Jacobsen v. Katzer is an interesting case in many respects. There’s the lengthy discussion of “provided that” as used in the draft (which Ken has separately blogged about). There’s the Brandeis brief on which open source is a good thing. But I’m personally find interesting the discussion of covenants vs. conditions.

The Federal Circuit finds that all of the “provided that” language were conditions of the copyright grant. Uses outside of the grant were held to be infringing uses. However, the court does not provide much guidance on how one drafts a *condition* in a license as opposed to drafting a *covenant*.

Certainly, when drafting a license I could (and sometimes do) say,

“Any uses of the Software in violation of Sections through of this Agreement are violations of the license granted by Licensor to Licensee, and thus are infringing uses under the U.S. Copyright Act.”

Not surprisingly, opposing counsel occasionally objects to such language. ;-)

So, if I write or receive a software license that is one page long or 50 pages long, how do I determine whether a provision agreed to by the parties in writing is a condition of the license grant or a covenant of the contract?

What do you think?

Thanks,

Fred Wilf

Software licenses evolved when software began to be thought of as a contract subject separate from hardware (because initially, hardware and software were inseparable and were provided at the same time by the same vendor). Lawyers did what lawyers always do when something new comes along: work from something familiar and make adaptations where the status quo doesn’t fit. In the case of software, the typical contracts at hand we looked at as templates, were patent and trade secret/know-how licenses (developed by industry), and copyright licenses (coming from publishing and the music and movie industries). We simply spliced these contract forms together. Why did we splice them together? It completely reflected back on the intellectual property rights underlying (or not underlying) the subject of the contract.

Software was not expressly protected by copyright until 1980, and even after that, it was not patentable for several years. And it was still an open question in 1985 whether patent and copyright protection could both apply to any one intellectual property, and at that time, the courts had not yet completely interpreted how copyright law would interact with contract law and whether contract law would be preempted (it is preempted, where contract law seeks to affect the same rights as are provided for and covered by copyright law. 17 USC section 301). But this was when the IBM PC and clones were exploding all over the place and mass-market software was becoming the norm. We were covering all the bases.

I agree with the line of thought expressed in the earlier comments that while these long strings of adjectives may or may not be appropriate to a particular situation and may or may not be duplicative — they go on being used on a daily basis because of a. familiarity and comfort level of purchasing and procurement departments with pattern language, and b. caselaw interpreting particular contract terms, terms of art, and legal jargon. (As a young lawyer I heard several times that there is apparently a Michigan case which discusses the meaning of “witnesseth” at length).

For Eric Goldman: I for one do not believe that “exclusive” is ever ambiguous in a software license — can you provide an example? The parties may be making a mutual mistake in using the term “exclusive license” because they do not mean to exclude the licensor, but that’s a separate issue from its meaning as a legal term.

I was taught in law school as a general principle that an exclusive license always excludes the grantor. In the context of US copyright law, the “exclusive rights” in software being referred to are the section 106 rights of the owner. Surely in this context the owner’s rights exclude the exercise of those rights by all others (subject to the balancing factors of the copyright act such as “fair use.”) The patent law uses the word “exclusive” in a similar manner.

When you look at copyright cases like the Franklin Mint case (the ‘cardinal on a branch’ case) and progeny, there is plenty of caselaw in the copyright context saying that an owner who transfers exclusive rights by license excludes himself from subsequently enjoying those rights. (In the Franklin Mint case, which is widely used in casebooks as a leading case, the artist excludes himself from the right to make derivative works by transferring all rights in his painting of a cardinal on a branch. The court said he was an infringer by making other paintings of cardinals on branches similar to the one he sold the rights to — these were derivative works and though he was the original creator, he had effectively excluded himself from making these kinds of paintings).

This is a meaning of “exclusive” coming out of copyright law, rather than a contract law interpretation.

Patent, trade secret and know how license grants are highly formulaic as well. It is typical in these to grant an exclusive license to the licensee in one subparagraph, and have a “grantback” of certain rights to the licensor in the next subparagraph, and these are simultaneous so that the licensor is never excluded. This drafting technique obviously implies the belief that the licensor would otherwise be excluded.

I haven’t looked into it, but how does a court construe the meaning of “exclusive” in a requirements, exclusive output, or exclusive dealing contract? I’d be interested in knowing if “exclusive” becomes ambiguous out of the intellectual property law context.

I’m not taking away from Ken’s thoughtful dissection of the utility of these strings of words by merely saying “always has been” — I’m just pointing out that it’s more than a ‘plain English’ question to revise how these grants are made.

Carol Shepherd
Arborlaw PLC

Because in a patent license license “worldwide” creates an implication that rights are granted, or will be sought, in countries in which no patent has been issued or granted and in which no one in their right mind would seek patent protection. Particularly where you have a pending PCT or EPO application, you don’t as the licensor want any language implying an obligation to nationalize the application in each country in the world. “without geographic restriction” is the modern and more precise way to address the concept.

Exclusive can mean “you’re the only one,” or it can mean “you’re the last one that can ever have this license, but there are others out there that may have the license already,” or it can be “only you and the licensor.”

In some contexts, I’ve seen “co-exclusive licenses” that are essentially “non-exclusive” licenses with a prohibition on future licenses (aka standstill).

To make matters worse, if you license from a university, there’s inevitably a qualification in an exclusive patent license agreement for government rights from Bayh-Dole.

I’ll also point out that exclusive grants have other implications like in antitrust, taxation, standing to sue, etc. The point being, there’s a lot within the definition and grants are definitely a trap for the unwary.

Finally, there are definite differences between patent, copyright, and trademark. So, you need to check the right rules for determining what applies when.

As Roger correctly states “If they say, I want to terminate the license, then I don’t accept irrevocable or perpetual language, although I have been forced to accept the words followed by the paranthetical “(except as provided in the termination provision)” to express the intent that it’s perpetual until its not.”

Perpetual means, well, perpetual (yes, this definition is for Mr. Adams). If the contract does not explicitly terminate the license on contract termination then the license will not be terminated.

From http://www.cafc.uscourts.gov/opinions/08-1001.pdf.

“Thus, if the terms of the Artistic License allegedly violated are both covenants and conditions, they may serve to limit the scope of the license and are governed by copyright law. If they are merely covenants, by contrast, they are governed by contract law.”

As for exclusive vs. non-exclusive, I suggest those who believe the distinction is straight forward examine “exclusive” licenses and their relation to anti-trust laws in Europe and the US.