Software Pluralism

Software Pluralism

Contracts or Licenses: Does it Matter?


The information in this article is primarily directed at laypeople and lawyers with no background in intellectual property law. It discusses the potential implications under copyright and contract law of characterizing a document that licenses software as either a "license" or a "contract."


Simply put, copyright protects a specific expression of an idea. Because software is a specific expression of an idea, software source code is generally considered to be copyrightable. The ideas embodied in the software are not protected, but the ways the ideas are expressed in source code are protected. Copyright is the subject of federal law, and United States copyright law (17 U.S.C. §§ 101 et. seq.) says that copyright holders have certain exclusive rights in the copyrighted work. Among these exclusive rights are the rights to make copies and "derivative works" and the right to distribute the work. A copyright holder may legally exclude others from doing these things with the work, unless the copyright holder authorizes others to do them. Copyright law is relatively uniform internationally, thanks to various treaties such as the Berne Convention.

In the context of copyright law, a “license” is a permission to do an act that, without the permission, would be unlawful.

The copyright holder's explicit authorization for someone else to copy, make derivative works of, or distribute the work is called a copyright "license." If you copy, make derivative works of, or distribute the work without the copyright holder's authorization (i.e., without a license), you may be infringing the copyright if the action is not covered by an exception to the copyright holder’s authority such as the first sale doctrine or fair use.

Copyright law does not require payment or anything else in return from the licensee for a license grant, but the copyright holder may, at his option, require payment, or otherwise condition the license grant on the fulfillment of various requirements, restrictions, or obligations. A copyright license may also include some restrictions on the license grant that are directly relevant to a given right. For example, the copyright holder may limit how many copies of the work the licensee can make. Or, the copyright holder may limit the geographical areas in which the licensee may distribute the work. If the licensee’s conduct exceeds the scope of the license, then copyright holder may also file an infringement claim in federal court to seek an injunction or damages.

Contract law, by contrast, revolves around the notion that two (or more) parties have bargained or negotiated an exchange of promises and/or performance. This notion includes three fundamental concepts: that one of the contracting parties has made an "offer," the other party has "accepted" the offer, and the accepting party has demonstrated its commitment to the offer by providing some sort of "consideration" back to the offeror. Contract law typically requires that "acceptance" of an offer be "affirmative;" that is, you must give some kind of clear indication that you are accepting the offer. The "consideration" may be just about anything, as long as it has been "bargained for." Although there is significant uniformity to contract law, as a creature of state law, it can vary from state to state.

In the software distribution context, courts have found that there is valid acceptance of the copyright holder's offer to grant a license if the licensee has been provided with the opportunity to view and accept the license agreement before downloading, installing, or using the software (by, for example, clicking on a button that says "I Agree"). The consideration requirement is usually fulfilled by the licensee's agreement to be bound by certain restrictions, limitations, or conditions contained in the agreement, such as no warranty for the software, or a limitation of the copyright holder's liability – restrictions that are not directly linked to the copyright holder's exclusive rights under copyright law (which are again, in this case, copying, making derivative works of, and distributing the copyrighted work).

In the U.S., the terms "license" and "contract" are often used interchangeably. When a lawyer speaks of a software license (often also called a "license agreement"), typically the lawyer is referring to a contract between the copyright holder/software vendor ("licensor") and a person or entity that wants to use the software in some way ("licensee"), whether by integrating the software into another product or as an end user. Such license agreements usually consist of the copyright license granted by the licensor, plus other conditions or limitations on the licensee, or promises by the licensor, that are enforceable under contract law. While some contend that consent of a licensee to the grant of a license is not required by copyright law and so try to distinguish between licenses and contracts on this basis, others reject this reasoning. The law in this area is not very clear, to say the least.

Distinguishing between a license and a contract in the open source software context may or may not be significant. The Mozilla Public License is clearly designed to be a robust contract. The authors of the General Public License, however, maintain that the GPL is nothing more than a bare copyright license. Yet the GPL contains a definition of "derivative work" that may be inconsistent with copyright law. In addition, the GPL contains conditions on use of open source subject to the license that are arguably distinct and separate from the copyright license grants. Is the GPL then enforceable as nothing more than a bare license under copyright law? No U.S. court has yet considered these questions.

If some of the contents of the GPL take it beyond the scope of copyright law, then a court would likely evaluate the GPL in light of contract law. But if the GPL is tucked away in one of the software's files that the user or developer does not readily see before use, then requisite assent or acceptance by the licensee is not present, and the GPL may not be not enforceable under contract law. Under this circumstance, it is possible that a court could employ the doctrine of "implied license" to allow the user to use the software without the restrictions and conditions contained in the copyright license, since the licensor made the software available without making the license restrictions obvious. Likewise, a court might determine that the licensee had “impliedly” consented to the formation of a contract even if there was not express consent. It remains to be seen whether a court would declare the license as a whole unenforceable under contract law, but uphold the purely copyright law-based licenses and provisions.



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