In addition to the patent-specific provisions, another attribute of GPLv3 that may interest patent litigators is that it is a "viral" software license because new software derived from GPLv3 source code (GPLed software) must be distributed under the GPLv3 to comply with the license. The viral nature of GPLv3 is the heart of the bargained-for exchange of the license; the licensor allows the licensee to use, modify, or redistribute its GPLed software, provided the licensee also licenses any distribution of it under GPLv3.
While some software companies understand that GPLv3 is viral and intentionally incorporate GPLed software into their products, this is not always the case. For instance, a developer may be tasked with developing software that will be released under a proprietary license (that is, one that would not allow licensees to modify and distribute the source code). Unbeknownst to the company, the developer incorporates GPLv3 source code into the company's software. Using this GPLed source code is permitted under GPLv3 (perhaps even encouraged), but only if the licensee abides by the terms of the license and releases its software under GPLv3. Here, when the company releases its software under a proprietary license without knowing the software includes GPLv3 source code, it has violated GPLv3.
Although use of open-source software like GPLv3 is rapidly increasing, issues arising from the patent provisions of GPLv3 have yet to appear in a published court opinion. Therefore, while it is not clear how courts will treat GPLv3's patent provisions, the provisions are worth exploring because they could affect how either a plaintiff (patentee) or a defendant (accused infringer) litigates a case. For example, counsel for plaintiffs should be aware of potential risks or pitfalls that may arise from their client's own use of GPLv3 or GPLed software. Counsel for defendants, on the other hand, should be looking for opportunities to learn of the plaintiff's use of GPLv3 or GPLed software and leverage that use to maximize defensive strategies.
A hypothetical fact pattern helps illustrate the potential patent-litigation strategies pertaining to GPLv3. Suppose a software company named MegaSoft holds a large patent portfolio containing claims that cover many of its profitable consumer software products. One of those patented products is a tax-preparation program, MegaTax, which allows small businesses the ability to file their taxes. MegaSoft learns that GratisSoft began distributing an open-source tax-preparation program, GratisTax, that has the ability to read and modify files in MegaSoft's proprietary, patented file format claimed in MS Patent I. MegaSoft files suit against GratisSoft for infringement. GratisSoft's counsel conducts an initial analysis and realizes that the prognosis is not good: MS Patent I's claims read on GratisSoft's activities, and it is likely that a court will find MS Patent I valid and infringed by GratisSoft. Faced with this bad news, GratisSoft's counsel starts brainstorming and develops the following additional strategies: limiting damages, finding creative defenses, and discovering hidden counterclaims.
Limiting Damages
GratisSoft may argue that its damages to MegaSoft should be limited if it discovers MegaSoft licensed software that embodies the claims of MS Patent I under GPLv3. Under GPLv3, the licensor grants a license for a patent that reads on the software being licensed. Accordingly, if MegaSoft licensed software under GPLv3 that reads on MS Patent I, then it will have granted a royalty-free patent license to another party to make, use, or sell MS Patent I. GratisSoft may leverage this fact to try to limit its damages to MegaSoft because existing patent licenses are an important factor when determining damages under a lost profits or reasonable royalty theory.
Lost Profits
Lost profits may be available to a plaintiff patentee when the plaintiff can show that it lost sales it would have made but for the defendant's infringing activity. It may be possible for a defendant to attack a claim of lost profits by showing there were free, licensed products on the market, and GPLv3 could be used as a tool to demonstrate the existence of such products.
Suppose, in addition to the hypothetical facts presented above, MegaSoft intentionally licensed software that embodied MS Patent I's claims under the GPLv3 in its own product that reads MegaTax files called MegaTaxReader. Under the GPLv3, a licensee of MegaTaxReader could redistribute the source code without infringing MS Patent I's claims, and anyone receiving that distribution would also receive a royalty-free license to practice MS Patent I's claims. Suppose further that a third party improves MegaTaxReader by building a tax-preparation program around it called FreeTax that is similar to MegaTax but is offered for free. Because the third party is a downstream recipient of MegaSoft's GPLv3 distribution of MegaTaxReader, the third party has a license to practice MS Patent I and FreeTax does not infringe MS Patent I. Accordingly, there are three tax-preparation software products on the market: MegaTax, FreeTax, and GratisTax. GratisSoft may now argue that MegaSoft cannot prove that it lost sales for all of the GratisTax products because MegaSoft's release of MegaTaxReader under GPLv3 enabled the development of FreeTax, a free competing product. Thus, if GratisTax was not available, at least some of the GratisTax customers might have chosen FreeTax rather than MegaTax. Moreover, even though FreeTax has a license under MS Patent I, the license is royalty-free. GratisSoft can argue that MegaTax would not have lost profits if the GratisTax customers chose FreeTax.
This example stresses the importance of drafting discovery requests that cover the use of GPLv3. If GratisSoft asked MegaSoft only for licenses that covered the claims of MS Patent I, the MegaSoftReader license (GPLv3) would likely not have been discovered because it does not specifically name MS Patent I. GPLv3 grants a license for "essential patent claims," not for the claims of any specifically named patent. Thus, patent litigators should consider drafting discovery requests directed to identifying open-source distributions of technology similar to the patent-in-suit.
Reasonable Royalty
When a plaintiff cannot prove lost profits, the plaintiff may still receive damages in the form of a reasonable royalty. Courts frequently define a reasonable royalty as a royalty that would have resulted from a hypothetical negotiation between a willing patent owner and a willing potential user. To determine a reasonable royalty, courts consider several factors, which include, among others:
- the royalties received by the plaintiff patentee for licensing the patent, tending to prove an established royalty;
- the plaintiff's established policy and marketing program to maintain a patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly;
- the established profitability of the product made under the patent, its commercial success, and its current popularity; and
- the amount that a licensor (such as MegaSoft) and a licensee (such as GratisSoft) would have agreed upon at the time the infringement began if both had been reasonably and voluntarily trying to reach an agreement.
Because courts give considerable weight to the first factor, GratisSoft could possibly limit MegaSoft's reasonable royalty rate by arguing that the free distribution of MegaSoftReader shows a royalty of zero for at least some of its licenses of MS Patent I.
It is important to note, however, that nothing prevents a licensor from charging a fee when it distributes software under GPLv3. The licensor need only distribute, or make available, the source code with the distribution. Thus, if MegaSoft charged for MegaSoftReader, it could argue that the royalty is not zero. GratisSoft, however, can point out that the GPLv3 states, "Each [licensor] grants you a non-exclusive, worldwide, royalty-free patent license under the [licensor's] essential patent claims." Thus, the license is explicit: Patent rights are granted royalty-free. Accordingly, GratisSoft could argue that any money MegaSoft received for MegaSoftReader is for other rights associated with the software, or it could be a distribution or service charge, as opposed to a royalty in exchange to practice MS Patent I. However, MegaSoft may counter by arguing that it provided other benefits, consideration, or a combination of these, which entitles it to a royalty rate greater than zero.
Further, the other factors listed above may present additional points of argument for GratisSoft to limit the reasonable royalty rate. For example, because MegaSoft offered MegaTaxReader under GPLv3, GratisSoft could argue that MegaSoft failed to maintain its patent monopoly and, due to the viral nature of GPLv3, encouraged others to practice the claims of MS Patent I because downstream recipients (who may have no direct contact with MegaSoft) would hold a license to MS Patent I's claims. In addition, GratisSoft could argue that the profitability of the products made under MS Patent I is limited. While MegaSoft may generate revenue from MS Patent I, it would not receive revenue from downstream licensees of MS Patent I's claims under the provisions of GPLv3.
Finally, in a hypothetical, arm's length negotiation between GratisSoft and MegaSoft, GratisSoft might argue that it has little incentive to pay a royalty for a license to use MS Patent I. Because the GPLv3 grants licensees the right to redistribute the licensed software, GratisSoft may argue that it could have obtained the source code to MegaTaxReader for free or for a nominal fee. In addition, GratisSoft may argue that because MegaSoft would not receive any royalties or other payments from downstream licensees, MegaSoft did not intend to receive royalties for MS Patent I and, therefore, would be likely to accept a royalty rate of zero in a negotiation.
The Effect of GPLv3's Viral Provisions on Damages Arguments
The damages examples above focused on a situation where MegaSoft had intentionally licensed software under GPLv3 and then later asserted a patent against GratisSoft, which independently developed GratisTax. Because GPLv3 is viral, even if MegaSoft did not intentionally release MegaTaxReader under GPLv3 (or did not release MegaTaxReader at all), GratisSoft may have other arguments (albeit weaker ones) limiting its damages if MegaSoft inadvertently incorporated GPLv3 software in its code.
Suppose, for example, that during development, a programmer working for MegaTax downloaded some GPLv3 source code, modified it, and then introduced the modified version into the code base of MegaTax. Because MegaTax is not released under GPLv3, MegaSoft is in violation of GPLv3. If GratisSoft discovers this fact, it may argue that, while MegaSoft did not license MegaTax under GPLv3, it should have done so and is bound by its terms. Accordingly, GratisSoft could then possibly make the arguments outlined above with respect to lost profits and reasonable royalty.
MegaSoft may point to GratisSoft's reliance on the viral provision to attack those arguments. First, MegaSoft might argue that GratisSoft should not be able to impose the terms of GPLv3 on MegaSoft because GratisSoft was not the licensor of the GPLed software that was added to the code base of MegaTax. In other words, MegaSoft would argue that GratisSoft does not have standing to enforce the GPLv3 provision. Second, MegaSoft could also argue that because the inclusion of GPLed software was inadvertent, the inclusion does not establish a royalty because it was not part of MegaSoft's plan to enforce MegaSoft Patent I.
Defenses
Implied License under Legal Estoppel
One tool an accused infringer may use to try to absolve itself of liability for infringement is an implied license. An implied license permits the accused infringer to practice the claims of a patent without the express permission of a patentee. One theory supporting an implied license is legal estoppel.
Legal estoppel applies when a patentee attempts to enforce against an accused infringer a first patent that must be practiced for the accused infringer to gain the benefit of a license for a second patent granted by the patentee. The policy behind the legal estoppel theory is that once a patentee licenses a property right in a patent, it cannot detract from that right through the use of another patent. A recent case, TransCore, LP v. Elec. Transaction Consultants, 563 F.3d 1271 (Fed. Cir. 2009), from the Court of Appeals for the Federal Circuit, illustrates an example of an implied license through legal estoppel.
In TransCore, the patentee (TransCore) attempted to enforce the '946 patent against an accused infringer (ETC). The infringement allegation stemmed from ETC's use of a product it purchased from a third party (Mark IV). Before TransCore's suit against ETC, it reached a settlement agreement with Mark IV that contained a covenant not to sue Mark IV for infringement of the '082 patent. Although the broader '946 patent was not part of the settlement agreement (it issued after the settlement agreement was reached), in order to practice the claims of the '082 patent, Mark IV would necessarily have to practice the claims of the '946 patent. The Federal Circuit determined that TransCore was legally estopped from asserting the '946 patent against Mark IV. Because ETC obtained its product from Mark IV, TransCore's patent rights were exhausted, and TransCore could not enforce the '946 patent against ETC.
To expand on this example, suppose MegaSoft distributed a product to a third party that is covered by a different patent, MS Patent II, under GPLv3, and suppose the third party modified the product and released the modification under GPLv3 as ThirdTax, which GratisSoft then modified and used in GratisTax. MegaSoft then obtained MS Patent I, which covers related subject matter to, and is broader in scope than, MS Patent II. MS Patent II cannot be practiced without necessarily infringing MS Patent I.
Here, although GratisSoft conducted no direct transactions with MegaSoft, GratisSoft may argue that it has an implied license under TransCore. GratisSoft received the software covered by MS Patent II from the third party and has rights to practice MS Patent II under GPLv3. Because GratisSoft cannot exercise its right under GPLv3 without necessarily infringing the claims of MS Patent I, legal estoppel may apply to relieve GratisSoft of its liability for infringement of MS Patent I.
Challenging Inventorship
Another tool available to defendants is the ability to challenge the inventorship of a patent under 35 U.S.C. § 102(f), which states that a person shall be entitled to a patent unless "he did not himself invent the subject matter sought to be patented." One of the features of GPLv3 is the distribution of source code allowing programmers to modify the code for their own purposes and redistribute it as part of their own products. If an accused infringer learns that a portion of the patentee's patented software contains source code originally licensed under GPLv3, and the patent claims cover features from the GPLv3 code, the accused infringer may be able to challenge the inventorship of the patent. Of course, the ability to leverage section 102(f) depends on the nature of the use of the GPLv3 source code.
For example, if MegaSoft used only a minor portion of GPLed software to develop the functionality that became claimed subject matter in MS Patent I, then a section 102(f) challenge by GratisSoft may not be appropriate. If, however, the claims of MS Patent I contain subject matter that originated in the GPLed software, and MegaSoft did not name the appropriate inventor, GratisSoft may be able to invalidate the patent due to improper inventorship.
Finding Hidden Counterclaims
Perhaps the most straightforward strategy a defendant might employ to leverage a plaintiff's use of GPLv3 software is for the defendant to terminate a patent license it granted to the plaintiff under GPLv3 because of a violation of GPLv3's terms. This technique may be useful in situations where the plaintiff may not be aware that the defendant's GPLed source code ended up in its product.
For example, suppose GratisSoft owns a small patent portfolio that includes GS Patent, which covers a new method for suggesting misspelled words. GratisSoft developed GratisSpellChecker, which embodies the claims of GS Patent. GratisSoft discovers that MegaSoft used GratisSpellChecker in its word processing program, MegaWord, which is very profitable and is not released under GPLv3. GratisSoft now has a counterclaim against MegaSoft. Because MegaWord is not licensed under GPLv3, it is in violation of the viral provision of the license. And because GPLv3 is violated, GratisSoft's royalty-free license to MegaSoft under GS Patent terminates, and MegaSoft's making and selling of MegaWord are an infringement of the GS Patent. MegaSoft's infringement now provides GratisSoft with a bargaining chip in settlement negotiations.
It is interesting to note that, in the above example, GratisSoft may not have learned of the GPLv3 violation without MegaSoft filing suit and without GratisSoft expanding discovery to products other than MegaTax. MegaWord may have been offered only as an off-the-shelf product, and GratisSoft may have had no reason to believe MegaSoft was infringing the claims of the GS Patent. It was only through discovery that GratisSoft learned of MegaSoft's activity providing a basis for a counterclaim.
Conclusion
While the arguments presented above may not be available in all cases, software-patent litigators should not overlook GPLv3 when developing litigation strategy. Given the increasing use of open-source software and the growing number of patent-software cases, there may be additional arguments based on GPLv3 or other open-source licenses. To prepare a robust defense on behalf of their clients, patent litigators ought to consider arguments based on open-source licenses that they may have previously overlooked.
Keywords: litigation, intellectual property, open-source software, GNU General Public License