GPL AND SOFTWARE LICENSING ISSUES LESSONS FROM THE VERSATA LAWSUIT Black Duck Software, Inc. All Rights Reserved.
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1 GPL AND SOFTWARE LICENSING ISSUES LESSONS FROM THE VERSATA LAWSUIT 2015 Black Duck Software, Inc. All Rights Reserved.
2 SPEAKERS Phil Odence Vice President & General Manager Karen Copenhaver Partner at Choate Hall & Stewart Counsel for the Linux Foundation Black Duck Software, Inc. All Rights Reserved. Mark Radcliffe Partner at DLA Piper General Counsel for the Open Source Initiative (OSI)
3 AGENDA Five cases arising from these allegations Important terms of the GPL-2.0 Q&A on open source license litigation Black Duck Software, Inc. All Rights Reserved.
4 USING OSS IS NOT A FREE LUNCH It s important to understand both the benefits and the risks Black Duck Software, Inc. All Rights Reserved.
5 FOSS GOVERNANCE CRITICAL Traditional FOSS Enforcement: Focus on Compliance Software Freedom Law Center Software Conservancy gplviolations Shift to Commercial Enforcement: Outlier or Trend Continuent v. Tekelec (GPL) Versata Series of Cases Major Difference in Goals Shift from compliance to revenue Focus on injunctive relief Black Duck Software, Inc. All Rights Reserved.
6 BASICS OF CONTRACT ANALYSIS (COURTESY OF KAREN COPENHAVER) Rules of Construction applicable to any contract The text of the document If the text is unambiguous, stop here Meaning of terms that are not defined in the agreement Industry Specific References Dictionaries Parol Evidence Extraneous evidence that is not included in the relevant written document Rule that written contracts may not be modified by prior or contemporaneous agreements that contradict its terms. Evidence of context may be provided if helpful to discern intent of the parties Limited to terms that are ambiguous Black Duck Software, Inc. All Rights Reserved.
7 ANALYSIS OF A SPECIFIC AGREEMENT (CONTINUED) Course of Performance / Course of Dealing and Usage of Trade (Article 2 of the Uniform Commercial Code, so US only) (2) The express terms of the agreement and any such course of performance, as well as any course of dealing and usage of trade, shall be construed whenever reasonable as consistent with each other; but when such construction is unreasonable, express terms shall control course of performance and course of performance shall control both course of dealing and usage of trade. Implied in Fact Based on the circumstances of the specific agreement Terms will not be implied that are inconsistent with any express provision of the agreement Terms will only be implied where the context makes it evident that both parties would have intended their inclusion Implied in Law Exhaustion Black Duck Software, Inc. All Rights Reserved.
8 ANALYSIS OF SPECIFIC LICENSOR AND LICENSEE Licensor He or she selected the license and we have to assume that he or she intended the license to mean what its words say Licensee can rely on the words Licensor can t alter the terms to the detriment of the Licensee Estoppel based on justifiable reliance What about a third party? Under the GPL family of licenses all of the rights flow directly from the Licensor to the Licensee There are no sublicenses There are no third parties Black Duck Software, Inc. All Rights Reserved.
9 FAQS Cannot change the meaning of the license if FAQ is inconsistent with the text of the license it is not valid But high level of ambiguity in license text leaves wide openings for evidence of intent License Stewards FAQs issued by the owners of the license is good evidence of the intent of the License Drafters and of the License for any code owned by the License Stewards May not be good evidence of intent of other licensors using the license Statements of Copyright Holder Using the License Useful to resolve ambiguity If contradict express terms, could be considered as an amendment Provide basis for estoppel argument by Licensees Black Duck Software, Inc. All Rights Reserved.
10 VERSATA: BASIC CASE Versata, Trilogy Software, Inc. and Trilogy Development Group v. Ameriprise, Ameriprise Financial Services, Inc. and American Enterprise Investment Services, Inc., Case No. D-1-GN ; 53rd Judicial District Court of Travis County, Texas. Original case in which Versata asserted breach of its license for the DCM software with Ameriprise and tried to terminate the license. Versata v. Ameriprise et al., Case No. 1:14-cv-12, U.S. District Court, Western District of Texas. Ameriprise removed the case to federal court based on Versata s defense of copyright preemption in the Texas case. The parties agreed to a dismissal with prejudice in 2014 after the court ruled that the state law claims of Versata in its defense were preempted, but that Ameriprise s defense based on the GPLv2 was not preempted. The parties agreed to have the case remanded to the Texas state court Black Duck Software, Inc. All Rights Reserved.
11 SUMMARY OF ALLEGATIONS Versata Failure to terminate Infosys as a Permitted Contractor (who violated MLA) was material breach of Master License Agreement ( MLA ) to DCM software Ameriprise Defense Breach of contract through wrongful termination Breach of warranties because of inclusion of XimpleWare Software under GPLv2 and 100 other FOSS programs (362 out of 701 DCM components depend on XML parser) Failure to establish an escrow Remedy under MLA of perpetual license for breach Application of GPLv2 to DCM proprietary software so Ameriprise should receive source code of DCM software from Versata Black Duck Software, Inc. All Rights Reserved.
12 VERSATA: XIMPLEWARE CASES XimpleWare v. Versata, Aurea Software Inc., Trilogy Development Group, Inc., Ameriprise Financial Services, Inc., Ameriprise Financial, Inc., United HealthCare Services, Inc., Waddell & Reed, Inc., Aviva USA Corporation, Metropolitan Life Insurance Company, Pacific Life Insurance Company, The Prudential Insurance Company of America, Inc. (subsequently dismissed), Wellmark, Inc., Case No. 5:13cv5161, U.S. District Court, Northern District of California (San Jose). XimpleWare has sued all defendants for direct patent infringement and declaratory relief and the Versata Defendants for contributory and inducement of patent infringement. XimpleWare v. Versata, Trilogy Development Group, Inc., Ameriprise Financial, Inc., Ameriprise Financial Services, Inc., Aurea Software, Inc., Case No. 3:13cv5160, U.S. District Court, Northern District of California. XimpleWare has sued the defendants for direct copyright infringement, unjust enrichment, unfair competition and declaratory relief and sued the Versata Defendants for contributory copyright infringement, violation of the Lanham Act, breach of contract, breach of implied covenant of good faith and fair dealing and international interference with prospective economic advantage. Parties announce settlement on February 10, 2015 of these cases, copyright case settlement finalized but patent case still pending Black Duck Software, Inc. All Rights Reserved.
13 JUDGE GREWAL S NOV. 25 ORDER Justified or not, customers usually do not take kindly to being sued by their suppliers. And so when Defendant Versata Software, Inc. sued its customer Defendant Ameriprise Financial, Inc. for breach of a software license, Ameriprise was not content merely to defend itself. Ameriprise instead reached out to Plaintiff XimpleWare, Inc., not only to support its defense but also to inform XimpleWare that it had discovered XimpleWare s source code throughout Versata s DCM product, in violation of Ximpleware s GNU General Public License. XimpleWare did not, however, direct its fire against Versata alone. Ximpleware filed this suit against both Versata and Ameriprise, as well as other Versata customers, alleging infringement of Ximpleware s patents Black Duck Software, Inc. All Rights Reserved.
14 VERSATA: CRITICAL ISSUES 1. What are the remedies for breach of the terms of the GPLv2? 2. What is a distribution under the GPLv2 that triggers the obligations under the GPLv2? 3. Does the GPLv2 include a patent license? 4. What type of integration between proprietary code and GPLv2 licensed code will result in creating a derivative work and subject such proprietary code to the terms of the GPLv2? Black Duck Software, Inc. All Rights Reserved.
15 INITIAL DECISIONS Decisions on pleadings GPLv2 structure works: violations by Versata do not affect rights of Versata customers Copyright: Ameriprise distribution of the DCM software to its contractors without complying with GPLv2 violates GPLv2 (pleading only) Patent: Versata customers not liable under GPLv2 unless they distribute the DCM software based on right to run The act of running the Program is not restricted, and the output from the Program is covered only if its contents constitute a work based on the Program (independent of having been made by running the Program). ND California: Because an express license is a defense to patent infringement, XimpleWare s direct infringement claims against Versata s customers turn on whether the customers distribution is licensed under the GPL. (but decision may be effected by poor pleadings) Black Duck Software, Inc. All Rights Reserved.
16 IMPORTANT XIMPLEWARE CLAIM Second Amended Complaint Allegation: No patent license under GPLv2, for both users and distributors The GPL does not grant a patent license. The only mention of patents in the operative text of the GPL are in Sections 7 and 8. Those Sections state that if any conditions on a licensee s use are imposed by a patent, then the licensee may not distribute the licensed program at all (Section 7), and allowing a licensor to place geographic exclusions on the license for countries in which there are patent or other restrictions (Section 8). Neither of those Sections grant a patent license. November 25 Order: In its prior order, the court held that: (1) XimpleWare s software is licensed under the GPL; (2) the downstream user provisions in GPL sections 4 and 6 authorize Customer Defendants to use XimpleWare s software; and (3) to show infringement, XimpleWare must show unlicensed distribution by the Customer Defendants to an unrelated third party. See id. at XimpleWare was provided leave to amend its complaint to cure the deficiencies identified by the court. On this issue, that meant amending the complaint to include factual allegations showing distribution by the Customer Defendants. Because Plaintiff neither sought leave to assert new claims nor moved for reconsideration of the court s previous order, this new argument is unavailing Black Duck Software, Inc. All Rights Reserved.
17 CRITICAL QUESTIONS Rise of commercial enforcers Ameriprise defense: Will terminated licensees regularly raise the defense of integration with GPLv2? Will warranty claims for poorly drafted licenses become common? Complex nature of modern IT and involvement of third parties means distribution becomes critical Distribution is distribution to the public Limited publication doctrine (White v. Kimmel, 193 F.2d 744, 746 (9th Cir. 1952)): to a definitely selected group and for a limited purpose without the right of diffusion, distribution or sale Reluctance of courts to grant injunctions in copyright infringement cases Black Duck Software, Inc. All Rights Reserved.
18 COMPLIANCE: COMMON PROBLEMS Software Freedom Conservancy: Copyleft and the GNU General Public License: A Comprehensive Tutorial and Guide, Software Freedom Law Center: Guide to GPL Compliance 2 nd Edition, According to them, most common problems: Not including notices Not providing complete corresponding source Not identifying copyleft programs in products distributed and their terms Ignoring requests regarding compliance Black Duck Software, Inc. All Rights Reserved.
19 SUGGESTIONS FOR BEST PRACTICES Implementing policies in engineering and software acquisition Understand requirements of compliant distribution, distributing source code with object code is simplest Complete corresponding source code Does not include compiler Most provide, especially if copyleft version If proprietary then need to include name, version and where it can be obtained in README file Does include make files, build scripts and packaging scripts Suggests that code scanners do not manage risk Involve development teams in responding to allegations of compliance violations Black Duck Software, Inc. All Rights Reserved.
20 SUMMARY FOR SOFTWARE DISTRIBUTORS Understand what FOSS is included in your products. Develop a FOSS use (and management) policy to ensure that you understand your obligations and can comply with them and check it against the SFC/SFLC guides Review your distribution agreements to ensure that they take into account any terms imposed by FOSS in your product and modify those terms as appropriate Black Duck Software, Inc. All Rights Reserved.
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