====== 2-281 ======

====== 2-283 ======

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 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.

====== 2-284 ======

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.

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

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 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

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

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

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

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.

====== 2-289 ======

NOTES