Artifex Software v. Hancom is a United States lawsuit brought in 2016 by Artifex Software, Inc., the licensor of the Ghostscript PDF interpreter, against Hancom, Inc., a South Korean maker of office software, in the United States District Court for the Northern District of California.[1] Artifex claimed breach of contract and copyright infringement over Hancom’s use of Ghostscript under the GNU General Public License (GPL). In 2017 the court denied Hancom’s motion to dismiss, holding among other things that the GPL, as pleaded, formed a contract and that the contract claim was not shown to be preempted by copyright law, and later refused to rule out monetary damages measured by the value of Artifex’s commercial licence.[1][3] The parties announced a settlement on confidential terms on 2017-12-05.[5]
Background
Artifex develops and licenses software that interprets page description languages such as PDF. The court described Artifex as the exclusive licensor of Ghostscript using a dual-licensing model: a licensee can take a commercial licence and pay a royalty, or use Ghostscript under a free open-source licence. Before 2013 that open-source licence was the GNU GPL; from 2013 Artifex used the GNU Affero General Public License.[3] Artifex’s own licensing page states that most of its products are dual-licensed under the AGPLv3 or a commercial licence.[7]
Section 9 of the GPL version quoted by the court says that a recipient is not required to accept the licence to receive or run a copy, but that “nothing other than this License grants you permission to propagate or modify any covered work”, and that “by modifying or propagating a covered work, you indicate your acceptance of this License”.[1]
Hancom develops Hangul, a word processor, and the Hancom Office suite. According to evidence summarised by the court, Hancom first sold software using Ghostscript in 2008 and continued until about 2016-08-25, when it says Ghostscript was removed. A screenshot of Hancom’s website from May 2016, whose translation Hancom did not dispute, stated that Hancom Office NEO used Ghostscript of Artifex Software and complied with the GPL. Artifex wrote to Hancom on 2016-06-15 about the alleged breach; after discussions failed, it filed suit.[3]
The dispute
Artifex’s allegations. Artifex alleged that Hancom incorporated Ghostscript into its software without a commercial licence, so that its use and distribution constituted consent to the GPL, and that Hancom then breached the GPL by distributing its software without the accompanying source code. Artifex alleged that this terminated Hancom’s licence and deprived Artifex of a licence fee or, alternatively, of the benefits of open-source sharing.[1] It sought injunctions, an order requiring Hancom to distribute complete source code to its licensees, and compensatory, consequential, statutory and exemplary damages; it pleaded that unjust enrichment, measured by its commercial royalty rates, exceeded $75,000.[1][3]
Hancom’s position. Hancom moved to dismiss, arguing that an unsigned GPL could not show mutual assent, that any contract claim was preempted by the Copyright Act, that the copyright claim could not reach acts outside the United States, and that parts of the relief sought should be struck.[1] It later moved for partial summary judgment, arguing that Artifex could not recover more for breach of a free licence than it would have gained from performance, so there were no damages, and that any damages were cut off at the date Hancom first released its product without complying. For that motion only, Hancom conceded that it had breached the GPL.[3]
Decision or outcome
Motion to dismiss, 2017-04-25
The court denied the motion to dismiss.[1]
- Contract formation. The court rejected the mutual-assent argument, stating that the GPL “provides that the Ghostscript user agrees to its terms if the user does not obtain a commercial license”, and that Artifex’s allegations that Hancom used Ghostscript, had no commercial licence and publicly represented that its use was licensed under the GPL “sufficiently plead the existence of a contract.”[1]
- Damages pleaded. Relying on Jacobsen v. Katzer, the court accepted that harm can flow from failing to comply with open-source licensing, and held that Artifex’s allegations about its dual-licensing structure were sufficient to plead damages.[1][6]
- Preemption. Hancom had not met its burden of proving preemption. The court noted Artifex’s reliance on a decision holding that the GPL’s obligation to make a derivative work open source is an “extra element” beyond copyright, and that Hancom did not explain why that requirement was not such an element. It added that claims premised on possible extraterritorial infringement, which the Copyright Act does not reach, would not be preempted.[1]
- Extraterritoriality. Because the complaint alleged distribution of the product in California through the internet, the court declined at the pleading stage to dismiss the copyright claim to the extent it rested on acts abroad.[1]
- Relief. The court declined to dismiss the request for specific performance requiring distribution of source code, while describing the ultimate imposition of that relief as “extremely dubious”; Artifex’s request for exemplary damages was deemed withdrawn.[1]
A pretrial order of 2017-06-19 set a jury trial for 2018-06-25.[2]
Partial summary judgment, 2017-09-12
The court denied Hancom’s motion for partial summary judgment. It held that although it could not impose the commercial licence’s terms on Hancom, “the jury can use the value of the commercial license as a basis for any damages determination”, and that under California law a reasonable royalty may measure damages for breach of contract. It also held that restitution or disgorgement measured by royalties or by Hancom’s profits was available, because the GPL “was not free in the sense that there was no consideration owed”, again citing Jacobsen v. Katzer. Given ambiguities in the record about later downloads of Ghostscript, Hancom had not shown that damages were cut off at its first non-compliant release.[3]
Settlement
On 2017-12-05 Artifex announced that the parties had reached a settlement and that “Terms of the settlement remain confidential.”[5] The rulings above were interlocutory; no court made a final finding that Hancom breached the GPL or infringed Artifex’s copyright. The published orders are collected on GovInfo.[4]
Significance for software licensing and SAM practice
The GPL as a contract. Earlier open-source cases such as Jacobsen v. Katzer focused on licence terms as copyright conditions.[6] This case allowed a GPL breach claim to proceed in contract, based on the licence’s own acceptance-by-conduct wording, and without a signature.[1]
Dual licensing and damages. Where a licensor offers the same code under a copyleft licence or for a fee, the court held that a jury may use the commercial licence price to value a breach of the copyleft terms.[3] For software asset management (SAM) and open-source review, this links a copyleft compliance failure to the licensor’s commercial price list, not only to an obligation to publish source.
Evidence of the licence relied on. The court treated Hancom’s public statement that its product used Ghostscript under the GPL as part of the pleaded basis for a contract.[1] Records of which licence an organisation relies on for each embedded component are therefore relevant evidence if that choice is later disputed.
Limits. The rulings came from a magistrate judge on a motion to dismiss and a partial summary judgment motion in a case that then settled, so they are not appellate precedent.[1][5]
Lessons learned
- Using GPL code without a commercial licence can create a contract through conduct, without a signature. The court held that Artifex had sufficiently pleaded a contract where Hancom used Ghostscript, had no commercial licence and publicly said its use was under the GPL.[1]
- Where code is dual-licensed, a copyleft breach may be valued at the price of the commercial licence. The court held that a jury could use the value of Artifex’s commercial licence as a basis for damages, and that restitution measured by royalties or profits was available.[3]
- Records of which licence is relied on for each embedded open-source component are relevant evidence. Hancom’s public statement that its product used Ghostscript under the GPL formed part of the pleaded basis for a contract.[1]
- The rulings were interlocutory and the case settled, so they are not appellate precedent. They came from a magistrate judge on a motion to dismiss and a partial summary judgment motion, and no court made a final finding of breach or infringement.[1][5]