By Dale C. Campbell

A copyright holder has the right to specify the terms under which others may use his or her work. How the terms under which a third party may use a copyrighted work are described can dramatically affect the remedies available to the copyright holder when the terms are breached.

This month, the United States Court of Appeals for the Federal Circuit addressed these issues in one of the first cases involving open source computer software. (Jacobsen v. Katzer, 2008 WL 3395772 (CA Fed. (Cal.).) Open source computer software is made available free to the public under a copyright license that allows others to create collaborative projects, to dedicate their works to the public, or to license certain uses of the works while keeping some rights reserved.

In Jacobsen,the plaintiff created open source software that allows model railroad enthusiasts to use their computers to control model trains. Jacobsen made his software available under what is known as an Artistic License that allows computer programmers to make changes and improvements to the code but requires the users to copy and restate the Artistic License, to describe which part of the collaborative work is original code created by the copyright holder, and to identify which part is newly added or altered by the collaborator.


Defendant Katzer created a competing product. Katzer admitted that he copied Jacobsen’s software code, modified the code, incorporated it in Katzer’s software, and did not include any notice of Jacobsen’s copyright, nor did it identify of what was the original code and what was modified.


The Northern District Court of California reviewed the Artistic License and determined that the defendant’s failure to provide the required notice constituted a breach of the license, but did not create liability for copyright infringement. The District Court found that the Artistic License was a non-exclusive license, unlimited in scope, and that the restrictions placed by the copyright holder were simply contractual covenants, but were not conditions to use that would otherwise mean the defendant’s conduct fell outside the scope of the license.


The question on appeal was whether Katzer’s use fell outside the scope of the copyright license. A “copyright owner who grants a non-exclusive license to use his copyrighted material waives the right to sue the licensee for copyright infringement” and can use only for breach of contract. (Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115, 1121 (9th Cir. 1999); Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998).) If, however, a license is limited in scope and the licensee acts outside the scope, the licensor can bring an action for copyright infringement. (See, also,  S.O.S., Inc. v. Playday, Inc., 1886 F.2d 1081, 1087 (9th Cir. 1989); Jacobsen v. Katzer, supra,at 7.)


Defendant Katzer argued that the terms of this Artistic License did not limit the scope of the license, but merely created contractual obligations for the use of the software. Katzer further argued that violation of that contract is neither compensable in damages nor subject to injunctive relief. Katzer argued the copyright holder has no economic interest in open source software since it is available to the public free of charge. The defendant relied on Gillam v. ABC, 538 F.2d 14, 20-21 (2d Cir. 1976), which held “American copyright law, as presently written, does not recognize moral rights or provide a cause of action for their violation, since the law seeks to vindicate the economic, rather than the personal, rights of the authors.”


The Federal Circuit reversed. First, the Court found that open source software, although made available to the public for free, does include an economic component even though profit is not immediate. The creator derives economic value from a public license because the creator is able to subsequently improve the software based upon suggestions by other users. As the software improves, so does the creator’s reputation in the community, and the software is improved even further. (Citing Planetary Motion, Inc. v. Techsplosion, 261 F.3d 1188, 1200 (11th Cir. 2001).)


The Federal Circuit readily found that the terms of the Artistic License created “conditions” under which a licensee could copy and modify the software and were not mere “covenants.” The Court analyzed the explicit terms of the Artistic License, which provide that the rights to copy, modify, and distribute are granted “provided that” the conditions are met. Terms such as “provided that” are generally interpreted as establishing a condition, not a mere covenant. The conditions established in the Artistic License are necessary for the copyright holder to benefit from the use by the work of the subsequent users. “Copyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material . . ..” (Jacobsen v. Katzer, supra, at 12.) The Court, therefore, found that it was outside the scope of the Artistic License for the defendant to modify and distribute the copyrighted materials without the required copyright notices and notification distinguishing the original material from the subsequent modifications.


The Jacobsen case affirms that the creator of open source software has an economic interest in his work, although it is not distributed for any monetary compensation and therefore holds a protectable copyright interest. The author may condition its subsequent use and modification as the author sees fit. However, IP practitioners should also view the Jacobsen decision as a cautionary lesson when drafting the terms of a license. The restrictions on use should be carefully drafted as conditions, the violation of which would fall outside the scope of the license and therefore subject the infringer to all remedies under the Copyright Act. Careless drafting of the license may leave the copyright holder with only unsatisfactory contractual remedies.