Re: Psystar's legal reply brief in response to Apple

[Alexander Terekhov]

Hyman Rosen wrote:
> 
> On 8/5/2010 11:26 AM, Alexander Terekhov wrote:
> > Even if the GPL would really specify "different requirements" for copies
> > made for own use and for copies made for distribution, that would NOT
> > change the fact that failure to fulfil such requirements is a contract
> > breach and not a copyright infringement, because the GNUtian
> > requirements are nether conditions precedent to the license grant nor
> > limitations of the rights granted (license scope limitations).
> 
> <http://www.cafc.uscourts.gov/opinions/08-1001.pdf>
>      "Having determined that the terms of the Artistic License
>       are enforceable copyright conditions..."

Yeah, CAFC and "copyright conditions"...

In Jacobsen, CAFC appears to be thoroughly confused regarding the 
concepts of conditions, license scope limitations, and consideration 
in the form of compliance with licensee's obligations.

To understand the concept of "conditions" see

http://law.scu.edu/FacWebPage/Neustadter/contractsebook/main/commentary/Promises%20and%20condtions.html

Also note CAFC's reliance on Diepenbrock v. Luiz:

"Under California contract law, “provided that” typically denotes a 
condition. See, e.g., Diepenbrock v. Luiz, 159 Cal. 716 (1911)"

The CAFC further ruled: 

"The choice to exact consideration in the form of compliance with the
open source requirements of disclosure and explanation of changes..." 

How on earth can "disclosure and explanation of changes" come before 
(be a condition precedent) to the license grant? 

As discussed by The Supreme Court of California in Diepenbrock v. Luiz,
115 P. 743, 744 (Cal. 1911), the term “provided” may or may not indicate
a condition, noting that “‘there is no magic in the term [“provided”],
and the clause in a contract is to be construed from the words employed
and from the purpose of the parties, gathered from the whole
instrument.’” Diepenbrock v. Luiz, 115 P. 743, 744 (Cal. 1911) (quoting
Boston Safe Dep. and Trust Co. v. Thomas, 53 P. 472 (Kan. 1898) (finding
that, based on a reading of an entire provision, a clause containing
“provided, that” was not a condition)). 

“It is undoubtedly true, as claimed by appellant, that stipulations in a
contract are not construed as conditions precedent unless that
construction is made necessary by the terms of the contract. ( Deacon v.
Blodget, 111 Cal. 418, [44 Pac. 159]; Antonelle v. Lumber Co., 140 Cal.
318, [73 Pac. 966].) There are also well considered cases holding that
provided does not necessarily impose a condition. In Hartung v. Witte,
59 Wis. 285, [18 N. W. 177], it is said: ‘But the words, “upon the
express condition,” as here used, or the words “if it shall so happen”
or “provided however” and the like do not always make a condition, and
it is often a nice question to determine whether it is a condition or a
covenant and courts always construe similar clauses in a deed as
covenants rather than as conditions, if they can reasonably do so.’ (2
Washburn on Real Property, 4.) 

“In Stanley v. Colt, 72 U.S. 119, [18 L. Ed. 502], it is declared that
‘The word provided though an appropriate word to constitute a common law
condition does not invariably and of necessity do so. On the contrary,
it may give way to the intent of the party as gathered from an
examination of the whole instrument, and be taken as expressing a
limitation in trust.’ 

“Similarly in Woodruff v. Woodruff, 44 N. J. Eq. 353, [16 Atl. 6, 1 L.
R. A. 380], it is said: ‘While the words “provided nevertheless” and
“upon the following conditions” are appropriate words to create a
condition, they do not of necessity create such an estate. They and
similar words, will give way when the intention of the grantor as
manifested by the whole deed, is otherwise, and they have frequently
been explained and applied as expressing simply a covenant or a
limitation in trust.’ 

“Indeed, the decisions are uniform to the point that, while ordinarily
the word ‘provided’ indicates that a condition follows, as expressed in
Boston S. and D. v. Thomas, 59 Kan. 470, [53 Pac. 472], ‘there is no
magic in the term, and the clause in a contract is to be construed from
the words employed and from the purpose of the parties, gathered from
the whole instrument.’ 

The Restatement (Second) of Contracts Article 224 states:

"Condition Defined:

A condition is an event, not certain to occur, which must occur, unless
its non-occurrence is excused, before performance under a contract
becomes due."

Obviously an "event" that depends on performance of a contract cannot
occur *before* performance of the contract becomes due. This result is
called an impossible condition in contract construction and is strictly
construed *against* the drafter.

The ruling of the CAFC reminds me of this limerick ridiculing the 
theory of special relativity:

There was a young lady named Bright,
Whose speed was far faster than light.
She went out one day,
In a relative way
And returned the previous night!

– Arthur Reginald Buller

More:

1. http://www.crynwr.com/cgi-bin/ezmlm-cgi?3:mss:15936 

------- 
This is not legal advice... 

As an attorney spending a great deal of time on software related IP 
licensing and litigation matters, I find the CAFC decision in the 
Jacobsen case to be troubling. While I am sympathetic to the court's 
apparent desire to validate the concept of open source licensing and 
its alternative forms of consideration, I do not believe that the 
court's ruling justifies a euphoric response by the open source 
community. 

First, the CAFC's decision is a clear repudiation of the "bare 
license" theory long espoused by Mr. Moglen and his followers. The 
CAFC's decision reflects the fact that open source licenses, like any 
other form of software licenses, are contracts. I agree with this 
aspect of the decision as it is well supported by precedent at all 
levels. Neither Mr. Moglen, nor any of his followers have cited legal 
precedent in support of the bare license theory. The CAFC's decision 
should serve as clear notice that the bare license theory is nothing 
more than Moglen's wishful thinking. The necessary implication of this 
finding by the court is that open source licenses must be interpreted 
in the context of applicable state law, and to an extent, the common 
law of the Federal Circuit in which the open source agreement is 
interpreted. (This is directly in conflict with the CAFC's willful 
failure to follow state law and Ninth Circuit precedent regarding the 
interpretation of restrictions as conditions precedent). 


Second, the CAFC's opinion creates a great deal of uncertainty for 
software licensing (whether proprietary or open source). Let's take 
the GPLv3 as an example. As most peoople are aware, there are a 
variety of disagreements over exactly what is required of a licensee 
to comply with various provisions of the GPL. Section 2 of the GPL 
appears to "condition" the rights granted under the license on the 
licensee's compliance with the "conditions" stated in the license. 
Under the CAFC's decision in Jacobsen, it stands to reason that a 
licensee that fails to fully satisfy the "conditions" stated in the 
GPLv3 would infringe the licensor's copyrights rather than merely 
breaching the license. Thus, even if the licensee unintentionally 
violated the terms of the GPLv3 because the meaning of the terms are 
not clear, the licensee would be liabile for infringement. 


Why does this matter? State courts, the federal circuit courts of 
appeal and the US Supreme Court have all uniformly and routinely 
interpreted license restrictions as covenants rather than conditions 
precedent. In other words, the courts presume that the restrictions 
are covenants rather than conditions precedent unless the agreement 
clearly defines the restrictions as conditions. the CAFC's decision 
wholly ignores this long held principle of law. 


Most licenses, open source or proprietary, contain provisions whose 
meanings are open to viable debate. In the past, parties to a 
software license have largely understood that a licensee that breaches 
a license agreement's terms is liable to the licensor for damages 
decided under contract law. Proprietary licenses typically include 
provisions which define or otherwise limit the scope of damages that 
may be recovered in the event of a breach. On the other hand, a party 
that is liable for infringement of a copyright is subject to 
injunctive relief and damages equal to the owner's actual damages 
(plus the infringer's profits not covered by the owner's actual 
damages) OR statutory damages of up to $150,000 per incidence of 
infringement. Any contractually agreed limitations on damages would 
be irrelevant in the infringement setting. 


The CAFC's Jacobsen decision unwittingly attempts to radically change 
the risks of licensing software. The CAFC states that any failure to 
comply with a license provision that the license even generally calls 
a "condition" is an infringement rather than a breach. Thus, any 
licensee that violates the "conditions" of a license, even if 
unintentional, is subject to infringement damages. If the CAFC's 
decision stands and is generally followed in the Circuits and state 
courts, (which it should not be), every license from this point 
forward will need to clearly state which, if any, restrictions are 
"conditions precedent" and which restrictions are merely covenants 
(all other restrictions). Moreover, the provisions that are 
conditions precedent will need to be defined with a high degree of 
care to minimize a licensee's risk of unintentionally infringing the 
copyrights as a result of miinterpreting the provisions. 


Another side note - many licesne agreement issues are brought in state 
courts. Section 301(a) of the Copyright Act, however, preempts any 
state court from hearing or deciding any cause of action which is 
equivalent to a copyright claim. If the CAFC's position is indeed the 
law of the land, then any cause of action relating to a breach of a 
provision in a license agreement that merely mentions the word 
"condition" (or some synonym thereof), or that could conceivably be 
interpreted as a condition precedent, will need to be decided by a 
federal court. Otherwise, the parties run the risk of going through a 
full trial in state court only to find that the state court has no 
jurisdiction to even hear the matter in the first place because the 
breach in fact constitutes an infringement. 


Ultimately, the only people that will benefit from this decision are 
attorneys. All open source licenses will need to be modified if the 
decision stands .... 
------- 


2. http://www.crynwr.com/cgi-bin/ezmlm-cgi?3:mss:15939 


------- 
>> If the CAFC's position is indeed the law of the land, then 
>> any cause of action relating to a breach of a provision in a license 
>> agreement that merely mentions the word "condition" (or some
synonym 
>> thereof), or that could conceivably be interpreted as a condition 
precedent, 
>> will need to be decided by a federal court. Otherwise, the parties 
run the 
>> risk of going through a full trial in state court only to find that 
the 
>> state court has no jurisdiction to even hear the matter in the first 
place 
>> because the breach in fact constitutes an infringement. 
>That is a technical matter that I have no opinion on. 


[Marc Whipple] I am a lawyer, but this is not legal advice. Always 
consult an attorney licensed in your jurisdiction and familiar with the 
relevant law before making legal decisions. 

I think you probably mean, "I do not consider myself able to offer an 
informed opinion on this point," but the way it was phrased sounds a 
little dismissive. If you didn't mean it that way, accept my apology if 
I've over-read your statement. 


That being said, calling this a "technical matter" is
oversimplification 
to a rather radical degree. As an attorney who often walks the line 
between questions of Federal and State jurisdiction it was one of my 
first concerns when I read a summary of the decision this morning. The 
utter pre-emption of matters even remotely concerned with the Copyright 
Act means that this is a question of the utmost importance to anyone who 
has anything to do with such licenses. I haven't read the full decision 
yet, and so won't comment on whether the assertion the OP makes is 
accurate, but if it is, he is right to be concerned. Among other things 
it would mean that the enforcement of OS licenses just got, at the bare 
minimum, a lot more expensive. 
------- 

regards,
alexander.

--
http://gng.z505.com/index.htm 
(GNG is a derecursive recursive derecursion which pwns GNU since it can 
be infinitely looped as GNGNGNGNG...NGNGNG... and can be said backwards 
too, whereas GNU cannot.)