On August 13, 2008, in Jacobsen v. Katzer, Case Number 2008-1001, ("Jacobsen"), the Federal Circuit Court of Appeals ruled that a cause of action exists for copyright infringement when the "conditions" of the "Artistic License," an "open source" or "public" license under which the copyrighted work was licensed, are breached. Read the full opinion by clicking here. [2]

Appellant Robert Jacobsen appealed from an order denying a motion for preliminary injunction. Jacobsen v. Katzer, No. 06-CV-01905 JSW, 2007 WL 2358628 (N.D. Cal. Aug. 17, 2007). Jacobsen holds a copyright to computer programming code. He makes that code available for public download from a website without a financial fee pursuant to the "Artistic License," an "open source" or public license. Appellees Matthew Katzer and Kamind Associates, Inc. (collectively "Katzer/Kamind") develop commercial software products for the model train industry and hobbyists. Jacobsen accused Katzer/Kamind of copying certain materials from Jacobsen's website and incorporating them into one of Katzer/Kamind's commercial software packages without following the terms of the Artistic License.

The parties did not dispute that Jacobsen is the holder of the copyright for the software. Also, Katzer/Kamind admitted that portions of Jacobsen's code were copied. However, Katzer/Kamind did not concede that they did not comply with the conditions of the Artistic License, nor did the District Court make factual findings on the likelihood of success on the merits in proving that Katzer/Kamind violated said conditions.

The District Court reviewed the Artistic License and determined that "Defendants’ alleged violation of the conditions of the license may have constituted a breach of the nonexclusive license, but does not create liability for copyright infringement where it would not otherwise exist." Id. at *7. The District Court found that Jacobsen had a cause of action only for breach of contract, rather than an action for copyright infringement based on a breach of the conditions of the Artistic License. Because a breach of contract creates no presumption of irreparable harm, the District Court denied the motion for a preliminary injunction.

The Federal Circuit Court of Appeals disagreed, and vacated the District Court's order, remanding the case to the District Court for a ruling consistent with its opinion.

The Federal Circuit found that the Artistic License grants users 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: a) place [the user's] modifications in the Public Domain or otherwise make them Freely Available, such as by posting said modifications to Usenet or an equivalent medium, or placing the modifications on a major archive site such as ftp.uu.net, or by allowing the Copyright Holder to include [the user's] modifications in the Standard Version of the Package. b) use the modified Package only within [the user's] corporation or organization. c) rename any non-standard executables so the names do not conflict with the standard executables, which must also be provided, and provide a separate manual page for each nonstandard executable that clearly documents how it differs from the Standard Version, or d) make other distribution arrangements with the Copyright Holder.

The heart of the argument on appeal concerned whether the terms of the Artistic License are conditions of, or merely covenants to, the copyright license. Generally, a "copyright owner who grants a nonexclusive license to use his copyrighted material waives his right to sue the licensee for copyright infringement" and can sue only for breach of contract. Sun Microsystems, Inc., v. Microsoft Corp., 188 F.3d 1115, 1121 (9th Cir. 1999); Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998). If, however, a license is limited in scope and the licensee acts outside the scope, the licensor can bring an action for copyright infringement. See S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir.1989); Nimmer on Copyright, 1015[A] (1999).

The Federal Circuit found 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. The Artistic License also uses the traditional language of conditions by noting that the rights to copy, modify, and distribute are granted 'provided that' the conditions are met. Under California contract law, 'provided that' typically denotes a condition. See, e.g., Diepenbrock v. Luiz, 159 Cal. 716 (1911) (interpreting a real property lease reciting that when the property was sold, 'this lease shall cease and be at an end, provided that the party of the first part shall then pay [certain compensation] to the party of the second part'; considering the appellant's 'interesting and ingenious' argument for interpreting this language as creating a mere covenant rather than a condition; and holding that this argument 'cannot change the fact that, attributing the usual and ordinary signification to the language of the parties, a condition is found in the provision in question')."

The Federal Circuit, having determined that the terms of the Artistic License are conditions to the copyright license, remanded to enable the District Court to take evidence on whether Katzer/Kamind violated the said conditions to determine whether Jacobsen has demonstrated (1) a likelihood of success on the merits and either a presumption of irreparable harm or a demonstration of irreparable harm; or (2) a fair chance of success on the merits and a clear disparity in the relative hardships and tipping in his favor.