Open source software has been in widespread use for longer than most people realize—consider the majority of websites running on Apache Web server software for more than a decade. It has particularly flourished in the business community over the last several years, despite some uncertainty regarding the legal status of open source software licenses. But an opinion by the United States Court of Appeals for the Federal Circuit this week is likely to go a long way toward dispelling that uncertainty.

In substance, the court ruled that the open source licensors in some circumstances will have recourse under copyright law, and it did so in definitive terms: "Copyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material."

The ruling in Jacobsen v. Katzer concerns an open source software program made available in source code form for download and use by the public, free of charge, subject to the provisions of the open source "Artistic License."

In simplified terms, the Artistic License permits the modification of the source code or its incorporation into other software programs, but requires any distributor of such programs to include with any distribution certain information identifying the source of the included code, as well as text the Artistic License itself, among a number of other things. Jacobsen, the head of the group that developed the code, alleged in a federal copyright infringement lawsuit that Katzer and his company incorporated certain of the groups' code into his own competing proprietary software product, but failed to comply with the requirements of the Artistic License.

In defense of the copyright infringement claim, Katzer (who admitted that his program used some of the code) argued that the open source code was provided free of charge pursuant to an intentionally broad, nonexclusive license, and that he had not exceeded the scope of the license in incorporating the code into his own product. The failure to include the required information with his product, he argued, was merely a breach of a license term. The difference between exceeding the scope of a license, and merely breaching a condition, is that the flexible and powerful remedies under copyright law are available only if the scope of the license has been exceeded. If a condition is breached, then only the relatively less powerful breach of contract remedies is available. In the case of open source software that is distributed free of charge, breach of contract remedies are further limited.

The appeals court concluded that the Artistic License "on its face ... creates conditions," that can be enforced under copyright law. The court's opinion also broadly affirmed the societal value of the open source approach: "There are substantial benefits, including economic benefits, to the creation and distribution of copyright works under public licenses that range far beyond traditional license royalties."

Although this is a momentous decision for the open source community, the take-away from the opinion is somewhat old hat for users of open source code. Best practices for business use of open source software include implementation of mechanisms to control the download and use of open source code, documentation of the licenses that accompany open source code, and periodic audits to assure compliance with their requirements.

Jeffrey Neuburger is a partner in the New York office and co-chair of the Technology, Media and Communications Practice Group at Proskauer Rose LLP. Maureen Garde, is a lawyer with the Technology, Media and Communications practice group at Proskauer Rose LLP.