Good news for open source: 9th Circuit contradicts itself on scope-limiting license conditions

A little less than a year ago, in MDY Industries, LLC v. Blizzard Entertainment, Inc., the Court of Appeals for the Ninth Circuit elucidated a new rule that a contract obligation in a license agreement will be considered a scope-limiting license condition, breach of which is remediable by copyright remedies, only if the obligation contains a “nexus” to the exclusive rights accorded to the copyright owner via the U.S. Copyright Act, or is a payment obligation. For more on this case, go to my previous blog post or read the article I wrote for Landslide magazine.

However, in a decision rendered less than one month ago, Apple Inc. v. PsyStar Corp., (9th Circuit, Sept. 28, 2011), the Ninth Circuit ruled (emphasis added):

Contrary to Psystar’s assertion, such licensing arrangements are also firmly rooted in the history of copyright law. While copyright owners may choose to simply exclude others from their work, i.e. not to transfer their rights, see Stewart v. Abend, 495 U.S. 207, 228-29 (1990); Fox Film Corp. v. Doyal, 286 U.S. 123, 127 (1932), courts have long held that copyright holders may also use their limited monopoly to leverage the right to use their work on the acceptance of specific conditions, see, e.g., Metro-Goldwyn-Mayer Distrib. Corp. v. Bijou Theatre Co., 59 F.2d 70, 77 (1st Cir. 1932) (holding that if a motion picture license is subject to the condition that its exhibition must occur at specified times and places, the licensee’s exhibitions at other times and places is without authority from the licensor and therefore constitutes copyright infringement).

This ruling cannot be squared with the MDY Industries case. In that case, the Ninth Circuit held that essentially only obligations that are restatements of rights provided under copyright law, or are payment obligations, are to be considered conditions redressable by copyright remedies. However, in PsyStar, conditions regulating use of the work (eg, exhibitions must occur at certain times and places), are scope-limiting and redressable by copyright remedies.

MDY Industries’ reasoning as applied to open source licenses would render notice, attribution, and copyleft obligations in those licenses as mere contract covenants and not conditions that are license scope-limiting, thus foreclosing the possibility of copyright remedies. The ruling, therefore, casts considerable doubt on the ability of open source licensors to effectively enforce these obligations. PsyStar, on the other hand, recognizes and confirms the right of licensors to condition licenses on virtually any types lasix online of conditions, thus preserving an important tool copyright owners have long enjoyed to control the use and distribution of their works.

It will be interesting to see if and how these two decisions will be reconciled, perhaps by en banc review.

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