Conditions and Covenants in License Contracts: Tales from a Test of the Artistic License

Pity the poor Artistic License version 1.0 (ALv1). The Free Software Foundation criticizes the license as “too vague” with some passages “too clever for their own good.” The Open Source Initiative suggests that it has been “superseded.” ALv1’s authors at the Perl Foundation even acknowledge its flaws. Yet it is the ALv1, not the venerable GNU General Public License (GPL), which the Federal Circuit upheld in Jacobsen v. Katzer [535 F.3d 1373 (Fed. Cir. 2008)], establishing at long last that open source licenses are enforceable. Although that outcome received most of the headlines, the case’s greater significance lies elsewhere. Jacobsen v. Katzer teaches valuable lessons about conditions and covenants in license contracts, lessons that apply to software licenses of all persuasions, open source and binary use alike. Moreover, the case raises an important issue about the interplay between contract and intellectual property law: can licensors manipulate the distinction between covenants and conditions in such a way that upsets the delicate balance in copyright law? This article begins with a short description of open source licensing, followed by a discussion of the Jacobsen v. Katzer case and the lessons that it teaches about license contracts. Then, this article presents the questions left unresolved by Jacobsen v. Katzer: (1) Can licensors manipulate the distinction between covenants and conditions, thereby positioning themselves to obtain copyright remedies, particularly injunctive relief, on top of contract remedies; (2) If so, does this unwisely enhance a licensor’s power under copyright law, tipping the balance too far in the direction of copyright holders? The article explores two approaches to resolving this open issue. One approach leaves the distinction between pure covenants and license conditions in the hands of the contracting parties. The other approach attempts to create a principled distinction between pure covenants and license conditions. This article concludes that leaving the distinction to the contracting parties, though not perfect, better supports business model innovation, particularly open source licensing, which contributes significantly to innovation and healthy competition in the software industry. Courts can temper the power of licensors when necessary by utilizing the boundaries already inherent in intellectual property licensing law. These boundaries, coupled with prudence in granting injunctive relief for breach of license conditions, should maintain the appropriate balance within copyright law while preserving the positive role of license contracts