XimpleWare: Does the GPL Govern Distributions to Independent Contractors?

the Versata v. Ameriprise case, in which Versata sued its customer Ameriprise for hiring unauthorized third parties to modify Versata’s DCM software. Ameriprise fired back with a claim that DCM was based on third-party software called VTD-XML licensed by XimpleWare under the GPL, and that Versata had breached its corresponding obligation to provide Ameriprise with the complete source code for DCM. As I mentioned at the end of my post about that case, XimpleWare filed its own lawsuit against both Versata and Ameriprise (as well as several other Versata customers), alleging that each of the parties had violated the GPL and lost their licenses as a result: Versata by distributing VTD-XML to is customers within DCM, and the customers by distributing DCM to independent franchisees. XimpleWare claims that each of the defendants directly infringed XimpleWare’s patents over the software, and that Versata induced its customers to infringe and contributed to their infringement.

When is a distribution a “distribution”?

The most interesting GPL-interpretation question raised by this case is whether, when Ameriprise distributed GPL-licensed software to franchisees, it made a “distribution” under Section 3 of GPLv2 and was therefore required to provide the recipients with source code and the other things the GPL requires. This issue was lightly briefed by the parties for Ameriprise’s motion to dismiss, which the judge decided on Friday, May 16th. However, the distribution question won’t be settled till much later in the case. As the judge pointed out in his order, he’s required to accept all of the allegations in the complaint as true for purposes of a motion to dismiss, including XimpleWare’s allegation that Ameriprise distributed DCM outside of Ameriprise. Ameriprise’s primary defense is that its distribution of DCM to its independent franchisees was not “distribution,” because the recipients were all internal to Ameriprise. Its support for this argument is fairly weak, consisting entirely of cases in which a contractor was hired to produce something exclusively for the primary licensee that incorporates or derives from licensed material (custom software modifications in Hogan, building materials in CoreBrace, and architectural designs in Womack+Hamilton Architects). In two of those cases (Hogan and Womack+Hamilton Architects), the original licenses explicitly provided for work by independent contractors (a scenario that GPLv2 does not distinguish from other forms of distribution). The third (CoreBrace) merely states a long-standing principle of patent law, that a license to “make” a patented article includes a license to have that article made by a third party, unless the license explicitly says otherwise—it has no bearing on whether Ameriprise’s distribution breached its license to XimpleWare’s copyrights under the GPL (thereby automatically losing its license under Section 4). However it comes out, this issue is an important one both for developers and corporate consumers of GPL-licensed software, because it will determine to what extent companies can restrict their contractors’ redistribution of GPL-licensed software. For its part, the Free Software Foundation has always maintained that “providing copies to contractors for use off-site is distribution.”

Outcome of defendants’ motion to dismiss

The judge dismissed XimpleWare’s direct infringement claims against every Versata customer except Ameriprise, finding that, while XimpleWare had adequately pleaded its claim that Ameriprise had distributed DCM to its franchisees, it made only conclusory pleadings that Versata’s other customers had done so. While a court is required to accept the allegations in the complaint is true for purposes of a motion to dismiss, it is not required to give the same credit to legal conclusions. Here, while XimpleWare alleged that the Versata customers distributed DCM, it didn’t allege any facts supporting that conclusion. XimpleWare was fortunate to have the specifics of Ameriprise’s distribution from the Versata v. Ameriprise filings; it looks like it was fishing for similar claims against the other parties without similar evidence that they distributed DCM. The judge pointed out that, under Section 0 of GPLv2, “[t]he act of running the Program is not restricted”—if the other customers were only using the software and not distributing it as Ameriprise did, XimpleWare could not claim they had lost their licenses. The judge also dismissed XimpleWare’s induced and contributory infringement claims against Versata. Both causes of action require the patent holder to show that the defendant was aware of the patents being infringed, but XimpleWare failed to allege that Versata knew its patents existed. For the same reason, the judge dismissed XimpleWare’s claim that Versata’s infringement was willful: “a party cannot be found to have ‘willfully’ infringed a patent of which the party had no knowledge.” The judge gave XimpleWare leave to amend its complaint within 14 days, meaning that any of these claims could return. XimpleWare should be able to revive most of its claims fairly easily, by simply inserting the missing allegations. (More documents from this case are available from the RECAP case docket.)]]]]> ]]>

Impeachment and Judicial Review

Recently the President suggested that the courts would intervene in his favor if Congress impeached him. Lawyers, scholars, and commentators mocked him for this because

Read More »