Re: CAFC 2008-1001 -- "license to the world must be a bare license" case

[Alexander Terekhov]

OSI's General Counsel contemplates upcoming "disaster for open source
licensors" and brings attention to another recent case
(3:06-cv-07391-MJJ). 

http://lawandlifesiliconvalley.blogspot.com/2008/02/jacobsen-redux-remedies-for-breach.html

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Jacobsen Redux: Remedies for Breach
 
As I mentioned in my post on Jacobsen v. Katzer
http://lawandlifesiliconvalley.blogspot.com/2007/08/new-open-source-legal-decision-jacobsen.html,
the issue of remedies for the breach of open source licenses is a
difficult one. A recent decision in the Northern District of California,
Netbula, LLC v. Storage Technology Corporation ("STC"), is a reminder of
these difficulties. Netbula tried to convince the court that STC's
alleged violation of the license agreement should be copyright
infringement as well as breach of contract. As I noted in that post,
most licensors prefer copyright infringement remedies:

Generally, the remedy for contract violations under US law is damages,
not "injunctive relief" (which means that the court order a party to
cease their violation). On the other hand, copyright infringement
generally includes a presumption that injunctive relief is appropriate.
Thus, the question of whether the violation of a license is a contract
violiation or copyright infringement (it can be both) is very important,
because licensors would prefer to obtain an injunction prohibiting the
breach of the license. The question turns on a nuanced legal issue of
whether the term in the license is a "restriction on the scope" of the
license or a covenant. In the first case, the failure to comply with the
provision means that the licensee is outside the scope of the license
and thus is a copyright infringer (as well as liable for breach of the
contract). On the other hand, if the term is merely a covenant, then the
failure to comply with it is a breach of contract. The most celebrated
case dealing with this issue involved the Java license between Sun and
Microsoft in which the court found that the obligation on Microsoft to
meet the Java compatability tests was a covenant, not a restriction on
the scope of the license and the court denied Sun an injunction on those
grounds (Sun got an injunction for unfair competition).

The Netbula decision demonstrates the difficulty of proving that a
license obligation is a "condition". Briefly, STC licensed Netbula's SDK
for development and runtime version for distribution. Netbula alleges
that STC used the SDK for more users than was permitted and on operating
systems that were not permitted. The license grant is as follows: " a
non-exclusive, perpetual, irrevocable license for Storagetek's
employees, consultants and subsidiaries for up to ONE user(s) for each
of the licenses purchased, to use the PowerRPC SDK Product under Windows
NT and 95/98 platforms; each user can only use the software on one
computer." The court found that the limitation on users was not a
condition, but only a covenant. Consequently, the remedies for breach of
the license would be damages and the breach was not copyright
infringement. On the other hand, the court found that the restriction on
the use of the SDK for certain operating sytems was a condition and its
breach would be copyright infringement. However, Netbula did not prove
that STC had used the SDK on the non permitted operating system.

Netbula also alleges that STC did not pay the royalties for all of the
copies which it distributed. The license provided for payment of a fixed
amount for 1000 copies. The court found that this obligation is
covenant, not a condition.

This case demonstrates the difficulties in making these distinctions.
The case demonstrates the reluctance of the courts to find a
"limitation" on the license and provide a licensor with copyright
infringement remedies. This case is important for open source licensors:
even though the Jacobsen case was probably wrongly decided, this issue
is a difficult one. The appeal of the Jacobsen case has the potential
for disaster for open source licensors: if the CAFC decides the issue
incorrectly and uses sweeping language (as opposed to narrowly focusing
on the provisions of the Artistic License), open source licensors will
be in a considerably weaker position in pursuing licensees who are in
breach.
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regards,
alexander.

--
"12/21/2007 ORDER TO EXTEND TIME FOR DEFENDANT...
 01/22/2008 ORDER TO EXTEND TIME FOR DEFENDANT...
 02/19/2008 ORDER TO EXTEND TIME FOR DEFENDAT(sic)...
 02/26/2008 ENDORSED LETTER addressed to Judge Laura Taylor Swain from
Daniel B. Ravicher...
 02/27/2008 ORDER that Defendants Verizon Communications, Inc. has
until March 14, 2008..."

 -- 1:07-cv-11070-LTS aka Never Beginning "GPL Enforcement" case