## United States Court of Appeals for the Federal Circuit

2008-1001 ROBERT JACOBSEN, Plaintiff-Appellant,

v. MATTHEW KATZER and KAMIND ASSOCIATES, INC. (doing business as KAM Industries), Defendants-Appellees.

Victoria K. Hall , Law Office of Victoria K. Hall, of Bethesda, Maryland, argued for plaintiff-appellant. R. Scott Jerger , Field Jerger LLP, of Portl and, Oregon, argued for defendantsappellees. Anthony T. Falzone , Stanford Law School, Center fo r Internet and Society, of Stanford, California, for amici curiae Creative Commons Corporat ion, et al. With him on the brief was Christopher K. Ridder

. Appealed from: United States District Cour t for the Northern District of California Judge Jeffrey S. White

## United States Court of Appeals for the Federal Circuit

2008-1001

ROBERT JACOBSEN, Plaintiff-Appellant,

v. MATTHEW KATZER and KAMIND ASSOCIATES, INC. (doing business as KAM Industries), Defendants-Appellees.

Appeal from the United States District Court for the Northern District of California in case no. 06-CV-1905, Judge Jeffrey S. White.

__________________________ DECIDED: August 13, 2008

__________________________

Before MICHEL, Chief Judge , PROST, Circuit Judge , and HOCHBERG, * District Judge

. HOCHBERG, District Judge

.

* The Honorable Faith S. Hochberg, Distric t Judge, United States District Court for the District of New Jersey, sitting by designation. We consider here the ability of a copyright holder to dedicate certain work to free public use and yet enforce an A open source @ copyright license to control the future distribution and modification of that work. Appellant Robert Jacobsen ( A Jacobsen @ ) appeals from an order denying a motion fo r preliminary injunction. Jacobsen v. Katzer , No. 06-CV01905 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 awebsite without a financial fee pursuant to the Artistic License, an A open source @ or public license. Appellees Matthew Katzer and Kamind Associates, Inc. (collectively

A 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 software packages without following the terms of the Artistic Licens e. Jacobsen brought an action for copyright infringement and moved for a preliminary injunction. The District Court held that the open s ource Artistic License created an A intentionally broad @ nonexclusive license which was unlimited in scope and thus did not create liability for copyright infringement. The District Court reasoned: The plaintiff claimed that by modi fying the software the defendant had exceeded the scope of the license and therefore infringed the copyright. Here, however, the JMRI Project license provides that a us er may copy the files verbatim or may other wise modify the material in any way, including as part of a larger, possibly commercial software distribution. The license explicitly gives the users of the material, any member of the public, A the right to use and distribute the [mat erial] in a more-or-less customary fashion, plus the right to make reasonable accommodations. @ The scope of the nonexclusive license is, therefore, intent ionally broad. The condition that the user insert a prominent notice of attribution does not limit the scope of the license. Rather, Defendants’ alleged violat ion of the conditions of the license may have constituted a breach of t he nonexclusive license, but does not create liability for copyright infringement where it would not otherwise exist. Jacobsen , 2007 WL 2358628 at *7 (internal citations omitted). On this basis, the District Court denied the motion for a preliminary injunction. We vacate and remand. I. Jacobsen manages an open source software group called Java Model Railroad Interface ( A JMRI @ ). Through the collective work of many participants, JMRI created a

2008-1001 2computer programming application called De coderPro, which allows model railroad enthusiasts to use their comput ers to program the decoder chip s that control model trains. DecoderPro files are available for download and use by the public free of charge from an open source incubator website called SourceFor ge; Jacobsen maintains the JMRI site on SourceForge. The downloadable files contain copyright notices and refer the user to a

A COPYING @ file, which clearly sets forth the terms of the Artistic License. Katzer/Kamind offers a competing software product, Decoder Commander, which is also used to program decoder chips. Duri ng development of Decoder Commander, one of Katzer/Kamind = s predecessors or employees is alleged to have downloaded the decoder definition files from DecoderPr o and used portions of these file s as part of the Decoder Commander software. The Decoder Commander software files that used DecoderPro definition files did not comply with the terms of the Artistic License. Specifically, the Decoder Commander software did not include (1) the authors = names, (2) JMRI copyright notices, (3) references to the COPYING file, (4 ) an identification of S ourceForge or JMRI as the original source of the defin ition files, and (5) a description of how the files or computer code had been changed from the original source code. The Decoder Commander software also changed various computer file names of DecoderPro files without providing a reference to the original JMRI files or information on where to get the Standard Version. 1

1 Katzer/Kamind represents that all potentially infringing activities using any of the disputed material have been vol untarily ceased. The district court held that it could not find as a matter of law that Katzer/Kamind = s voluntary termination of allegedly wrongful activity renders the motion for preliminary in junction moot because it could not find as a matter of law that it is absolutely clear that the alleged behavior could not recur. Jacobsen , 2007 WL 2358628 at *5. We agree that this matter is not moot. See also Adarand Constructors, Inc. v. Slater , 528 U.S. 216, 222 (2000) ( A Voluntary cessation of challenged conduct moots a case . . . only if it is absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur. @ (emphasis in original)).

2008-1001 3Jacobsen moved for a preliminar y injunction, arguing that the violation of the terms of the Artistic License constituted copyright infringement and that, under Ninth Circuit law, irreparable harm could be presumed in a copyri ght infringement case. The District Court reviewed the Artistic License and determined that A Defendants’ alleged violation of the conditions of the license may have constitut ed a breach of the nonexclusive license, but does not create liability for copyright infri ngement where it woul d 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 copyri ght infringement based on a breach of the conditions of the Artistic Lic ense. Because a breach of cont ract creates no presumption of irreparable harm, the District Court denied the motion for a preliminary injunction. Jacobsen appeals the finding that he does not have a cause of action for copyright infringement. Although an appeal concerning copyright law and not patent law is rare in our Circuit, here we indeed possess appellate jurisdicti on. In the district court, Jacobsen’s operative complaint against Katzer/Kamind included not only his claim for copyright infringement, but also claims seeking a declarato ry judgment that a patent issued to Katzer is not infringed by Jacobsen and is invalid. Ther efore the complaint aros e in part under the patent laws. See 28 U.S.C. § 2201(a); Golan v. Pingel Enter. , 310 F.3d 1360, 1367 (Fed. Cir. 2002) (explaining that “[i]n the context of a complain t seeking a declaration of noninfringement, the action threatened by the declara tory defendant . . . would be an action for patent infringement,” and “[s]uch an action cl early arises under the patent laws”). Thus the district court’s jurisdiction was based, at least in part, on 28 U.S.C. § 1338(a) as it relates to the patent laws , and we have appellate jurisdiction under 28 U.S.C. § 1292(c)(1). See 28 U.S.C. § 1338(a) (“T he district courts shall have original jurisdiction of any civil

2008-1001 42008-1001 5 action arising under any Act of Congress rela ting to patents, plant variety protection, copyrights and trademarks.”); id. at § 1295(a)(1) (The Federal Circuit shall have exclusive jurisdiction “of an appeal from a final decision of a district court of the United States” if (1) “the jurisdiction of that court was based, in whol e or in part, on section 1338 of this title” and (2) the case is not “a case involving a clai m arising under any Act of Congress relating to copyrights, exclusive rights in mask wor ks, or trademarks and no other claims under section 1338(a).”); id. at § 1292(c)(1) (Federal Circuit shall have jurisdiction over appeals from interlocutory orders of the district courts refusing injunctions “in any case over which the court would have jurisdiction of an appeal under section 1295”).
II. This Court looks to the interpretive la w of the regional circuit for issues not exclusively assigned to the Federal Circuit. Hutchins v. Zoll Med. Corp. , 492 F.3d 1377, 1383 (Fed. Cir. 2007). Under Ninth Circuit law, an order granting or denying a preliminary injunction will be reversed only if the district court relied on an erroneous legal premise or abused its discretion. Wright v. Rushen , 642 F.2d 1129, 1132 (9th Cir. 1981). A district
court = s order denying a preliminary in junction is reversible for factual error only when the district court rests its conclusions on clearly erroneous findings of fact. Sports Form, Inc. v. United Press Int = l, Inc. , 686 F.2d 750, 753 (9th Cir. 1982). In determining whether to issue a preliminar y injunction, the Ninth Circuit requires demonstration of (1) a combination of probability of success on the merits and the possibility of irreparable harm; or (2) seri ous questions going to the merits where the balance of hardships tips sharply in the moving party = s favor. Perfect 10, Inc. v. Amazon.com, Inc. , 487 F.3d 701, 713-14 (9th Cir. 2007); Dep = t of Parks & Recreation v.Bazaar Del Mundo, Inc. , 448 F.3d 1118, 1123 (9th Cir. 2006). In cases involving copyright claims, where a copyright holder has shown likelihood of success on the merits of a copyright infringement claim, the Ninth Circuit has held that irreparabl e harm is presumed. LGS Architects, Inc. v. Concordia Homes of Nev. , 434 F.3d 1150, 1155-56 (9th Cir. 2006). But see MGM Studios, Inc. v. Grokster, Ltd. , 518 F. Supp. 2d 1197, 1212 (C.D. Cal. 2007) (noting that “the longstanding rule that irrepar able harm can be a presumed after a showing of likelihood of success for purposes of a copyri ght preliminary injuncti on motion may itself have to be reevaluated in light of eBay [Inc. v. MercExchange, L.L.C. , 547 U.S. 388 (2006)]”). Thus, for a prelimi nary injunction to issue, Jacobsen must either show (1) a likelihood of success on the merits of his copyright infringement claim from which irreparable harm is presumed; or (2) a fair chance of success on the merits and a clear disparity in the relative hardships t hat tips sharply in his favor.
A. Public licenses, often referred to as A open source @ licenses, are used by artists, authors, educators, software dev elopers, and scientists who wish to create collaborative projects and to dedicate certain works to the public. Several types of public licenses have been designed to provide creators of copyrighted materials a means to protect and control their copyrights. Creative Commons, one of the amici curiae, provides free copyright licenses to allow parties to dedicate their wor ks to the public or to license certain uses of their works while keeping some rights reserved. Open source licensing has become a widely used method of creative collaboration that serves to advance the arts and sciences in a manner and at a pace that few could have imagined just a few decades ago. For ex ample, the Massachusetts Institute of

2008-1001 6Technology ( A MIT @ ) uses a Creative Commons public license for an OpenCourseWare project that licenses all 1800 MIT courses. Other public licenses support the GNU/Linux operating system, the Perl programming language, the Apache web server programs, the Firefox web browser, and a collaborativ e web-based encyclopedia called Wikipedia. Creative Commons notes that, by some esti mates, there are cl ose to 100,000,000 works licensed under various Creat ive Commons licenses. The Wikimedia Foundation, another of the amici curiae, estimates that the Wi kipedia website has more than 75,000 active contributors working on some 9,000,000 articles in more than 250 languages. Open Source software projects invite computer programmers from around the world to view software code and make changes and improvements to it. Through such collaboration, software progr ams can often be written and debugged faster and at lower cost than if the copyright holder were requi red to do all of the work independently. In exchange and in consideration for this collabor ative work, the copyright holder permits users to copy, modify and distribute the softwar e code subject to conditions that serve to protect downstream users and to keep the code accessible. 2 By requiring that users copy and restate the license and attribution informa tion, a copyright hol der can ensure that recipients of the redistributed co mputer code know the identity of the owner as well as the scope of the license granted by the original owner. The Artistic License in this case also requires that changes to the computer code be tracked so that downstream users know what part of the computer c ode is the original code created by the copyright holder and what part has been newly added or al tered by another collaborator.

2 For example, the GNU General Public Li cense, which is used for the Linux operating system, prohibits downstr eam users from charging for a license to the software. See Wallace v. IBM Corp. , 467 F.3d 1104, 1105-06 (7th Cir. 2006).

2008-1001 7Traditionally, copyright owners sold thei r copyrighted material in exchange for money. The lack of money changing hands in open source licensing should not be presumed to mean that ther e is no economic considerat ion, however. There are substantial benefits, including economic benefits, to the cr eation and distribution of copyrighted works under public licenses that r ange far beyond traditional license royalties. For example, program creators may generate market share for their programs by providing certain components free of charge. Similarly, a programmer or company may increase its national or international reput ation by incubating open source projects. Improvement to a product can come rapidly and free of char ge from an expert not even known to the copyright holder. The Eleventh Circuit has recognized the economic motives inherent in public licenses, even where prof it is not immediate. See Planetary Motion, Inc. v. Techsplosion, Inc. , 261 F.3d 1188, 1200 (11th Cir . 2001) (Program creator A derived value from the distribution [under a public license] because he was able to improve his Software based on suggestions sent by end-users. . . . It is logical that as the Software improved, more end-users used his Software, thereby increasi ng [the programmer = s] recognition in his profession and the likelihood that the So ftware would be improved even further. @ ).
B. The parties do not dispute t hat Jacobsen is the holder of a copyright for certain materials distributed through his website. 3 Katzer/Kamind also adm its that portions of the DecoderPro software were copied, modified, and distributed as part of the Decoder Commander software. Accordingly, Jacobsen has made out a prima facie case of copyright infringement. Katzer/Kamind argues that they cannot be liable for copyright

3 Jacobsen = s copyright registration creates the presumption of a valid copyright.

2008-1001 82008-1001 9 infringement because they had a license to us e the material. Thus, the Court must evaluate whether the use by Katzer/Kamind was outside the scope of the license. See LGS Architects , 434 F.3d at 1156. The copyrighted materials in this case are downloadable by any user and are labeled to include a copyright notification and a COPYING file that includes the text of the Artistic License. The Artistic License grants users the right to copy, modify, and distribute the software:

See, e.g. , Triad Sys. Corp. V. Se. Exp. Co. , 64 F.3d 1330, 1335 (9th Cir. 1995). provided that [the user] insert a promi nent notice in each changed file stating how and when [the user] changed that file, and provided t hat [the user] do at least ONE of the following: a) place [the user = s] modifications in the Pub lic Domain or otherwise make them Freely Available, such as by posti ng said modifications to Usenet or an equivalent medium, or placing the modifi cations on a major archive site such as ftp.uu.net, or by allowing the C opyright 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 nonst andard executable that clearly documents how it differs from the Standard Version, or d) make other distribution arrangem ents with the Copyright Holder. The heart of the argument on appeal concerns whether the terms of the Artistic License are conditions of, or merely covenant s to, the copyright license. Generally, a

A copyright owner who grants a nonexclusive license to use his copyrighted material waives his right to sue the licens ee 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 forcopyright infringement. See S.O.S., Inc. v. Payday, Inc. , 886 F.2d 1081, 1087 (9th Cir.1989); Nimmer on Copyright, ' 1015[A] (1999). Thus, if the terms of the Artistic Lic ense 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 cont rast, they are governed by contract law. See Graham , 144 F.3d at 236-37 (whether breach of license is actionable as copyright infringement or breach of contract turns on whether provision breac hed is condition of the license, or mere covenant); Sun Microsystems , 188 F.3d at 1121 (following Graham ; independent covenant does not limit scope of copyri ght license). The Dis trict Court did not expressly state whether the limitations in t he Artistic License are independent covenants or, rather, conditions to the scope; its analysis, however, clearly treated the license limitations as contractual covenants rather than conditions of the copyright license. 4 Jacobsen argues that the terms of the Ar tistic License define the scope of the license and that any use outside of these restrictions is copyright infringement. Katzer/Kamind argues that these terms do not limit the scope of the license and are merely covenants providing contractual te rms for the use of the materials, and that his violation of them is neither compensable in damages nor subject to injunctive relief. Katzer/Kamind = s argument is premised upon the assumption that Jacobsen = s copyright gave him no economic rights because he made hi s computer code available to the public at no charge. From this assumption, Katzer/Kamind argues that copyright law does not recognize a

4 The District Court held that A Defendants’ alleged violation of the conditions of the license may have constitut ed a breach of the nonexclusive license . . . [and] the Court finds that Plaintiff’s claim properly sounds in contract. @ Jacobsen , 2007 WL 2358628 at *7. Thus, despite the use of the word A conditions, @ the District Court treat ed the terms of the Artistic License as contractual covenants wh ich did not limit the scope of the license.

2008-1001 10cause of action for non-ec onomic rights, relying on Gilliam v. ABC , 538 F.2d 14, 20-21 (2d Cir. 1976) ( A American copyright law, as presently wr itten, does not recognize moral rights or provide a cause of action for their violation, since the law seeks to vindicate the economic, rather than the personal rights of authors. @ ). The District Court based its opinion on the breadth of the Artistic License terms, to which we now turn.
III. The Artistic License states on its face that the document creates conditions: A The intent of this document is to state the conditions under which a Package may be copied. @ (Emphasis added.) The Artistic License also uses the tr aditional language of conditions by noting that the rights to copy, modify, and distribute are granted A provided that @ the conditions are met. Under California contract law, A provided that @ typically denotes a condition. See, e.g. , Diepenbrock v. Luiz , 159 Cal. 716 (1911) (inter preting a real property lease reciting that when the property was sold, A 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 A interesting and ingenious @ argument for interpreting this language as creating a mere co venant rather than a condition; and holding that this argument A cannot change the fact that, attr ibuting the usual and ordinary signification to the language of the parties, a condition is found in the provision in question @ ) (emphases added). The conditions set forth in the Artistic License are vital to enable the copyright holder to retain the ability to benefit from the work of downstream users. By requiring that users who modify or distribute the copyrighted material retain the reference to the original source files, downstream users are directed to Jacobsen = s website. Thus, downstream users

2008-1001 11know about the collaborative effort to impr ove and expand the Source Forge project once they learn of the A upstream @ project from a A downstream @ distribution, and they may join in that effort. The District Court interpreted the Arti stic License to permit a user to A modify the material in any way @ and did not find that any of the A provided that @ limitations in the Artistic License served to limit this grant. The District Court = s interpretation of the conditions of the Artistic License does not credit the explicit restrictions in t he license that govern a downloader = s right to modify and distribute the copy righted work. The copyright holder here expressly stated the terms upon which the right to modify and distribute the material depended and invited direct contact if a dow nloader wished to negotiate other terms. These restrictions were both clear and necessa ry to accomplish the objectives of the open source licensing collaboration, including economic benefit. Moreover, the District Court did not address the other restricti ons of the license, such as the requirement that all modification from the original be clearly shown with a new nam e and a separate page for any such modification that shows how it differs from the original. Copyright holders who engage in open source lic ensing have the right to control the modification and distribution of copyrighted materi al. As the Second Circuit explained in Gilliam v. ABC , 538 F.2d 14, 21 (2d Cir. 1976), the A unauthorized editing of the underlying work, if proven, would constitute an infringement of the copyright in that work similar to any other use of a work that ex ceeded the license granted by the proprietor of the copyright. @ Copyright licenses are designed to support the right to exclude; m oney damages alone do not support or enforce that right. The choi ce to exact consideration in the form of compliance with the open source requirements of disclosure and explanation of changes,

2008-1001 12rather than as a dollar-denominat ed fee, is entitled to no less legal recognition. Indeed, because a calculation of damages is inherently speculative, these types of license restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief. In this case, a user who downloads the JM RI copyrighted materials is authorized to make modifications and to distribute the materials A provided that @ the user follows the restrictive terms of the Artist ic License. A copyright holder can grant the right to make certain modifications, yet retain his right to prevent other modifica tions. Indeed, such a goal is exactly the purpose of addi ng conditions to a license grant. 5 The Artistic License, like many other common copyright licenses, requires that any c opies that are distributed contain the copyright notic es and the COPYING file. See, e.g. , 3-10 Nimmer on Copyright ' 10.15 ( A An express (or possibly an implied) condi tion that a licensee must affix a proper copyright notice to all copies of the work that he causes to be published will render a publication devoid of such not ice without authority from the licensor and therefore, an infringing act. @ ). It is outside the scope of the Artistic Licens e to modify and distribute the copyrighted materials without copyright not ices and a tracking of modifications from the original computer files. If a downloader does not assent to these conditions stated in the COPYING

5 Open source licensing restrictions are easily distinguished from mere A author attribution @ cases. Copyright law does not automatically protect the rights of authors to credit for copyrighted materials. See Gilliam , 538 F.2d at 20-21 (“American copyright law, as presently written, does not recognize moral rights or provide a cause of action for their violation, since the law seeks to vindicate t he economic, rather than the personal rights of authors.”); Graham , 144 F.3d at 236. Whether such rights are protected by a specific license grant depends on the language of the license. See County of Ventura v. Blackburn , 362 F.2d 515, 520 (9th Cir. 1966) (copyright infr ingement found where the county removed copyright notices from maps licensed to it where the license granted the county A the right to

2008-1001 13file, he is instructed to A make other arrangements wit h the Copyright Holder. @ Katzer/Kamind did not make any such A other arrangements. @ The clear language of the Artistic License creates conditions to protect the economic rights at i ssue in the granting of a public license. These conditions govern the rights to modify and distribute the computer programs and files included in the downloadable software package. The attribution and modification transparency requirements directly serve to drive traffic to the open source incubation page and to inform downstream users of the project, which is a significant economic goal of the copyright holder that the law will enfor ce. Through this controlled spread of information, the copyright holder gai ns creative collaborator s to the open source project; by requiring that c hanges made by downstream users be visible to the copyright holder and others, the copyright holder learns about the uses for his software and gains others = knowledge that can be used to advance future software releases.
IV.

obtain duplicate tracings @ from photographic negatives that contained copyright notices).

2008-1001 14For the aforementioned reasons, we va cate and remand. While Katzer/Kamind appears to have conceded that they did not comp ly with the aforedescribed conditions of the Artistic License, the District Court did not make factual findings on the likelihood of success on the merits in proving that Katzer/K amind violated the conditions of the Artistic License. Having determined that the terms of t he Artistic License are enforceable copyright conditions, we remand to enable the District Court to determine whether Jacobsen has demonstrated (1) a likelihood of success on the merits and either a presumption of irreparable harm or a demonstrati on of irreparable harm; or (2) a fair chance of success on the merits and a clear disparity in the re lative hardships and tipping in his favor. 6 The judgment of the District Court is va cated and the case is remanded for further proceedings consistent with this opinion. VACATED and REMANDED

6 At oral argument, the parti es admitted that there might be no way to calculate any monetary damages under a contract theory.

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