10. Termination for Patent Action

Both OSL and AFL

This License shall terminate automatically and You may no longer exercise any of the rights granted to You by this License as of the date You commence an action, including a cross-claim or counterclaim, for patent infringement (i) against Licensor with respect to a patent applicable to software or (ii) against any entity with respect to a patent applicable to the Original Work (but excluding combinations of the Original Work with other software or hardware).

Patents are formidable property interests. Patents can be the basis for enormously profitable monopolies, and patents can bring infringing competitors to their knees. Like them or not, patents are enshrined in the Constitution of the United States (see Article I, section 8) and in the constitutions and laws of most countries around the world. We must deal with them for they are perceived by many to be a real threat to the openness of software.

Throughout this book I have described the ways that open source licenses deal ”or don't deal ”with the threat of third party patents. There aren't many reasonable options. Even if a licensor is thoroughly diligent to review patent databases, and almost regardless of the care that a licensor takes to avoid infringing other companies' patents, such submarines can appear suddenly and can stop an open source project dead in the water.

This has long been an issue in the software world. Proprietary software vendors deal with third party patent claims all the time. The big companies negotiate patent licenses and pay royalties where necessary. Those royalties are included in the cost of software. The price of software adjusts to compensate.

That isn't usually an option for free software, of course. Open source distributors don't have the same resources to simply bargain over the price of a royalty- bearing patent license, because they usually can't recover royalties in their own software prices. (See Open Source Principles # 2 and 3.)

Major software vendors often use defensive strategies to protect themselves from third party patents. The strategy of the biggest companies, it appears, is to create huge portfolios of intellectual property, which they can withhold from those people who threaten them. As an intellectual property defense it resembles the cold war threat that kept civilized countries from bombing each other into oblivion: "If you bomb me, I'll bomb you worse ." Because their private intellectual property is so embedded in products used throughout the world, the mere threat to withdraw rights to valuable intellectual property is a deterrent to infringement lawsuits against these big patent owners .

Of course, if a third party doesn't actually benefit from the infringer's intellectual property, a threat to withdraw that intellectual property isn't worth much. Defensive use of intellectual property requires that the intellectual property that may be withdrawn be perceived as valuable. Thus defensive strategies are particularly valuable in software licenses. Licensees are presumed to need the licensor's software. A threat to withhold that software from the licensee may be enough to discourage a patent infringement lawsuit by that licensee.

Such a defensive strategy in the open source context also has the smell of justice being served . It just feels wrong to let a licensee benefit from free software and then turn around and sue that generous licensor for patent infringement. You shouldn't be allowed to have your cake and eat it too.

It feels right for a license to say: If you sue me for patent infringement relating to software, or if you sue my customers for patent infringement by this licensed software, your license to this software terminates.

Comparison to Other Licenses

It is perhaps easier to understand OSL/AFL section 10 by comparison to other licenses. For this we can ignore the other academic licenses (i.e., the BSD, MIT, Apache, and Artistic licenses) because none of them provide any form of patent defense.

Provisions for the defensive use of intellectual property are in the MPL and CPL licenses, and in most of the OSI-approved commercial open source licenses listed at www.opensource.org . Companies such as IBM, Nokia, Sun, Apple, and many others have released open source software under licenses containing defensive termination provisions.

Sections 8.2 and 8.3 of the MPL deal with license termination in the event of patent infringement. Here are the key differences between the OSL/AFL and MPL termination provisions:

• The MPL excludes declaratory judgment actions . Those are lawsuits in which a party seeks only to have the court declare that it is the owner of a patent, but doesn't seek damages. (MPL section 8.2.) The OSL/AFL do not draw this distinction.

• The MPL refers only to lawsuits against Initial Developer and Contributor . (MPL section 8.2.) The OSL/AFL also terminate the license if the licensee files an infringement lawsuit against a customer or user of the licensed software for infringement by the specific software being licensed.

• If someone sues for infringement by Participant's Contributor Version , then all copyright and patent licenses to that person in the MPL terminate. (MPL section 8.2[a].) If someone sues for infringement by any software, hardware, or device, other than such Participant's Contributor Version , then only the patent licenses to that person terminate. (MPL section 8.2[b].) Under the OSL/AFL, both copyright and patent license grants terminate.

• The MPL suggests settlement of the infringement dispute for a reasonable royalty and payment arrangement. The license can continue if the parties settle within a sixty-day period. (MPL section 8.2[a].) There is no equivalent provision in the OSL/AFL, but there are almost always advance notice and negotiation before companies undertake patent litigation.

• The reasonable value of the license is to offset the royalty for any patent license, which the parties negotiate. (MPL section 8.3.) There is no equivalent provision in the OSL/AFL.

The CPL's patent termination provision is in the second paragraph of its section 7. The major difference between the CPL's provision and the one in the OSL/AFL is that the CPL terminates only its patent license; the CPL's copyright license continues. If there are no licensor patents actually embodied in the software and licensed under the CPL, then the CPL license to the software does not terminate.

The CPL's provision makes sense when one considers that the author of that license, IBM, has the largest patent portfolio of any company in the world. That company has a tradition of using its patents portfolio to defend itself against patent infringement lawsuits. It generally hasn't needed to use its copyrights to protect against patent infringement lawsuits.

The OSL/AFL, on the other hand, by terminating both the copyright and patent licenses, use the entire intellectual property in the software ”both its copyright component and its patent component ”to protect that software and the licensor from patent infringement lawsuits. This is more appropriate than IBM's defensive strategy for open source contributors and distributors who, for the most part, don't have patents to license but who do have their copyrights.

The GPL's patent defense strategy is subtly different from all these others. Here is what the GPL says:

If, as a consequence of a court judgment or allegation of patent infringement or for any other reason (not limited to patent issues), conditions are imposed on you (whether by court order, agreement or otherwise ) that contradict the conditions of this License, they do not excuse you from the conditions of this License. If you cannot distribute so as to satisfy simultaneously your obligations under this License and any other pertinent obligations, then as a consequence you may not distribute the Program at all. For example, if a patent license would not permit royalty-free redistribution of the Program by all those who receive copies directly or indirectly through you, then the only way you could satisfy both it and this License would be to refrain entirely from distribution of the Program. ( GPL section 7.)

The GPL is incompatible with royalty-bearing patent licenses because they impose conditions that contradict the conditions of this License , in particular the at no charge requirement of GPL section 2(b). If such a license affects the software, then the software cannot be distributed under the GPL, and so a licensee may not distribute the Program at all.

There may be other license incompatibilities besides a requirement for patent royalties. A patent license that is limited as to field of use so that it prevents the creation of certain types of derivative works might ultimately turn out to be incompatible with the GPL. Any licensing incompatibilities that contradict the conditions of the GPL are sufficient to prevent further distribution under the GPL.

GPL section 7 effectively terminates only the license to distribute, not the license to copy and create derivative works. Those rights continue under the GPL. And GPL section 7 is designed to take effect when the Program infringes a patent, not every time the licensor is sued for patent infringement. In these ways it is very different from the termination provisions in the MPL, CPL, and OSL/AFL licenses. That GPL provision is unique among open source licenses.

What then happens if a GPL licensee wins a patent infringement lawsuit against a GPL licensor because the Program infringes, and then the licensee refuses to license the patent royalty-free? The software can no longer be distributed by the licensee under the GPL license. (GPL section 7.) Can anyone else continue to distribute the software under the GPL? The GPL provides the following answer:

It is not the purpose of this section to induce you to infringe any patents or other property right claims or to contest validity of any such claims; this section has the sole purpose of protecting the integrity of the free software distribution system, which is implemented by public license practices. Many people have made generous contributions to the wide range of software distributed through that system in reliance on consistent application of that system; it is up to the author/donor to decide if he or she is willing to distribute software through any other system and a licensee cannot impose that choice. ( GPL section 7.)

Section 7 of the GPL is a form of patent defense, but it is unlike anything in any other open source license. Indeed, the GPL suggests that it is more than a license condition:

This section is intended to make thoroughly clear what is believed to be a consequence of the rest of this License. ( GPL section 7.)

The consequences of GPL section 7 ”indeed, the consequences of any of the patent defense provisions in any open source licensees ”have never been tested in court.

Breaking News about OSL/AFL Version 2.1

The main criticism of section 10 of OSL/AFL version 2.0 is that it creates a substantial business risk to licensees who own patents. If they someday seek to assert one of their patents against the licensor, they may lose the right to the software being licensed. They risk nonenforceability of their present patents ”and even perhaps their future patents ”if they someday sue a licensor for patent infringement. That risk cannot easily be measured.

A difficult challenge in any license ”open source or proprietary ”is to balance the interests and rights of licensees who own patents with the interests and rights of licensors who own software. Parties to software licenses traditionally negotiate license terms and conditions and, through the process of negotiation, some balance is achieved between the interests of the licensor and the licensee. But mass-market software licenses are not negotiated and so, when you buy Windows or Linux, for example, you take the software under its license or leave it. It requires a sophisticated licensee to stand up to a mass-market software license and say, "This isn't a fair provision, and I won't accept the software under those terms."

The problem lies in subsection (i) of section 10 in OSL/AFL version 2.0. Here for easy reference is the provision again:

Termination for Patent Action. This License shall terminate automatically and You may no longer exercise any of the rights granted to You by this License as of the date You commence an action, including a cross-claim or counterclaim, for patent infringement (i) against Licensor with respect to a patent applicable to software or (ii) against any entity with respect to a patent applicable to the Original Work (but excluding combinations of the Original Work with other software or hardware). ( OSL / AFL version 2.0, section 10.)

Because of the phrase "patent applicable to software" in subsection (i), the licensor is conditioning the license for this "Original Work" on the licensee's not suing for patent infringement of any patent applicable to any software . For a licensee with a big patent portfolio, there is no easy way to assess that cost or to limit that risk. Such a company may come to discover that important unrelated patents in its portfolio have been emasculated because the company has in-licensed some software under an open source license containing this section 10. Its other patents relating to other software can no longer effectively be asserted against infringers who happen to be licensors of valuable open source software. Better, they say, given the uncertainty of the risk, not to accept this software under such licenses in the first place.

Note that the problem with section 10 of the OSL/AFL version 2.0 is virtually identical to the problem with MPL sections 8.2 and 8.3, CPL section 7, and several other approved commercial open source licenses. It is a major open source licensing problem that has adversely affected the acceptance of software under those licenses. Such license provisions are simply unacceptable to some licensees with large, diverse patent portfolios. They cannot assess the risk to unrelated patents in their portfolios if they in-license software under licenses containing such defensive provisions and so they refuse to in-license such software at all.

Here is the new language in section 10 in OSL/AFL version 2.1:

Termination for Patent Action. This License shall terminate automatically and You may no longer exercise any of the rights granted to You by this License as of the date You commence an action, including a cross-claim or counterclaim, against Licensor or any licensee alleging that the Original Work infringes a patent. This termination provision shall not apply for an action alleging patent infringement by combinations of the Original Work with other software or hardware. ( OSL / AFL version 2.1, section 10.)

This new section 10 defensive provision terminates the license to this Original Work only if the licensee asserts a patent claim against this Original Work . The condition relating to unrelated software is removed. The termination provision now applies if an infringement lawsuit is filed against "Licensor or any licensee"; the previous version included "any entity." These differences significantly reduce the scope of the patent termination provision and make it friendlier to patent-owning companies.

The whole point of this change is that such companies can now feel more comfortable in-licensing open source software. The community will grow, and more open source software will be created.

There is no such thing as a fairest license. As I have repeatedly suggested, each license in this book creates a legitimate open source bargain, albeit in sometimes vastly different ways from other licenses. But I personally agree with some who suggest that OSL/AFL version 2.1 is fairer to licensees than the earlier version. In the hope of mitigating some but not all of the patent risk, some of us have negotiated this compromise.