Versata v. Ameriprise and XimpleWare v. Versata are linked United States cases about VTD-XML, an XML parser that XimpleWare published under the GNU General Public License (GPL), which Versata allegedly incorporated into its Distribution Channel Management (DCM) software licensed to Ameriprise. In Texas, the federal court held that Ameriprise’s counterclaim that Versata breached the GPL was not preempted by copyright law, because the GPL’s obligation to make derivative source code available is an “extra element” beyond copyright, and it remanded the case to state court.[1] In California, XimpleWare’s copyright claims against both Versata and Ameriprise survived motions to dismiss, and the case was dismissed with prejudice on settlement in February 2015.[2][5]
Background
Under a 1999 Master License Agreement (MLA), Versata granted Ameriprise a nonexclusive, nontransferable, perpetual licence to its DCM software, conditioned on limiting access to Ameriprise employees and approved “Permitted Contractors”. Versata sued Ameriprise in Texas state court alleging that non-permitted contractors had accessed the software, purported to terminate the MLA and demanded return of the software.[1] Ameriprise counterclaimed that Versata had incorporated VTD-XML into DCM and was therefore required by the GPL to make the DCM source code available to users, including Ameriprise.[1]
The dispute
Ameriprise removed the Texas case to federal court on 2014-01-07 after Versata raised copyright preemption as a defence to the GPL counterclaim. Each side then argued the other’s contract claim was preempted by the Copyright Act.[1]
Separately, after learning of the Texas case, XimpleWare sued Versata and Ameriprise in the Northern District of California on 2013-11-05 for copyright infringement, Lanham Act violations, breach of contract and other claims. It alleged that Versata distributed DCM containing VTD-XML without a commercial licence or GPL compliance, and that Ameriprise distributed DCM and VTD-XML to thousands of non-employee financial advisors without attribution, copyright notices or an offer of source code.[2]
Decision or outcome
On 2014-03-11 Judge Sam Sparks in the Western District of Texas held that Versata’s claim under the MLA, limited to Ameriprise’s failure to return the software after termination, was preempted, but that Ameriprise’s GPL counterclaim was not. The court described the GPL’s “viral” component as “separate and distinct from any copyright obligation”, since “Copyright law imposes no open source obligations”, so the claim required an extra element: “a failure to disclose the source code of the derivative software”. It did not decide whether Ameriprise could enforce the GPL as a third-party beneficiary, and remanded the case to the 53rd Judicial District Court of Travis County.[1]
In California, Judge Susan Illston denied Ameriprise’s motion to dismiss on 2014-02-04. Applying the principle that a licensee who acts outside the scope of a limited licence may be sued for infringement, the court found that XimpleWare had alleged that Ameriprise reproduced and distributed the software outside Ameriprise and to non-employees, “thereby acting outside the scope of the GPL”.[2] On 2014-03-14 the court denied the Versata defendants’ motion as to most claims, including direct and contributory copyright infringement and breach of contract, and dismissed the claims for breach of the implied covenant and interference with prospective economic advantage.[3]
On XimpleWare’s motion for a preliminary injunction, Versata represented that it had delivered a patch removing VTD-XML to its eight DCM customers and that it was working at four of them, and said that buying a commercial licence from XimpleWare was “something that Versata would be happy to do”. On 2014-11-25 the court ordered Versata to show by 2015-02-28 that the patch was installed and working at the other four customers, or why it had not bought a licence.[4] The parties then settled; the court dismissed the case with prejudice on 2015-02-12, and Versata’s appeal was voluntarily dismissed by stipulation on 2015-06-29.[5][6] The settlement terms are not in the public record reviewed.
Significance for software licensing and SAM practice
The cases show a GPL compliance problem inside a vendor’s product flowing to the vendor’s customer. Ameriprise was sued by the open-source author for its own distribution to advisors, while it used the same GPL issue as leverage in its licence dispute with the vendor.[1][2] The Texas ruling treats the GPL’s source code condition as a contractual promise that a licensee can plead in state court, although the question whether a customer can enforce the GPL as a third-party beneficiary was left open.[1] See GNU GPL, LGPL and AGPL obligations.
Lessons learned
- Embedded open source can reach the customer. XimpleWare’s infringement claim against Ameriprise survived because it alleged distribution of the GPL code outside Ameriprise and to non-employees.[2]
- Know what is inside vendor software. The dispute was resolved in part by Versata patching VTD-XML out of DCM at its customers, with a commercial licence as the alternative the court put to it.[4]
- GPL obligations can be contractual. The Texas court held that the promise to release derivative source code is an extra element beyond copyright, so a claim to enforce it was not preempted.[1]