"Proprietary" and "free" licenses get a win, but is it contractual?


FOSS licensors applaud the Federal Circuit decision in Jacobson, but the real winners are the vastly more numerous software producers who reject the “free” software model. Why………?


The reason is simple. 

The decision expressly recognizes that downloaded software or other copyrighted content can come with conditions on its use, apparently without requiring that those conditions be part of a contractual arrangement.  That result seems correct, and it supports not only FOSS software, but more importantly the wide-ranging commercial software regime under which rights-owners conditionally distribute their software, limiting the permissions and conditions under which use is permitted. “Free” and “proprietary” software distributors engage in the same process. They are distribution models, differing only in the details of the terms.

            So, let’s look at the issue.

            The FOSS argument is that licenses are (at least in some cases) non-contractual permissions – a rights-owner gives the other party permission to use the owner’s rights, but can restrict that permission in whatever way the rights owner chooses. This does not require agreement.

            There are obvious limits on this concept. 

One is the idea of “fair use” in copyright law. If a transaction is non-contractual, fair use is a defense to the copyright infringement claim. If the transaction were contractual, however, a contract claim is not affected.

Another is “first sale” or “exhaustion” doctrine under patent or copyright law. Non-contractual notices do not prevent exhaustion (or first sale) rights from transferring to the purchaser under intellectual property law. Quanta Computer, Inc. v. LG Electronics, Inc., 2008 WL 2329719, 86 USPQ2d 1673 (US 2008).

            Neither of these issues were raised in Jacobsen v. Katzer, 2008 WL 3395772 (Fed. Cir. 2008). The defendant downloaded a copy of the “free” software and used it in its own products, but did not comply with the provisions in the free “Artistic license.” It was sued for copyright infringement. Without addressing whether there was a contract or whether the downloader agreed to terms, the Court of Appeals focused on whether the provisions the defendant failed to comply with were promises or “conditions” on the permission granted under the license. That is, was permission to copy and distribute the software conditioned on compliance with the full terms of the license, or was that permission granted in return for a promise by the licensee to comply with the provisions of the license. The terms provided, in relevant part, that the licensee had 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: [stating several steps required with respect to the copies]

The court focused on “provided that”, concluding that, under California contract law, this is treated as a language of condition. As a result, when the licensee did not comply with these terms, it acted outside the scope of its license and, thus, could be sued for copyright infringement.

            The court’s opinion did not explicitly address whether this license was a contract or not, but did engage in the following analysis, which implies that it was looking to establish that a contract did exist and that the terms were important even though no money exchanged hands. Whether they talk about being free, many FOSS providers receive commercial benefits from their licenses.

            So the net result is a court of appeals ignoring whether there was assent to terms or an opportunity to review them and focusing on the fact that “Copyright holders … have the right to control the modification and distribution of copyrighted material.” If I were a commercial (or an open source software provider), I would make certain that my licenses conformed the terms of condition recognized by this court.

Written By:GeneTinsley On October 9, 2009 5:57 PM

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