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Computer

The

& Internet
Lawyer
Volume 26 ▲ Number 8 ▲ AUGUST 2009 Ronald L. Johnston, Arnold & Porter, LLP Editor-in-Chief*

Closing the Loophole: Open Source Licensing
& the Implied Patent License
By Christian H. Nadan

O pen source software harbors an unsettling se-
cret: More than half of the open source soft-
ware in the world is not protected by a patent license.
Without a patent license, anyone copying,
using, or distributing the open source software
might face liability for patent infringement from
Rather, the software is distributed and used around the creator or any subsequent contributor to the
the world under open source licenses that do not in- code, if the creator or contributor patented any
clude a patent license grant. Indeed, three of the four of its creations or contributions. Yet this explains
most popular open source licenses do not include a why most users properly discount such risk of
patent license, including the two best known, the actual patent infringement—why would the cre-
GNU General Public License (GPL) and the Berke- ator or contributor make the software available
ley Software Distribution license (BSD).1 Thus, the to the world in the first place just to turn around
famous Linux operating system (distributed under and sue its adopters for patent infringement?
the GPL) has been widely deployed in numerous Moreover, even if that were the creator’s nefari-
large commercial enterprises from Google to Daim- ous plan, would the law permit such a tactic? It
lerChrysler and in many products such as the TiVo is widely assumed with logical force that the law
box, all without benefit of a patent license. would imply a patent license in such a situation,2
but in fact, the traditional law of implied license
does not fit so easily.
Christian H. Nadan is a Senior Director and Deputy The uncertainty of implied licenses is the
General Counsel, Sun Microsystems, Inc., and Adjunct source of unspoken unease in the open source
Professor, University of California Berkeley, Boalt community. Now, however, the Court of Appeals
Hall School of Law. This article represents the views for the Federal Circuit has provided an alternate
and analysis of the author alone and not of Sun and perhaps better-fitting doctrine to protect
Microsystems, Inc., or any other entity. The author open source licensees: implied patent license by
thanks Brandon Baum and Michele Milnes Nadan for legal estoppel. This doctrine might finally elimi-
their generous assistance and thoughtful comments and nate any doubts concerning open source software
suggestions. under licenses without a patent grant. In turn,
Open Source

this may accelerate open source software’s already rapid GPL includes an express patent obligation as to third
maturation and acceptance. party patents, but apparently not as to the creator’s own
patents.
Open Source Software The GPL’s failure to include an express patent license,
Open source software is software made freely avail- particularly while otherwise addressing patents, might
able to the public under a license that permits free use, mean that no patent license rights are granted. In State
copying, modification, and distribution. Typically, a Contracting & Engineering Corp. v. Florida, for example,
community of developers works with the code, creating the court examined a broad license grant that similarly
enhancements, extensions, and improvements, which are failed to mention patents.10 With respect to certain of
in turn freely shared with the community and further its data, the patent owner granted a license to “all rights
enhanced, extended, and improved.3 In this way, valu- to use, duplicate or disclose, in whole or in part, in any
able and productive software programs are created and manner and for any purpose whatsoever . . . . ”11 The
evolve, such as the Linux operating system, the Apache court ruled that the omission of an express provision
Webserver, and the MySQL database. providing for the license of patent rights demonstrated
Many thousands of users have deployed open source that the contract did not convey a patent license. As
software, from individuals to massive global enterprises. with GPL, the contract here did address patent rights
As an example, the MySQL database software is down- elsewhere, which “shows that, if the parties had intended
loaded more than 60,000 times every day.4 In a recent to convey other patent rights, they would have done so
study, the Gartner research group found that 85 percent explicitly.”12
of companies surveyed are currently using open source The BSD license grant simply provides that
software in their enterprises, and the remaining 15 per- “[r]edistribution and use in source and binary forms,
cent are expecting to in the next 12 months.5 In other with or without modification, are permitted” provided
words, by 2010 every one of the 274 end-user organiza- certain conditions are met, such as including a copy-
tions surveyed across various countries and markets in right notice. While the word “use” is a patent term, and
Asia Pacific, Europe, and North America will be using nothing in this grant excludes its applicability to patents,
open source software. Open source software has become that result is not at all certain. By comparison, the very
a major force in the technology industry. Accordingly, similar MIT license provides “permission to deal in the
removing ambiguity and uncertainty in open source Software without restriction, including without limita-
licensing can reduce transaction costs and risk across the tion the rights to use, copy, modify, merge, publish, dis-
technology industry. tribute, 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
Without a Patent License, No Patent express patent rights.13 By comparison, therefore, the
Rights Are Granted MIT license only heightens the concern that the BSD
The most common open source licenses have lived license does not include express patent rights.14
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 Even if No Patent Rights Are Granted, Might
did not focus on or include an express patent grant. an Implied License Exist?
Instead, these licenses used mostly copyright language Even if some open source licenses lack an express
to describe the rights granted and obligations imposed patent license, it might not matter. Many believe that
under the licenses. For instance, GPL grants the right there is an implied patent license in the GPL, BSD, and
to “copy and distribute” the code and to “modify” the the other licenses lacking an express patent license.15
code, “provided that you conspicuously and appropri- The problem is that the law of implied patent license
ately publish on each copy an appropriate copyright is ill-fitting and unreliable. Implied licenses can arise
notice . . . .”8 The GPL does not expressly exclude pat- by acquiescence or conduct, by equitable estoppel, and
ents from the license grant of course, and one could by legal estoppel.16 The Federal Circuit has cautioned,
argue that the failure to mention any specific form of however, that “judicially imposed licenses are rare under
intellectual property in the grant meant that the license any doctrine.”17
covers all forms, including patents. Yet where the GPL An implied license by conduct or acquiescence
includes a patent obligation, it does so expressly; the requires a nexus between the patent owner’s course of
creator is expressly obligated to pass through any pat- conduct or a waiver of its patent rights, and the alleg-
ent licenses that it receives from third parties.9 Thus, the edly infringing action.18 The open source licensee has

2 • The Computer & Internet Lawyer Volume 26 • Number 8 • August 2009
Open Source

a facially attractive argument that it exploited the open can protect open source licensees who have not received
source software in reliance on the licensor’s offering an express patent license.
the software under a broad copyright license. In other In TransCore LP v. Electronic Transactions Consultants
words, licensor’s conduct in making the code publicly Corp., the patent owner entered into a patent settle-
available is the cause of the allegedly infringing action— ment agreement with a competing manufacturer of toll
licensee’s use of the software under the very copyright collection systems.22 In exchange for $4.5 million, the
terms set out by the licensor.The only problem with this patent owner covenanted not to sue for infringement
argument is that it is not necessarily reliable, as implied of certain patents, but specifically excluded from the
license by conduct or acquiescence is highly fact depen- covenant “any other patents issued as of the effective
dent. Indeed, cases finding such implied licenses often date of this Agreement or to be issued in the future.”23
involve much more obvious conduct or acquiescence, Some years later, the patent owner again charged the
such as a licensee’s reliance on six years of licensor’s competing manufacturer’s goods with patent infringe-
public statements and inducement to create the infring- ment, this time asserting a patent issued after the date
ing goods.19 This makes it hard to predict what a court of the settlement and therefore excluded from the cov-
would do in a particular case. Such uncertainty adds enant not to sue. Because the later-issued patent’s scope
risk, thereby increasing the cost of using open source overlapped the earlier patents, however, the competing
software under one of the open source licenses lacking manufacturer could not practice the covenanted pat-
a patent grant. ents (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 manufac-
The GPL’s failure to include an turer would necessarily infringe the later-issued patent.
express patent license, particularly The court explained the rationale behind the legal
while otherwise addressing patents, estoppel doctrine: “[T]he licensor (or assignor) has
might mean that no patent license licensed (or assigned) a definable property right for
rights are granted. valuable consideration, and then has attempted to dero-
gate or detract from that grant. The grantor is estopped
from taking back in any extent that for which he has
Implied license by equitable estoppel is an even less received consideration.”24
helpful doctrine. It requires the infringer’s reliance on
the patentee’s conduct and knowledge of the patent.20
Implied license by legal estoppel may
An open source licensee might prove the first element,
as discussed earlier. The second element presents a chal- be the most promising doctrine on
lenge, however. Rarely would the open source licensee which to find an implied license in the
know of the patents that the creator might have obtained context of open source software made
on the open sourced software. Indeed, the open source available under a license without an
licensee often acquires the software from someone who is express patent grant.
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 patent owner was therefore legally estopped
the product of many contributors, any of whom could from asserting the later-issued patent in derogation of
have a patent on his or her contribution, this uncer- the covenant granted for $4.5 million under the settle-
tainty is multiplied. The licensee may not know who ment agreement. The court disregarded the contract
all the creators are, let alone whether any of them has a language in the settlement agreement excluding the
patent. Thus, implied license by equitable estoppel will later-issued patent because this was not a contract-based
rarely benefit an open source user or redistributor. estoppel; rather, the patent owner was legally estopped
Implied license by legal estoppel may be the most from derogating from the rights it expressly granted.25
promising doctrine on which to find an implied license The circumstances of an open source license are
in the context of open source software made available similar. The open source licensor grants a license to use
under a license without an express patent grant. Legal and distribute the open source software. If the licensor
estoppel is “where a patentee has licensed or assigned a has also obtained a patent on that software, then use or
right, received consideration, and then sought to dero- distribution would likely infringe the patent. In other
gate from the right granted.”21 A pair of Federal Circuit words, because the patent’s scope overlaps the license
cases, applied in combination, reveals how this doctrine grant, the licensee cannot exercise the license grant

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Open Source

without infringing the patent. Simply stated, the open demanding money. That choice should not enable the
source licensor has granted a right to enjoy the software licensor to give a license with one hand and sue for
and would be derogating from that right by claiming patent infringement with the other on the ground the
patent infringement.26 consideration received is non-monetary.30
As noted, the test has one additional element, consid- The confluence of TransCore and Jacobsen suggests
eration: Implied license by legal estoppel is found when that open source licensees who do not receive an express
a patentee has licensed or assigned a right, received patent license still would enjoy an implied patent license
consideration, and then sought to derogate from the under the doctrine of legal estoppel. The patent own-
right granted. Since open source licenses are always free, ing open source licensor is receiving a benefit from the
with no license fee or royalty required, it might appear licensee’s giving attribution to the licensor, contribut-
that there is no consideration to the licensor. ing modifications to the open source community, and
extending the licensor’s market share. Accordingly, as the
beneficiary of these benefits, the patent owner should
The Jacobsen case fulfills the remaining
be legally estopped from asserting its patent in deroga-
element of legal estoppel. The open tion of the rights granted to the licensee under the open
source licensor is obtaining a benefit, source license.31
non-monetary economic consideration
from the licensee. Conclusion
On its face, it seems wrong for a licensor to grant
someone permission to do something and then turn
The Federal Circuit has addressed this issue too, in around and sue them for doing just that under licensor’s
Jacobsen v. Katzer.27 Jacobsen involved a claim for copy- patents. This basic premise is so reasonable and fair it
right infringement against an open source licensee would likely prevail in many cases.32 Indeed, this prem-
who did not comply with the conditions of the open ise is so widely held that the lack of an express pat-
source license. The court found that the open source ent license in the most common open source licenses
license was an enforceable contract and recognized that, has not hindered massive adoption. To the contrary, the
although the licensor did not receive money, the license undeniable benefits of open source—fantastic perfor-
did provide non-monetary economic consideration. mance for the price (the software is free), no barrier
Specifically, there are to entry (again because the software is free), no vendor
lock-in (because the source code is open, you can fix or
substantial benefits, including economic benefits, to enhance the code yourself if you do not like the vendor),
the creation and distribution of copyrighted works and standardization (the first three benefits foster mass
under public licenses that range far beyond tradi- adoption)—have dwarfed any concerns about missing
tional license royalties. For example, program cre- patent grants. Open source software’s momentum con-
ators may generate market share for their programs tinues to grow, and will continue to grow. Nonetheless, it
by providing certain components free of charge. can only help to ground the popularly assumed implied
Similarly, a programmer or company may increase patent license on a solid legal foundation. The Federal
its national or international reputation by incubat- Circuit has provided a roadmap for future litigants and
ing open source projects. Improvement to a prod- courts to find an implied patent license in open source
uct can come rapidly and free of charge from an licenses. Perhaps the patent license loophole will finally
expert not even known to the copyright holder.28 be closed.

The Jacobsen case fulfills the remaining element of Notes
legal estoppel. The open source licensor is obtaining a 1. The top four most commonly used licenses are GPL (52
benefit, non-monetary economic consideration from the percent), LGPL (10 percent), Artistic License (9 percent), and
licensee.This consideration justifies the law’s imposition BSD (6 percent). See http://www.blackducksoftware.com/gpl3
of a license, to prevent the licensor from preempting (last visited 6/1/09). Of these four, only the Artistic License
the open source license grant while receiving consider- includes a patent grant.
ation from the licensee. “The choice to exact consider- 2. Richard Stallman, “Why Upgrade to GPL Version 3,” http://
ation in the form of compliance with the open source gplv3.fsf.org/rms-why.html (last visited 6/1/09) (“With GPLv2,
requirements . . . rather than as a dollar-denominated users rely on an implicit patent license to make sure that the
fee, is entitled to no less legal recognition.”29 It is the company which provided them a copy won’t sue them”);
licensor’s choice to open source the software instead of Adam Kubelka & Matthew Fawcett, “No Free Beer—Practice

4 • The Computer & Internet Lawyer Volume 26 • Number 8 • August 2009
Open Source

Tips For Open Source Licensing,” 22 Santa Clara Computer 14. See OSI, supra n.8, MIT license. Once it became clear that
& High Tech. L.J. 797, 814 n.59 (2006) (“the GPL . . . relies software was patentable and the US Patent Office began grant-
on an implied patent license”); Mark A. Lemley, “Intellectual ing software patents, open source licenses began to include a
Property Rights and Standard-Setting Organizations,” 90 Calif. patent grant as a matter of course. For example, the Mozilla
L. Rev. 1889, 1924 (2002) (“Implied license is also likely where Public License (MPL) and its derivatives such as the Common
an IP owner invites a use that would otherwise infringe, for Public License (CPL) and the Community Development &
example, by posting their copyrighted work on the Internet for Distribution License (CDDL) all include express patent grants,
free download.”). as does the Apache License version 2.0 and the newest release
3. For a discussion of the origins of open source software and of GPL, GPLv3. These patent license grants vary in scope. The
open source licensing generally, see Christian H. Nadan, “Open MPL grants a license only as to the code as made available by
Source Licensing: Virus or Virtue?,” 10 Texas Intell. Prop. L.J. the licensor, whereas GPLv3 includes a patent license covering
349 (2002). licensee’s modifications that are within the scope of the patent
claims initially licensed by the licensor. See the OSI site at supra
4. “Sun Microsystems Announces Completion of MySQL
n.8, GPLv3 § 11. It is worth noting that one does not have to
Acquisition; Paves Way for Secure, Open Source Platform
use the word “patent” to grant a patent license; for instance,
to Power the Network Economy,” at http://www.mysql.com/
some proprietary software licenses provide a license grant
news-and-events/sun/ (last visited 6/1/09).
“under licensor’s intellectual property rights” (which of course
5. Zafar Anjum, “Enterprise Open Source Adoption Underway includes patents).
But Needs Company Policies” at http://www.cio.com/
15. See discussion at supra n.2.
article/464821/Enterprise_Open_Source_Adoption_Underway_
But_Needs_Company_Policies_ (last visited 61/09). 16. “These labels describe not different kinds of licenses, but
rather different categories of conduct which lead to the same
6. Technically, what is commonly known as GPL is actually GPL
conclusion: an implied license. The label denotes the rationale
version 2, released in 1991. The first GPL license was dated
for reaching the legal result.” Wang Labs., Inc. v. Mitsubishi
1989. The BSD license dates to 1989 or earlier (see Marshall
Electronics America, Inc., 103 F.3d 1571, 1580 (Fed. Cir. 1997),
Kirk McKusick, “Twenty Years of Berkeley Unix From AT&T-
cert. denied, 522 U.S. 818 (1997).
Owned to Freely Redistributable,” at http://oreilly.com/catalog/
opensources/book/kirkmck.html) (last visited 6/1/09)). 17. Wang, 103 F.3d at 1581.
7. It was not until the Federal Circuit’s decision in State Street 18. AT&T Corp. v. Microsoft Corp., 70 U.S.P.Q.2d 1141, 2004
Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d U.S. Dist. LEXIS 1214, *15-16 (S.D.N.Y. 2004).
1368 (Fed. Cir. 1998), that the patentability of software became 19. Wang, 103 F.3d at 1581-1582. See also AT&T, 2004 U.S. Dist.
generally recognized. LEXIS 1214 at *15-16 (citing cases).
8. For a list of the most common open source licenses and a 20. AT&T, 2004 U.S. Dist. LEXIS 1214 at *13-14 (citing cases).
complete copy of each of them, see The Open Source Initiative 21. Wang, 103 F.3d at 1581.
(OSI) site at http://www.opensource.org/licenses/alphabetical (last
22. TransCore, LP v. Electronic Transactions Consultants Corp.,
visited 6/1/09). For a discussion of software licensing gener-
563 F.3d 1271,1273 (Fed. Cir. 2009).
ally, see Christian H. Nadan, “Software Licensing in the 21st
Century: Are Software ‘Licenses’ Really Sales, and How Will 23. Id.
the Industry Respond?,” 32 Am. I.P. Law Ass’n Q. J. 555 (Fall 24. Id. at 1279.
2004). 25. The doctrine may not be common, but it is not new. See
9. See OSI, supra n.8, GPL § 7. Preformed Line Prods. Co. v. The Fanner Manufacturing Co.,
10. State Contracting & Eng. Corp. v. Florida, 258 F.3d 1329, 1339 225 F. Supp. 762, 781-782 (N.D. OH 1960), aff’d, 328 F.2d
(Fed. Cir. 2001), cert. denied, 534 U.S. 1131 (2002). 265 (6th Cir.), cert. denied, 379 U.S. 846 (1964) (court granted
implied license by legal estoppel to an additional patent that
11. Id.
was not covered in the parties’ agreement but was needed
12. Id. at 1339-1340; Robert W. Gomulkiewicz, “General to practice the patents that were licensed: “even though not
Public License 3.0: Hacking the Free Software Movement’s expressly provided for in the agreement, where it is contem-
Constitution,” 42 Hous. L. Rev. 1015, 1033 (2005) (“First, does plated that the licensee shall be able to make, use and sell a
the GPL grant rights under the licensor’s patents as well as its given device in a specified manner, the licensor is estopped
copyrights? Although the GPL’s grant language speaks mainly from asserting against the licensee any other patent which it
in terms of copyrights, is there also an implied right under may then own or later acquire, the effect of which would be
patents?”). to deprive the licensee of the rights bargained for.”).
13. See, e.g., Dowagiac Mfr’ing Co. v. Minnesota Moline Plow 26. It should be noted that these cases applying the doctrine typi-
Co., 235 U.S. 641, 648 (1915) (discussing a “course of granting cally involve underlying patent grants and later assertions of
licenses to others to deal in [patented] articles embodying the patent infringement. Yet the rationale for the implied patent
invention”), Pitney Bowes, Inc. v. Mestre, 701 F.2d 1365, 1370 license by legal estoppel does not rely on the underlying grant
(11th Cir. 1983) (involving a patent license to make, use, sell, also being a patent license. There’s nothing in the basic fair-
import “and deal in” the patented product). ness of the doctrine—you cannot give something in exchange

Volume 26 • Number 8 • August 2009 The Computer & Internet Lawyer • 5
Open Source

for consideration and then turn around and prevent the buyer Inc., 128 S. Ct. 2109, 2121-2122 (2008), the Supreme Court
from enjoying its purchase—that would limit its application reaffirmed the doctrine of patent exhaustion, holding that any
to protecting only underlying patent licenses. Indeed, the sale of a patented item authorized by the patent owner would
US Circuit Court of Claims encountered a case where the extinguish the patent owner’s rights to control the subsequent
underlying license allowed defendant to exploit an idea, rather use or resale of that patented item, thereby eliminating the
than a patent. The court nonetheless held that licensor was still purchaser’s need for an express or implied patent license:
legally estopped from then negating that license by asserting “Exhaustion is triggered only by a sale authorized by the pat-
that exercising the license infringed a later-acquired patent. ent holder. . . . The authorized sale of an article that substan-
AMP v. United States, 389 F.2d 448, 454 (Ct. Claims 1968); tially embodies a patent exhausts the patent holder’s rights and
Preformed Line Products, 225 F. Supp. at 782 (“It is a maxim of prevents the patent holder from invoking patent law to control
the common law that one, granting a thing, impliedly grants postsale use of the article.” But is the distribution by the patent
that without which the thing expressly granted would be use- owner under an open source license an “authorized sale” that
less to the grantee. This maxim is as applicable to grants of patent exhausts its patent rights? See, e.g., Telecomm Tech. Svcs., Inc. v.
rights as to other species of property.” (citing cases)) (emphasis Siemens Rolm Comms., Inc., 66 F. Supp. 2d 1306, 1323
added). Hence, the fact that with open source licenses the (N.D.Ga. 1998) (denying summary judgment on claim that
initial exchange involves a copyright license should not Rolm exhausted its patents by selling patented PBX systems,
matter. The open source licensor should not be able to pre- because whether license of Rolm PBX software and restricted
vent licensee from enjoying the copyright license just because sales of PBX hardware exhausted patents raised issues of fact).
licensor is using a different form of intellectual property (a The distribution by the patent owner is certainly authorized,
patent) to accomplish the derogation. See also Sony Corp. of and as discussed in the text there is economic consideration
America v. Universal City Studios, Inc., 464 U.S. 417, 439 flowing to the licensor under the open source license, as
(1984) (noting “the historic kinship between patent law and might be required for a sale.Yet the open source license clearly
copyright law”). purports to be a license to the code, not the sale of the code.
27. Jacobsen v. Katzer, 535 F.3d 1373 (Fed. Cir. 2008). There is much debate in the courts as to whether a perpetual
software license is really a sale or a license. See Nadan, supra
28. Id. at 1379.
n.8, at 567-588, 589-621 (discussing why software is licensed,
29. Id. at 1382. and whether a software license is really a sale). If a software
30. The consideration needed to create an implied patent license license were considered a sale at least for patent purposes, it
by legal estoppel does not have to be monetary at all. McCoy v. would mean that the patent owner exhausted its patent rights
Mitsuboshi Cutlery, Inc., 67 F.3d 917, 922 (Fed. Cir. 1995), to control the licensee’s use or distribution of the open sourced
cert. denied, 516 U.S. 1174 (1996) (based on legal estoppel, software, and thus no patent license (i.e., no permission from
the court implied a license to sell patented knives: the patent the patent owner) would be needed.
owner hired a manufacturer to make the knives, and the manu- 32. Of course, any implied patent license would likely be limited
facturer conferred a benefit by making the knives, but then to patents overlapping (reading on) the software, not indepen-
patent owner refused to pay for or take delivery of the knives, dent patents that the licensee might infringe on its own. Like
so based on legal estoppel the manufacturer had an implied most open source licenses that do include an express patent
patent license to sell the knives to mitigate its loss. The court grant (see supra n.14), an implied patent license might also not
noted that “the law may create an implied license to enforce cover modifications made by the licensee under the copyright
the contract obligations of the patent holder.”). license, but only the acts of copying, using and distributing
31. Even if there is no express or implied patent license at all, it still the software in the form it was made available by the patent-
might not matter. In Quanta Computer, Inc. v. LG Electronics, owning licensor.

Reprinted from The Computer & Internet Lawyer, August 2009, Volume 26, Number 8, pages 1 to 6,
with permission from Aspen Publishers, Inc., a Wolters Kluwer business, New York, NY,
1-800-638-8437, www.aspenpublishers.com.

6 • The Computer & Internet Lawyer Volume 26 • Number 8 • August 2009