California Judges Confused about Contractual Right and Property Right -- Federal Circuit Reverses

JACOBSEN v. KATZER, 2008-1001 (Fed. Cir. 8-13-2008)
United States Court of Appeals, Federal Circuit.
Decided August 13, 2008.

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

HOCHBERG, District Judge.
...

The heart of the argument on appeal concerns whether the terms of the
Artistic License are conditions of, or merely covenants to, the copyright
license. Generally, a "copyright owner who grants a nonexclusive license
to use his copyrighted material waives his right to sue the licensee for
copyright infringement" and can sue only for breach of contract...

Thus, if the terms of the Artistic License 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 contrast, they are governed by contract law... The District Court did not expressly state
whether the limitations in the 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.[fn4]

...

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...

The District Court interpreted the Artistic License to permit a user to
"modify the material in any way" and did not find that any of the
"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 the license
that govern a downloader's right to modify and distribute the copyrighted
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 downloader wished to negotiate other terms. These
restrictions were both clear and necessary to accomplish the objectives
of the open source licensing collaboration, including economic benefit.
Moreover, the District Court did not address the other restrictions of
the license, such as the requirement that all modification from the
original be clearly shown with a new name and a separate page for any
such modification that shows how it differs from the original.

...

For the aforementioned reasons, we vacate and remand. ...

The judgment of the District Court is vacated and the case is remanded
for further proceedings consistent with this opinion.

VACATED and REMANDED