Ground Breaking Decision In Open Source Software: The Versata Software Case

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INTRODUCTION

An Open Source Software is a type of software with a source code which can be modified, enhanced and inspected by ANYONE.  Source code is that part of a particular software program which empowers a person to alter how the software works or improve it by adding features or fixing parts that do not work properly. Differing from closed software, whereby only the person/organization that created the software has the capacity to alter it, OSS is preferred more and is a better option for the users than the former, granting them more freedom in relation to the software. Some prime examples of OSS are the Apache HTTP Server, the e-commerce platform osCommerce, internet browsers Mozilla Firefox and Chromium. Facebook, Google, and LinkedIn all release OSS so developers can share knowledge, create solutions, and contribute to stable and functional products. There are certain landmark cases in the field of open source software that hold paramount importance in deciding the future of the same as well as opening legal floodgates in its respect, one of which has been discussed at length below.

VERSATA SOFTWARE INC. V. AMERIPRISE FINANCIAL INC & ORS.

Versata sued Ameriprise in Texas state court on May 3, 2013 (the "Texas case"), alleging that Ameriprise materially breached a software license between the two parties for Versata's Distribution Channel Management (DCM) software, which Versata had licensed for millions of dollars.[1]

Background

The lawsuit primarily involves two contractual agreements between three companies. The first one is a Master License Agreement between Versata and Ameriprise, whereby, the latter is granted a non-exclusive, non-transferable and perpetual license to use the DCM software limiting its access to Ameriprise employees and certain permitted contractors only. However, Ameriprise allowed non-permitted contractors to access and work on the DCM software in violation of the MLA, due to which Versata purported to terminate the MLA and demanded Ameriprise to stop using and return the DCM software to Versata.

The second agreement is the GNU General Public License which Versata was granted by a non party XimpleWare Corporation, whereby, Versata was permitted to use XimpleWare’s “VTD-XML” software, an open source product. Versata allegedly incorporated VTD-XML into its DCM software due to which Ameriprise counterclaimed in the suit stating that Versata was required by the GPL to make the DCM source code freely available to all users, including Ameriprise and its contractors.

Versata, also, contended that Amerprise’s breach of contract counterclaim which was based on Versata’a alleged violations of the GPL are preempted by copyright law. As a result, Ameriprise removed the case to the federal court to determine whether the case could be decided under copyright law.

XimpleWare

Once XimpleWare became aware of the allegations made against Versata by Ameriprise, it filed a federal lawsuit against both of them on November 5, 2013 for copyright infringement as well as for breach of contract.

It alleged that Versata infringed its copyright by including the source code in its DCM software without obtaining a commercial license, permission for the use of XimpleWare's products, or complying with the GPLv2 license.[2]

It further claimed that Ameriprise distributed the DCM software without attribution to XimpleWare, XimpleWare's copyright notice, reference to XimpleWare's source code, or any offer to make the source code freely available—all violations of the GPLv2.[3]

In addition to the copyright case, XimpleWare also filed a Patent infringement case on the very same day against Versata, Ameriprise and several of Versata’s customers.

Judgment

Versata and XimpleWare reached an out-of-court settlement on 10th February, 2015 for both patent and copyright infringement cases.

For the counterclaim of Ameriprise to that of Versata stating how it breached the GPLv2, the federal court concluded that the GPLv2 imposes additional obligations which is beyond the scope of the Copyright Act and as a result, the counterclaim of Ameriprise was not preempted and thus, sent the case back to the state court.

To what extent can software companies restrict their contractors from further sub contracting or redistributing their GPLv2 license still remains an open question as the court could not give a sound conclusion for the same.

In the Patent case, the court stated  "even if the original licensee—[here, Versata]—breaches its license for whatever reason, third-party customers of that original license retain the right to use XimpleWare's software so long as the customer does not itself breach the license by 'distributing' XimpleWare's software without satisfying [any] attendant conditions."  [4] In other words, if one party violates the license, it would not automatically terminate other licensees’ rights who have complied with the terms of license.

ANALYSIS

GNU General Public License Version 2 (GPLv2), being the most important license for open source software, is widely used. Black Duck Software estimates that 16 billion lines of code are licensed under GPLv2.[5] This particular collection of law suits threatened to break novel grounds on the GPL as well as software licensing issues.  It will continue to provide important guidelines regarding GPLv2 compliance.

Where on one hand, the District Court of Texas simplified certain issues; on the other hand, it failed to give a concrete judgment on certain others. The Court clarified that even if a GPLv2 has been acquired from a party who has infringed the same, it will still be a fully valid and legal license if the recipient has duly complied with the GPL provisions. The rationale behind this decision is that the GPLv2 license constitutes a direct license from the owner of the intellectual property right and the actions of any entity in its distribution chain are immaterial. This way, the interests of the end consumers are protected and they do not have to suffer on the ground of infringement by the licensor (not the owner).

Where most OSS claims are usually based on breach of contract or copyright infringement, the suit instituted by XimpleWare paved a new way by arguing that distributing software in violation of the GPLv2 license directly infringed its “patent rights”. The court’s ruling that GPLv2 has an implied patent license in addition to a copyright license, has expanded the scope of the same. With regard to the patent “use”, the license expressly states “the act of running the Program is not restricted.[6] Such “running of the program” can be interpreted as merely using the source code in this pertinent case, which is explicitly permitted by the GPLv2 licence. A patent license to use, make, sell, and offer to sell are permitted by the GPLv2 because it does not restrict patent use, patent make and sell rights are strongly implied in the GPLv2, and the general policy of the license implies an “offer to sell” right.[7] Also, nowhere in the course of the proceedings did XimpleWare claim that Versata was aware of the claimed patent. This is important to know as no party can “willfully” infringe any right that it is has no knowledge of.

Though the court couldn’t conclusively decide on the issue of restraining the contractors and sub contractors from further distributing the GPLv2 license, Ameriprise’s internal circulation of the license shouldn’t amount to any infringement. This is because, such disposition to its own employees does not constitute a distribution or sale to unrelated or third parties as envisioned in copyright law or patent law, because the transaction does not involve a sale to the public or transfer of ownership.[8]

The decisions arrived at these cases are important in a number of ways, primarily because it confirmed the working of the GPLv2 structure. Mark Radcliffe, a licensing expert and partner at law firm DLA Piper has rightly exclaimed that “The days of open source software free lunches are rapidly coming to an end, and that means enterprises that fail to stick to the terms of open source licenses can expect to be sued.”

Author:  Anwesha Singh, Legal Intern at Global Patent Filing. In case of any queries please contact/write back to us at support@globalpatentfiling.com.

References:

[1] Texas case: Versata Software, Inc. et al. v. Ameriprise Financial, Inc. et al., Case No. D-1-GN-12-003588; 53rd Judicial District Court of Travis County, Texas (May 3, 2013).

[3] Ibid

[4] See "Order Granting-in-Part Defendants' Motions to Dismiss" (May 16, 2014) in Patent case

[6] GNU General Public License, Version 2, OPENSOURCE.ORG, https://opensource.org/licenses/GPL-2.0

[8] Thomas F. Cotter, Toward a Functional Definition of Publication In Copyright Law, 92 MINN. L. REV. 1724, 1753 (2008)