they are packaged. This License gives no permission to license the work in any other way, but it does not invalidate such permission if [the user] have separately received it.

d) If the work has interactive user interfaces, each must display Appropriate Legal Notices; however, if the Program has interactive interfaces that do not display Appropriate Legal Notices, [the user's] work need not make them do so.

GNU GPL, § 5, "Conveying Modified Source Versions" (emphasis added).

While the GPL has yet to be interpreted by a Federal Court, it seems likely that the phrase "provided that [the user] also meet all of these conditions" places a condition, and not a covenant, on the user. Therefore, following the Federal Circuit's reasoning in Jacobsen, the provisions of the GPL likely limit the scope of the copyright license and allow a copyright holder to pursue copyright-infringement claims for actions beyond that scope.

While the law surrounding copyleft agreements is still in its infancy, the recent appellate court decisions in Wallace and Jacobsen suggest that copyleft agreements may be effective in ensuring that copies and modifications to open-source software will remain open source. In these cases, the courts have clearly taken note of the public benefits provided by open-source software. The courts' acknowledgement of the sound public policy behind open-source software suggests that the courts will continue to look favorably on open-source licensing and that copyleft agreements will remain effective and enforceable.

Keywords: litigation, intellectual property, copyleft agreements, GNU General Public License

R. Scott Rhoades and Jon Rastegar – September 20, 2011

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