Damages

The main reason we worry about litigation is because of the consequences of losing. The other big reason is the cost of the litigation itself. For major battles between big companies, attorneys' fees of more than $300,000 per month are now commonplace in the United States. Ignoring attorneys ' fees for the moment, though, what are the potential consequences of losing a lawsuit?

Calculating damages arising from cause of action in a software dispute is tricky. What is the value of software? Is it a function of the price paid for the software or the benefit derived from the software? Are damages a function of what was lost, such as business opportunity or sales? If the damages were caused by a part of the software but not the entire package, should damages be prorated?

There are no default damage calculation rules, although some licenses vaguely address this problem (e.g., MPL section 8.3; OSL/AFL section 11). There are also no standard royalty rates for copyrights or patents against which damages can be calculated.

The prospect of damages may encourage a company to file a lawsuit, but it probably shouldn't unless there is a reasonable prospect of recovering at least enough in damages to pay for its own attorneys' fees and costs.

I once represented a company that wanted to sue because a licensee hadn't complied with a provision of the GPL that requires the licensee to give recipients of the Program "a copy of this License along with the Program." (See GPL section 1.) While that was technically a violation of an express GPL condition, how should one calculate damages for its breach? How much would my client have to pay his own attorneys to force the licensee to either obey the GPL or pay damages for infringement? And then, how should a court calculate damages for the failure to publish a license that anyone can find instantly on the Internet? Our final problem was that, by the time we had discovered the licensee's failure to publish the GPL as required, the licensee had already stopped distributing his software. How can we calculate damages for past breaches of a license that are not ongoing?

Perhaps unfortunately for those who would welcome the clarity of a court decision, such questions were never answered because my client decided not to sue. No court has yet told us how to calculate damages for breaches of open source licenses. Answers to these questions will depend upon the specific business and software facts of the case and upon local law.

All open source licenses ”indeed, all software licenses of any kind from commercial companies ”contain limitations of liability. This is to ensure that the maximum dollar exposure of a party for damages due to claims by the other party is strictly limited. (In some jurisdictions, class action lawsuits can aggregate the small damages of a large number of plaintiffs into one large claim on behalf of all members of the class; this possibility is well beyond the scope of this book.) As for the maximum dollar exposure for such claims, all open source licenses essentially contain provisions that say "no damages at all."

Limitation of liability provisions are not enforceable in all jurisdictions, despite what the license says. In some countries , consumer protection policies always trump a vendor liability disclaimer.

The limitation of liability provisions in the BSD, MIT, Apache, GPL and OSL/AFL licenses protect only the licensor ; in the MPL and CPL, they protect both parties. Some limitation of liability provisions purport to limit liability to any person; see MPL section 6. It is difficult to see how such a limitation in a license between two parties would be binding on a third party.

So even where damages can be calculated, the limitation of liability provision may reduce the actual recovery.

Where actual damages are difficult to calculate, statutory damages may be prescribed by law. Statutory damages for copyright infringement in the United States can range from $750 to $30,000 "as the court considers just," and in cases of willful infringement the maximum statutory damages are increased to $150,000. Damages are calculated for the entire work and not for each copy made:

...For all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally.... For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work. (17 U.S.C. § 504.)

The prospect of collecting statutory damages often isn't enough to compensate for attorneys' fees and costs. For example, in the case I described earlier where a licensee had merely failed to publish the license as required by GPL section 1, an award of more than the minimum statutory damages of $750 is unlikely . After all, why would a court consider higher amounts just under the circumstances?

Nor should a prospective litigant rely on a provision of a license or of a statute that awards attorneys' fees to the prevailing party. Such awards are often limited to "reasonable" attorneys' fees, and they may also be at the discretion of the court.

In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party.... Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs. (17 U.S.C. § 505.)