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Closing the Loophole: Open Source Licensing & the Implied Patent License (Reprinted from: 26 The Computer & Internet Lawyer 1 (August 2009))

Christian H. Nadan

Actian Corporation

Christian H. Nadan is a Senior Director and Deputy General Counsel, Sun Microsystems, Inc., and Adjunct Professor, University of California Berkeley, Boalt Hall School of Law. This article represents the views and analysis of the author alone and not of Sun Microsystems, Inc., or any other entity. The author thanks Brandon Baum and Michele Milnes Nadan for their generous assistance and thoughtful comments and suggestions.

If you find this article helpful, you can learn more about the subject by going to www.pli.edu to view the on demand program or segment for which it was written.


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Open source software harbors an unsettling secret: More than half of the open source software in the world is not protected by a patent license. Rather, the software is distributed and used around the world under open source licenses that do not include a patent license grant. Indeed, three of the four most popular open source licenses do not include a patent license, including the two best known, the GNU General Public License (GPL) and the Berkeley Software Distribution license (BSD).1 Thus, the famous Linux operating system (distributed under the GPL) has been widely deployed in numerous large commercial enterprises from Google to DaimlerChrysler and in many products such as the TiVo box, all without benefit of a patent license.

Without a patent license, anyone copying, using, or distributing the open source software might face liability for patent infringement from the creator or any subsequent contributor to the code, if the creator or contributor patented any of its creations or contributions. Yet this explains why most users properly discount such risk of actual patent infringement— why would the creator or contributor make the software available to the world in the first place just to turn around and sue its adopters for patent infringement? Moreover, even if that were the creator’s nefarious plan, would the law permit such a tactic? It is widely assumed with logical force that the law would imply a patent license in such a situation,2 but in fact, the traditional law of implied license does not fit so easily.

The uncertainty of implied licenses is the source of unspoken unease in the open source community. Now, however, the Court of Appeals for the Federal Circuit has provided an alternate and perhaps better-fitting doctrine to protect open source licensees: implied patent license by legal estoppel. This doctrine might finally eliminate any doubts concerning open source software under licenses without a patent grant. In turn, this may accelerate open source software’s already rapid maturation and acceptance.

Open Source Software

Open source software is software made freely available to the public under a license that permits free use, copying, modification, and distribution. Typically, a community of developers works with the code, creating enhancements, extensions, and improvements, which are in turn freely shared with the community and further enhanced, extended, and improved.3 In this way, valuable and productive software programs are created and evolve, such as the Linux operating system, the Apache Webserver, and the MySQL database.

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Many thousands of users have deployed open source software, from individuals to massive global enterprises. As an example, the MySQL database software is downloaded more than 60,000 times every day.4 In a recent study, the Gartner research group found that 85 percent of companies surveyed are currently using open source software in their enterprises, and the remaining 15 percent are expecting to in the next 12 months.5 In other words, by 2010 every one of the 274 end-user organizations surveyed across various countries and markets in Asia Pacific, Europe, and North America will be using open source software. Open source software has become a major force in the technology industry. Accordingly, removing ambiguity and uncertainty in open source licensing can reduce transaction costs and risk across the technology industry.

Without a Patent License, No Patent Rights Are Granted

The most common open source licenses have lived the longest. GPL was written in 1991, and BSD was written even earlier.6 At that time, it was not at all clear that software was patentable.7 Hence, these older licenses did not focus on or include an express patent grant. Instead, these licenses used mostly copyright language to describe the rights granted and obligations imposed under the licenses. For instance, GPL grants the right to “copy and distribute” the code and to “modify” the code, “provided that you conspicuously and appropriately publish on each copy an appropriate copyright notice. . . .”8 The GPL does not expressly exclude patents from the license grant of course, and one could argue that the failure to mention any specific form of intellectual property in the grant meant that the license covers all forms, including patents. Yet where the GPL includes a patent obligation, it does so expressly; the creator is expressly obligated to pass through any patent licenses that it receives from third parties.9 Thus, the GPL includes an express patent obligation as to third party patents, but apparently not as to the creator’s own patents.

The GPL’s failure to include an express patent license, particularly while otherwise addressing patents, might mean that no patent license rights are granted. In State Contracting & Engineering Corp. v. Florida, for example, the court examined a broad license grant that similarly failed to mention patents.10 With respect to certain of its data, the patent owner granted a license to “all rights to use, duplicate or disclose, in whole or in part, in any manner and for any purpose whatsoever. . . .”11 The court ruled that the omission of an express provision providing for the license of patent rights demonstrated that the contract did not convey a patent license. As with GPL, the contract here did address patent rights

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elsewhere, which “shows that, if the parties had intended to convey other patent rights, they would have done so explicitly.”12

The BSD license grant simply provides that “[r]edistribution and use in source and binary forms, with or without modification, are permitted” provided certain conditions are met, such as including a copyright notice. While the word “use” is a patent term, and nothing in this grant excludes its applicability to patents, that result is not at all certain. By comparison, the very similar MIT license provides “permission to deal in the Software without restriction, including without limitation the rights to use, copy, modify, merge, publish, distribute, sublicense, and/or sell copies of the Software.” By using patent terms like “deal in,” “use,” and “sell,” the MIT license grant is more likely to be deemed to include express patent rights.13 By comparison, therefore, the MIT license only heightens the concern that the BSD license does not include express patent rights.14

Even If No Patent Rights Are Granted, Might an Implied License Exist?

Even if some open source licenses lack an express patent license, it might not matter. Many believe that there is an implied patent license in the GPL, BSD, and the other licenses lacking an express patent license.15 The problem is that the law of implied patent license is ill-fitting and unreliable. Implied licenses can arise by acquiescence or conduct, by equitable estoppel, and by legal estoppel.16 The Federal Circuit has cautioned, however, that “judicially imposed licenses are rare under any doctrine.”17

An implied license by conduct or acquiescence requires a nexus between the patent owner’s course of conduct or a waiver of its patent rights, and the allegedly infringing action.18 The open source licensee has a facially attractive argument that it exploited the open source software in reliance on the licensor’s offering the software under a broad copyright license. In other words, licensor’s conduct in making the code publicly available is the cause of the allegedly infringing action—licensee’s use of the software under the very copyright terms set out by the licensor. The only problem with this argument is that it is not necessarily reliable, as implied license by conduct or acquiescence is highly fact dependent. Indeed, cases finding such implied licenses often involve much more obvious conduct or acquiescence, such as a licensee’s reliance on six years of licensor’s public statements and inducement to create the infringing goods.19 This makes it hard to predict what a court would do in a particular case. Such uncertainty adds risk, thereby increasing the

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cost of using open source software under one of the open source licenses lacking a patent grant.

Implied license by equitable estoppel is an even less helpful doctrine. It requires the infringer’s reliance on the patentee’s conduct and knowledge of the patent.20 An open source licensee might prove the first element, as discussed earlier. The second element presents a challenge, however. Rarely would the open source licensee know of the patents that the creator might have obtained on the open sourced software. Indeed, the open source licensee often acquires the software from someone who is one or more levels downstream from the patent-owning creator and might not be aware of the creator’s identity at all. Moreover, since open source software is typically the product of many contributors, any of whom could have a patent on his or her contribution, this uncertainty is multiplied. The licensee may not know who all the creators are, let alone whether any of them has a patent. Thus, implied license by equitable estoppel will rarely benefit an open source user or redistributor.

Implied license by legal estoppel may be the most promising doctrine on which to find an implied license in the context of open source software made available under a license without an express patent grant. Legal estoppel is “where a patentee has licensed or assigned a right, received consideration, and then sought to derogate from the right granted.”21 A pair of Federal Circuit cases, applied in combination, reveals how this doctrine can protect open source licensees who have not received an express patent license.

In TransCore LP v. Electronic Transactions Consultants Corp., the patent owner entered into a patent settlement agreement with a competing manufacturer of toll collection systems.22 In exchange for $4.5 million, the patent owner covenanted not to sue for infringement of certain patents, but specifically excluded from the covenant “any other patents issued as of the effective date of this Agreement or to be issued in the future.”23 Some years later, the patent owner again charged the competing manufacturer’s goods with patent infringement, this time asserting a patent issued after the date of the settlement and therefore excluded from the covenant not to sue. Because the later-issued patent’s scope overlapped the earlier patents, however, the competing manufacturer could not practice the covenanted patents (for which it paid $4.5 million) without practicing the later-issued patent. Thus, to obtain the benefit of its bargain with the patent owner, the competing manufacturer would necessarily infringe the later-issued patent.

The court explained the rationale behind the legal estoppel doctrine: “[T]he licensor (or assignor) has licensed (or assigned) a definable property

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right for valuable consideration, and then has attempted to derogate or detract from that grant. The grantor is estopped from taking back in any extent that for which he has received consideration.”24

The patent owner was therefore legally estopped from asserting the later-issued patent in derogation of the covenant granted for $4.5 million under the settlement agreement. The court disregarded the contract language in the settlement agreement excluding the later-issued patent because this was not a contract-based estoppel; rather, the patent owner was legally estopped from derogating from the rights it expressly granted.25

The circumstances of an open source license are similar. The open source licensor grants a license to use and distribute the open source software. If the licensor has also obtained a patent on that software, then use or distribution would likely infringe the patent. In other words, because the patent’s scope overlaps the license grant, the licensee cannot exercise the license grant without infringing the patent. Simply stated, the open source licensor has granted a right to enjoy the software and would be derogating from that right by claiming patent infringement.26

As noted, the test has one additional element, consideration: Implied license by legal estoppel is found when a patentee has licensed or assigned a right, received consideration, and then sought to derogate from the right granted. Since open source licenses are always free, with no license fee or royalty required, it might appear that there is no consideration to the licensor.

The Federal Circuit has addressed this issue too, in Jacobsen v. Katzer.27Jacobsen involved a claim for copyright infringement against an open source licensee who did not comply with the conditions of the open source license. The court found that the open source license was an enforceable contract and recognized that, although the licensor did not receive money, the license did provide non-monetary economic consideration. Specifically, there are

substantial benefits, including economic benefits, to the creation and distribution of copyrighted works under public licenses that range far beyond traditional license royalties. For example, program creators may generate market share for their programs by providing certain components free of charge. Similarly, a programmer or company may increase its national or international reputation by incubating open source projects. Improvement to a product can come rapidly and free of charge from an expert not even known to the copyright holder.28

The Jacobsen case fulfills the remaining element of legal estoppel. The open source licensor is obtaining a benefit, non-monetary economic consideration from the licensee. This consideration justifies the law’s imposition of a license, to prevent the licensor from preempting the open source license grant while receiving consideration from the licensee. “The choice to

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exact consideration in the form of compliance with the open source requirements . . . rather than as a dollar-denominated fee, is entitled to no less legal recognition.”29 It is the licensor’s choice to open source the software instead of demanding money. That choice should not enable the licensor to give a license with one hand and sue for patent infringement with the other on the ground the consideration received is non-monetary.30 The confluence of TransCore and Jacobsen suggests that open source licensees who do not receive an express patent license still would enjoy an implied patent license under the doctrine of legal estoppel. The patent owning open source licensor is receiving a benefit from the licensee’s giving attribution to the licensor, contributing modifications to the open source community, and extending the licensor’s market share. Accordingly, as the beneficiary of these benefits, the patent owner should be legally estopped from asserting its patent in derogation of the rights granted to the licensee under the open source license.31


On its face, it seems wrong for a licensor to grant someone permission to do something and then turn around and sue them for doing just that under licensor’s patents. This basic premise is so reasonable and fair it would likely prevail in many cases.32 Indeed, this premise is so widely held that the lack of an express patent license in the most common open source licenses has not hindered massive adoption. To the contrary, the undeniable benefits of open source—fantastic performance for the price (the software is free), no barrier to entry (again because the software is free), no vendor lock-in (because the source code is open, you can fix or enhance the code yourself if you do not like the vendor), and standardization (the first three benefits foster mass adoption)—have dwarfed any concerns about missing patent grants. Open source software’s momentum continues to grow, and will continue to grow. Nonetheless, it can only help to ground the popularly assumed implied patent license on a solid legal foundation. The Federal Circuit has provided a roadmap for future litigants and courts to find an implied patent license in open source licenses. Perhaps the patent license loophole will finally be closed.

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The top four most commonly used licenses are GPL (52 percent), LGPL (10 percent), Artistic License (9 percent), and BSD (6 percent). Seehttp://www.blackducksoftware.com/gpl3 (last visited 6/1/09). Of these four, only the Artistic License includes a patent grant.


Richard Stallman, “Why Upgrade to GPL Version 3,” http://gplv3.fsf.org/rms-why.html (last visited 6/1/09) (“With GPLv2, users rely on an implicit patent license to make sure that the company which provided them a copy won’t sue them”); Adam Kubelka & Matthew Fawcett, “No Free Beer—Practice Tips For Open Source Licensing,” 22 Santa Clara Computer & High Tech. L.J. 797, 814 n.59 (2006) (“the GPL . . . relies on an implied patent license”); Mark A. Lemley, “Intellectual Property Rights and Standard-Setting Organizations,” 90 Calif. L. Rev. 1889, 1924 (2002) (“Implied license is also likely where an IP owner invites a use that would otherwise infringe, for example, by posting their copyrighted work on the Internet for free download.”).


For a discussion of the origins of open source software and open source licensing generally, see Christian H. Nadan, “Open Source Licensing: Virus or Virtue?,” 10 Texas Intell. Prop. L.J. 349 (2002).


“Sun Microsystems Announces Completion of MySQL Acquisition; Paves Way for Secure, Open Source Platform to Power the Network Economy,” at http://www.mysql.com/news-and-events/sun/ (last visited 6/1/09).


Zafar Anjum, “Enterprise Open Source Adoption Underway But Needs Company Policies” at http://www.cio.com/article/464821/Enterprise_Open_Source_Adoption_Underway_But_Needs_Company_Policies_ (last visited 61/09).


Technically, what is commonly known as GPL is actually GPL version 2, released in 1991. The first GPL license was dated 1989. The BSD license dates to 1989 or earlier (see Marshall Kirk McKusick, “Twenty Years of Berkeley Unix From AT&T Owned to Freely Redistributable,” at http://oreilly.com/catalog/opensources/book/kirkmck.html) (last visited 6/1/09)).


It was not until the Federal Circuit’s decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), that the patentability of software became generally recognized.


For a list of the most common open source licenses and a complete copy of each of them, see The Open Source Initiative (OSI) site at http://www.opensource.org/licenses/alphabetical (last visited 6/1/09). For a discussion of software licensing generally, see Christian H. Nadan, “Software Licensing in the 21st Century: Are Software ‘Licenses’ Really Sales, and How Will the Industry Respond?” 32 Am. I.P. Law Ass’n Q. J. 555 (Fall 2004).


See OSI, supra n.8, GPL § 7.


State Contracting & Eng. Corp. v. Florida, 258 F.3d 1329, 1339 (Fed. Cir. 2001), cert. denied, 534 U.S. 1131 (2002).




Id. at 1339-1340; Robert W. Gomulkiewicz, “General Public License 3.0: Hacking the Free Software Movement’s Constitution,” 42 Hous. L. Rev. 1015, 1033 (2005) (“First, does the GPL grant rights under the licensor’s patents as well as its copyrights? Although the GPL’s grant language speaks mainly in terms of copyrights, is there also an implied right under patents?”).


See, e.g., Dowagiac Mfr’ing Co. v. Minnesota Moline Plow Co., 235 U.S. 641, 648 (1915) (discussing a “course of granting licenses to others to deal in [patented] articles embodying the invention”), Pitney Bowes, Inc. v. Mestre, 701 F.2d 1365, 1370 (11th Cir. 1983) (involving a patent license to make, use, sell, import “and deal in” the patented product).


See OSI, supra n.8, MIT license. Once it became clear that software was patent-able and the US Patent Office began granting software patents, open source licenses began to include a patent grant as a matter of course. For example, the Mozilla Public License (MPL) and its derivatives such as the Common Public License (CPL) and the Community Development & Distribution License (CDDL) all include express patent grants, as does the Apache License version 2.0 and the newest release of GPL, GPLv3. These patent license grants vary in scope. The MPL grants a license only as to the code as made available by the licensor, whereas GPLv3 includes a patent license covering licensee’s modifications that are within the scope of the patent claims initially licensed by the licensor. See the OSI site at supra n.8, GPLv3 § 11. It is worth noting that one does not have to use the word “patent” to grant a patent license; for instance, some proprietary software licenses provide a license grant “under licensor’s intellectual property rights” (which of course includes patents).


See discussion at supra n.2.


“These labels describe not different kinds of licenses, but rather different categories of conduct which lead to the same conclusion: an implied license. The label denotes the rationale for reaching the legal result.” Wang Labs., Inc. v. Mitsubishi Electronics America, Inc., 103 F.3d 1571, 1580 (Fed. Cir. 1997), cert. denied, 522 U.S. 818 (1997).


Wang, 103 F.3d at 1581.


AT&T Corp. v. Microsoft Corp., 70 U.S.P.Q.2d 1141, 2004 U.S. Dist. LEXIS 1214, *15-16 (S.D.N.Y. 2004).


Wang, 103 F.3d at 1581-1582. See also AT&T, 2004 U.S. Dist. LEXIS 1214 at *15-16 (citing cases).


AT&T, 2004 U.S. Dist. LEXIS 1214 at *13-14 (citing cases).


Wang, 103 F.3d at 1581.


TransCore, LP v. Electronic Transactions Consultants Corp., 563 F.3d 1271, 1273 (Fed. Cir. 2009).




Id. at 1279.


The doctrine may not be common, but it is not new. SeePreformed Line Prods. Co. v. The Fanner Manufacturing Co., 225 F. Supp. 762, 781-782 (N.D. OH 1960), aff’d, 328 F.2d 265 (6th Cir.), cert. denied, 379 U.S. 846 (1964) (court granted implied license by legal estoppel to an additional patent that was not covered in the parties’ agreement but was needed to practice the patents that were licensed: “even though not expressly provided for in the agreement, where it is contemplated that the licensee shall be able to make, use and sell a given device in a specified manner, the licensor is estopped from asserting against the licensee any other patent which it may then own or later acquire, the effect of which would be to deprive the licensee of the rights bargained for.”).


It should be noted that these cases applying the doctrine typically involve underlying patent grants and later assertions of patent infringement. Yet the rationale for the implied patent license by legal estoppel does not rely on the underlying grant also being a patent license. There’s nothing in the basic fairness of the doctrine—you cannot give something in exchange for consideration and then turn around and prevent the buyer from enjoying its purchase—that would limit its application to protecting only underlying patent licenses. Indeed, the US Circuit Court of Claims encountered a case where the underlying license allowed defendant to exploit an idea, rather than a patent. The court nonetheless held that licensor was still legally estopped from then negating that license by asserting that exercising the license infringed a later-acquired patent. AMP v. United States, 389 F.2d 448, 454 (Ct. Claims 1968); Preformed Line Products, 225 F. Supp. at 782 (“It is a maxim of the common law that one, granting a thing, impliedly grants that without which the thing expressly granted would be useless to the grantee. This maxim is as applicable to grants of patent rights as to other species of property.” (citing cases)) (emphasis added). Hence, the fact that with open source licenses the initial exchange involves a copyright license should not matter. The open source licensor should not be able to prevent licensee from enjoying the copyright license just because licensor is using a different form of intellectual property (a patent) to accomplish the derogation. See alsoSony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 439 (1984) (noting “the historic kinship between patent law and copyright law”).


Jacobsen v. Katzer, 535 F.3d 1373 (Fed. Cir. 2008).


Id. at 1379.


Id. at 1382.


The consideration needed to create an implied patent license by legal estoppel does not have to be monetary at all. McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 922 (Fed. Cir. 1995), cert. denied, 516 U.S. 1174 (1996) (based on legal estoppel, the court implied a license to sell patented knives: the patent owner hired a manufacturer to make the knives, and the manufacturer conferred a benefit by making the knives, but then patent owner refused to pay for or take delivery of the knives, so based on legal estoppel the manufacturer had an implied patent license to sell the knives to mitigate its loss. The court noted that “the law may create an implied license to enforce the contract obligations of the patent holder.”).


Even if there is no express or implied patent license at all, it still might not matter. In Quanta Computer, Inc. v. LG Electronics, Inc., 128 S. Ct. 2109, 2121-2122 (2008), the Supreme Court reaffirmed the doctrine of patent exhaustion, holding that any sale of a patented item authorized by the patent owner would extinguish the patent owner’s rights to control the subsequent use or resale of that patented item, thereby eliminating the purchaser’s need for an express or implied patent license: “Exhaustion is triggered only by a sale authorized by the patent holder. . . . The authorized sale of an article that substantially embodies a patent exhausts the patent holder’s rights and prevents the patent holder from invoking patent law to control postsale use of the article.” But is the distribution by the patent owner under an open source license an “authorized sale” that exhausts its patent rights? See, e.g., Telecomm Tech. Svcs., Inc. v. Siemens Rolm Comms., Inc., 66 F. Supp. 2D 1306, 1323 (N.D.Ga. 1998) (denying summary judgment on claim that Rolm exhausted its patents by selling patented PBX systems, because whether license of Rolm PBX software and restricted sales of PBX hardware exhausted patents raised issues of fact). The distribution by the patent owner is certainly authorized, and as discussed in the text there is economic consideration flowing to the licensor under the open source license, as might be required for a sale. Yet the open source license clearly purports to be a license to the code, not the sale of the code. There is much debate in the courts as to whether a perpetual software license is really a sale or a license. See Nadan, supra n.8, at 567-588, 589-621 (discussing why software is licensed, and whether a software license is really a sale). If a software license were considered a sale at least for patent purposes, it would mean that the patent owner exhausted its patent rights to control the licensee’s use or distribution of the open sourced software, and thus no patent license (i.e., no permission from the patent owner) would be needed.


Of course, any implied patent license would likely be limited to patents overlapping (reading on) the software, not independent patents that the licensee might infringe on its own. Like most open source licenses that do include an express patent grant (see supra n.14), an implied patent license might also not cover modifications made by the licensee under the copyright license, but only the acts of copying, using and distributing the software in the form it was made available by the patent-owning licensor.