I like to think that somewhere in America, at this very moment, a college kid has just agreed without reservation to accept five bucks from his friend to drink an entire bottle of hot sauce. Non-lawyers are often surprised to learn that, public policy concerns aside, such an agreement contains all the elements necessary to create a legally binding contract: Offer, acceptance and consideration.
Part of a lawyer’s job is to identify relevant legal issues lurking beneath factual scenarios. Issue spotting can be frustratingly difficult, however, because, as the absurd hot sauce agreement illustrates, the law is often counterintuitive. Counter-intuitions abound in the weird world of open source license agreements. License agreements have become commonplace in our tech-saturated lives. If you’re not sure what they are, jog your memory to the last time you downloaded an app for your laptop or smartphone. Remember being asked to read and agree to an endless list of terms and conditions? That contract that you “read” and agreed to was almost certainly an end user license agreement to use the app for a specific purpose.
Over the past twenty years or so, several copyright licensing movements have gained traction. In general, these new types of licenses challenge traditional notions of copyright protection by granting licensees the right to modify the original copyrighted material for future use free of charge so long as certain promises are kept and/or conditions are met.
One well-known movement is the Open Source Initiative, which reviews and approves open source software (OSS) licenses. OSS licenses typically provide licensees with the right to access the source code of the original software program (hence “open” source) and create new software programs subject to the terms of the license. So, what happens if you’ve obtained an OSS license, and you violate the terms? Intuition tells us that a contract – a legally binding agreement – has been breached, and the non-breaching party can obtain remedies under the rules of contract law. Turns out, though, that sometimes the law tells us something different.
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About ten years ago, an OSS group called Java Model Railroad Interface (JMRI) created a computer program called DecoderPro. Model railroad enthusiasts could run DecoderPro on their computers to remotely control their model trains. DecoderPro files were publicly available online for downloading free of charge, and programmers could use the files to create their own custom programs. Those who downloaded the files were required, however, to agree to an Artistic License. The Artistic License obligated the creators of modified programs based on DecoderPro to provide attribution to the original code’s authors, to identify the source of the program files, and to describe how the original files were modified from the original source code.
Mathew Katzer and his organization, Kamind Associates, Inc., subsequently introduced a competing software program called Decoder Commander. JMRI’s manager, Robert Jacobsen, then claimed that a Kamind employee or predecessor used portions of the DecoderPro source code to create the Decoder Commander software without complying with the terms of JMRI’s Artistic License. Jacobsen sued Katzer, seeking a preliminary injunction on the theory that Decoder Commander infringed JMRI’s copyright.
Jacobsen argued that he was entitled to remedies under copyright law – most importantly, the right to get an injunction – because Katzer’s violation of the Artistic License’s terms constituted copyright infringement. Katzer responded in defense that the license was a contract, and that Jacobsen was therefore entitled exclusively to remedies under contract law for any breach of the license – money damages only, not an injunction. Unlike in breach of contract cases, where an aggrieved contract party can only get monetary damages, a copyright holder can get a court to stop (i.e. enjoin) an infringer from using illegal software. In the case of Jacobsen v. Katzer, this would have meant that Katzer had to completely stop selling Decoder Commander, making the product dead in the water.
How did things turn out for our pugnacious programmers? The U.S. District Court for the Northern District of California denied Jacobsen’s motion to enjoin Katzer, finding that Katzer’s violation of the Artistic License may have constituted a breach of contract but did not amount to a copyright infringement. The court reasoned that the terms of the license were covenants to a contract and that any violation of those covenants could only be remedied by money damages in accordance with contract law.
Lawyers that serve the OSS industry were troubled by the outcome. They argued that money damages alone for violations of OSS license terms would often leave software programmers with little meaningful remedy at all, since money damages might be difficult to calculate and inadequate even if provable. Or, to put it another way, since the software developer makes the software freely available anyway, what possible monetary damages can he or she claim for breach of contract/license? And on what basis would those damages be calculated, even if more than nominal?
Jacobsen was vindicated on appeal, however, when the U.S. Court of Appeals for the Federal Circuit held that Katzer’s violation of the Artistic License’s terms created liability for copyright infringement because the terms were conditions (rather than covenants) of the license, and those conditions expressly limited the license’s scope.
The Federal Circuit’s opinion turned on the nuanced legal distinction between a covenant and a condition. A covenant to a contract is a promise to do something, or to avoid doing something, that is “baked in” to a contract – if you break the promise, you breach the contract. In contrast, a condition is a contingency that defines the limits of the agreement. Easy, right?
Well, an example may help. If the licensee fails to comply with a condition of the license, then the licensee’s use of the underlying software is outside the scope of the license agreement, and the developer’s remedies would not be covered by – or restricted by – the license terms. In that case, the developer can look to copyright law for remedies, which provides for injunctive relief. Put yet another way, this view of a license condition means that the contract terms do not even kick in until the software licensee first does these enumerated things spelled out in the license. Prior to that happening, all legal remedies under copyright law are still available to the program developer.
In Jacobson v. Katzer, the Federal Circuit looked to the intent of the parties in creating the license agreement and held that the license terms were intended to be conditions, not covenants. The Court noted that, “the Artistic License states on its face that the document creates conditions: ‘The intent of this document is to state the conditions under which a Package may be copied.’” And further, “the rights [under the Artistic License] are granted ‘provided that’ the conditions are met. Under California contract law ‘provided that’ typically denotes a condition.” Thus, the Court held that an injunction was legally available to Jacobsen. The case was remanded and the combatants eventually settled.
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A troublemaker might look at the Federal Circuit’s opinion in Jacobsen v. Katzer and wonder, when would contract remedies ever kick in at all? Since (based on the Court’s ruling) all contract terms could be viewed as conditions, not covenants, in which case the license agreement itself would be meaningless.
We will explore that question in a blog post coming to you very soon, on this same topic, but from a slightly different perspective.
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