The recent announcement about the “Openstack” product from Rackspace emphasizes the increasing importance of the cloud to the open source industry. http://blogs.the451group.com/opensource/2010/07/19/openstack-from-rackspace-nasa-shows-power-of-open-source-in-clouds/. 

For the last year, I have seen an increasing number of open source issues relating to cloud computing (for a general review of cloud contracts, see my presentation as part of a panel for PLI  http://www.pli.edu/product/mp3_detail.asp?id=103540). Many of these legal issues are new; it reminds me of the legal situation in 2004 when many fundamental legal issues in open source licenses, such as the scope of the GPL and the remedies for breach of an open source license, were unsettled.  The use of open source software in the cloud raises new and difficult legal issues such as when is use in the cloud a “distribution” (which triggers obligations to make source code available in the GPL family of licenses) and what is an “aggregate” in the cloud. We had a very lively discussion about these issues at the Stanford Law School E-Commerce conference (most of these questions deal with the GPL family of licenses so the use of the Apache license by OpenStack project will avoid some of these questions). 

The obligation to provide source code under GPLv2 is based on the “distribution” of object code of the GPL Licensed Code.  The term distribution does not have a simple or obvious meaning; “distribution is defined in Section 106(3) of the Copyright Act of 1976 (“1976 Act”) as the right “to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” The term “public” is not separately defined in the 1976 Act but is defined by reference to “publication”.  Publication is defined as follows:  “Publication is the distribution of copies or phonorecords of a work to the public by sale or other transfer of ownership, or by rental, lease, or lending.  The offering to distribute copies or phonorecords to a group of persons for purposes of further distribution, public performance, or public display, constitutes publication.  A public performance or display of a work does not of itself constitute publication.”  Publication is a complicated concept which derives from the Copyright Act of 1909 (“1909 Act”).  Under the 1909 Act, publication without copyright notice had very significant legal consequences: it could result in the loss of all rights under the 1909 Act, placing the work in the public domain.   

Ironically, cloud computing requires us to reach back to the “limited publication” doctrine from the 1909 Act to find legal guidance for how to interpret the scope of the distribution right.  The doctrine of limited publication was created by the courts under the 1909 Act in order to avoid the forfeiture of rights under the 1909 Act through inadvertent transfer of a copy of the work without the required copyright notice.  White v. Kimmel is the seminal case for the doctrine and defines a “limited distribution” as a distribution that “communicates the contents of a [manuscript] to a definitely selected group and for a limited purpose without the right of diffusion, distribution or sale.”  White v. Kimmel, 193 F.2d 744, 746 (9th Cir. 1952).  The doctrine of limited publication continues to be viable under the 1976 Act, but it has become much less important because the use of copyright notice is now optional and the failure to include it no longer puts the work into the public domain.  The House Report of the 1976 Act defines distribution to the public as “it refers to persons under no explicit or implicit restriction with respect to disclosure of its contents.”  Cloud computing may bring new life to the “limited publication” doctrine and open source lawyers may be reading a lot of 1909 Act cases (get ready, there are more than 50 of them that are relevant and thanks to our summer associate Eduardo Blanco from Northwestern University School of Law that helped me sort through them).

In case of first impression in France, the Court of Appeals in Paris has issued a holding, as part of a larger dispute over the delivery of software, that supports the assumption that the General Public License is enforceable. http://fsffrance.org/news/arret-ca-paris-16.09.2009.pdf. The case also suggests a new basis for licensees to allege breach of contract for commercial licenses: the failure of the licensor to comply with the open source licenses for modules included in the commercial product.The case involved a claim for rescission under Civil Code Article 1184 that permits rescission of a contract and the award of damages, or specific enforcement, if the other party does not perform its contractual obligations.

The case originated when Edu4 won an RFP issued by AFPA for a system to run adult educational programs. The RFP required the use of VNC software.  Edu4 provided the software, which was licensed under the General Public License (GPL). 

The GPL requires that the company distributing the licensed software provide either the source code of the software or a written offer to provide the source code. Edu4 promised to provide the source code to AFPA, but failed to do so.  Edu4 also removed two copyright notices in the VNC software and substituted its own notices; deleted the text of the GPL; and failed to properly indicate that VNC software had been integrated in the deliverables.  In addition, Edu4 deleted user features that AFPA alleged created the risk of an intrusion of privacy.

AFPA subsequently argued that the contract had been breached, and ceased its performance.  Edu4 claimed wrongful termination and was awarded damages by the lower court.  On appeal, the Paris Court overturned the lower court decision, finding that Edu4 breached its contractual obligations by delivering a product that 1) created a risk to user privacy because  modifications by Edu4 allowed other users or remote users to assume control over all the workstations and 2) did not comply with the GNU GPL because Edu4 had deleted two copyright notices in the VNC software and replaced them with its own copyright notice and had deleted the GNU GPL license language.

The case is also unusual because it involved a suit by a licensee, AFPA, against a distributor, Edu4, claiming breach based on violation of the terms of the GPL by the distributor.  Other suits to enforce the GPL of which I am aware have been brought by the owner  of the copyright (or its agent) in the GPL licensed product to enforce the GPL.   I want to thank my partner in Paris, Carol Umhoefer, for assisting me in understanding the significance of this case. 

This decision is important for two reasons:

1.  For the first time, the GPL was  found, indirectly, enforceable under French law.

2. It reminds us that licensees of the code can also sue to enforce the rights resulting from the GPL

3. It may also suggest a new basis for licensees to charge breach of the commercial license agreement:  the licensor has failed to comply with the terms of open source licenses to software included in the product under the commercial license agreement