GPLv2 Showdown in California: Ximpleware Corp. v. Versata Software Inc. et. al.

The lawsuit

There is an interesting lawsuit going on titled XimpleWare Corp. v. Versata Software, Inc., et. al.  The case is in the United States District Court of the Northern District of California and touches on whether or not there is an expressed or implied patent license in the GPLv2.

There are related and critical points being argued such as what is a condition vs covenant, other allegations flying, and other parties. I’ll stick to a high level overview of the patent aspect here and mostly to the litigation between Ameriprise (a former Versata customer) and XimpleWare.

How this all started

Who is XimpleWare?

XimpleWare developed and owns software which parses XML.  It is called “VTD-XML” or “VTD XML Extended” if you want to get fancy.  I’ll refer to it as a parser. The parser is dual licensed under GPLv2 and under a proprietary commercial license. XimpleWare was issued a few patents with claims that cover the dual licensed software.

XimpleWare allegedly has (or had) a statement on its website which stated: “If the resulting software is kept only for use by the modifier, no disclosure of source code is required. Although VTD-XML is protected by US patents…, as long as you abide by the GPL, you don’t have to worry about patent infringement.” I don’t see that statement on their website any longer though I do see the below.


Who is Versata and who is Ameriprise?

Versata is a company which provided Distribution Channel Management (DCM) software, incorporating the XimpleWare parser, to a company called Ameriprise. Versata and Ameriprise had a Master License Agreement between them. Things went sour and Versata sued Ameriprise in state court for redistributing the DCM software to unauthorized parties in breach of the Master License Agreement. There seems to be some debate as to whether Versata is also alleging Ameriprise decompiled the DCM software in violation of the Master License Agreement.

Through discovery Ameriprise apparently obtained the source for the Versata DCM software and realized Versata may have violated the GPLv2 by not complying with the license on the XimpleWare parser. So Ameriprise counterclaimed and said Versata had violated the GPLv2 by not providing the source in breach of the Copyright Act and that this preempted the breach of contract claim filed by Versata.

Ameriprise removed to federal court. The federal court held that the source disclosure provision of the GPLv2 imposed an additional obligation beyond the scope of the Copyright Act, thus the claim was not preempted by the Copyright Act and sent it back to state court.

Sadly, the court made the following statement in its order:  “In other words, the GPL is a ‘viral’ license in the sense the incorporation of a GPL-covered software program ‘infects’ the new program and requires it to become open source too.”

The court effectively characterized the GPL as the Ebola of the open source licenses. Much ado has been made here in NY over the doctor who rode the subway and went bowling prior to displaying symptoms of Ebola. People are wigging out wondering if they will catch Ebola because of having ridden in the same car or using the same bowling ball. I saw an interview last week with a guy who explained that you can only get Ebola from contact with bodily fluids of an infected person and so odds of catching it from simply being in the same car or bowling alley are slim to none. He said, and I quote, “If you see mucus laying around on the subway don’t eat it. Then you should be safe.”  You can use GPL’d software, modify, and integrate with your own software to your heart’s content and you won’t have to make your code available so long as you don’t redistribute the code. You can’t “catch” the GPL source code disclosure requirement simply by use, it requires distribution. No need to wear the HazMat suit while working with your GPLv2 software.

Versata’s defense regarding the GPLv2 violation was that it relied on what is known as the “classpath exception” to the GPL.  While an exception to the GPL is certainly possible, only the owner of that software can authorize the exception.  XimpleWare had never okayed an exception to the GPL beyond the proprietary licensing they offered.  Also, unfortunately for Versata, their own documentation seems to confirm they understood there was no classpath exception. Versata maintained a list of open source components used in the DCM software. The list mentioned the XimpleWare code was licensed under the GPLv2 and made no mention of the classpath exception.  XimpleWare is using the list to hang their willful and induced patent infringement hat on.

Ameriprise decided to call in enforcement and clued XimpleWare into the GPLv2 breaches.

Plot Twist!

XimpleWare sued both Ameriprise and Versata for patent infringement.

Ameriprise and Versata are situated differently and defenses that would apply to Ameriprise would not necessarily apply to Versata. Particularly with respect to whether or not code was “distributed”.

What does Ameriprise say?

Ameriprise argues, rightfully so, that the GPLv2 places no restrictions on use. The GPLv2 is a distribution license. The rub is that Ameriprise claims providing the parser to their financial advisors, who happen to be independent contractors instead of employees, does not equal distribution. Therefore, the only thing Ameriprise did with the parser was use it. And XimpleWare can’t place restrictions under the GPLv2 on “licensee’s own use of the software, whether through employees or independent contractors. Ameriprise personnel are fully entitled to engage in simply ‘running’ the Program.”

Ameriprise also claims that the Preamble to the GPLv2 provides a patent license.

The relevant part of the Preamble states “Finally, any free program is threatened constantly by software patents. We wish to avoid the danger that redistributors of a free program will individually obtain patent licenses, in effect making the program proprietary. To prevent this, we have made it clear that any patent must be licensed for everyone’s free use or not licensed at all.”

Ameriprise also points to the portions of the GPLv2 that state,   “The act of running the Program is not restricted… ” Ameriprise says this makes it clear that using the DCM software can’t be restricted by a patent or anything else. They also point to the portion that says “You may not copy, modify, sublicense, or distribute the Program except as expressly provided under this License. Any attempt to otherwise copy, modify, sublicense, or distribute this Program is void, and will automatically terminate your rights under this license.”  Ameriprise argues that use is never mentioned and so ability to use is not contingent on compliance. Only the right to copy, modify, sublicense, and re-distribute is subject to compliance with the license.

They further argue that even if use were contingent on compliance with the GPLv2, Ameriprise complied with the use provisions as they never modified the code. Ameriprise was only using what had been provided to them by Versata.

Ameriprise pointed out that while Versata may have failed to comply with the GPLv2 the license has language that indicates noncompliance by Versata wouldn’t terminate downstream user’s rights such as Ameriprise’s so long as Ameriprise is in compliance. The language relied upon is “You may not copy, modify, sublicense, or distribute the Program except as expressly provided under this License. Any attempt otherwise to copy, modify, sublicense or distribute the Program is void, and will automatically terminate your rights under this License. However, parties who have received copies, or rights, from you under this License will not have their licenses terminated so long as such parties remain in full compliance.”


What does XimpleWare say?

XimpleWare argues not only does Versata’s license terminate due to breach but so does the license to Versata’s customers such as Ameriprise.

XimpleWare emphasizes the language which says “so long as such parties remain in full compliance.”  Ameriprise had never received certain information, such as source code or the GPL notice. Without having the information necessary to comply with the GPLv2 it was impossible that they could have complied with it.

XimpleWare alleges the following portions of the GPLv2 were breached: (1) no GPL warranty disclaimer was included in the code, (2) no notice it was licensed under the GPL was included in the code, (3) XimpleWare’s copyright notice not in code, and (4) the source was neither provided nor offered upon the object code distribution.

XimpleWare states any breach of the GPL results in no license and any rights (whether patent or otherwise) are voided.

With respect to the Preamble, XimpleWare says is not part of the Terms and Conditions of the GPLv2.  In other words the Preamble is similar to the sections at the tops contracts that read “RECITALS” or “BACKGROUND”.   Normally the Recitals and Background are the place for your hopes and dreams. Neither party is responsible for actually achieving those hopes and dreams. The parties are only responsible for meeting the terms and conditions in the license. XimpleWare’s argument is that if the Preamble were intended to be binding then the authors would have said that and/or incorporated the Preamble into the terms. In fact, after the Preamble these words appear: “The precise terms and conditions for copying, distribution, and modification follow.”

XimpleWare says the financial advisors Ameriprise distributed to consisted of “more than 7,400 independent franchisees or employees or contracts of franchisees.”  They claim these independent contractors are third parties, not employed by Ameriprise itself, and so providing those copies of the software results in distribution.

XimpleWare hired Lawrence “Literally Wrote the Book on Open Source Licensing” Rosen as an expert. If you are at all involved in open source licensing I highly recommend you read his book, “LAWRENCE ROSEN, OPEN SOURCE LICENSING: SOFTWARE FREEDOM AND INTELLECTUAL PROPERTY LAW” (Prentice Hall 2004). It does a great job of breaking down what the terms of different open source licenses mean.

Mr. Rosen assisted in responding to a Rule 11 motion (motion for sanctions for filing frivolous litigation) which had been filed by various defendants. In his response he mentioned Section 7 of the GPL stating, “This, of course, would have been a natural place for GPL’s drafters to include an express patent license, but there is none.”

Section 7 reads “If, as a consequence of a court judgment or allegation of patent infringement or for any other reason (not limited to patent issues), conditions are imposed on you (whether by court order, agreement or otherwise) that contradict the conditions of this License, they do not excuse you from the conditions of this License. If you cannot distribute so as to satisfy simultaneously your obligations under this License and any other pertinent obligations, then as a consequence you may not distribute the Program at all. For example, if a patent license would not permit royalty-free redistribution of the Program by all those who receive copies directly or indirectly through you, then the only way you could satisfy both it and this License would be to refrain entirely from distribution of the Program.”

With respect to Ameriprise’s arguments over “The act of running the Program is not restricted…” Mr. Rosen explained the GPL is a copyright license, not a patent license. And that copyright is about distribution, not use, so of course the right to run the program is unrestricted.

 What’s next?

The motions to dismiss filed by Ameriprise and the other defendants as well as the motion for sanctions have to play out. More importantly, Mr. Rosen recently made this foreshadowing statement “There is rich detail about this matter that will come out in litigation. Please don’t criticize until you understand all the facts.” 

Additional sources of information 

Check out Aaron Williamson’s blogs on the XimpleWare litigation by going to the Tor Ekeland P.C. site. 

Viewpoint of Lawrence Rosen 

 “Lawsuit threatens to break new ground on the GPL and software licensing issues” by Aaron Williamson


One comment

  1. I fail to understand how the license to use/run the code is granted by the GPL v2. The fact that the GPL v2 doesn’t restrict running of the program doesn’t mean that the license to run the program is granted, it simply means that the GPL v2 doesn’t add any additional restrictions. But until you are told otherwise, you have not received a license to run the program.

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