Software programs are commonly eligible for copyright protection as literary works. The right holder’s exclusive rights secured by copyright include the rights to copy, modify and distribute the copyrighted work, such as a computer program. In order for deriving economic value from these exclusive rights, proprietary companies often tend to grant their customers merely the limited right to run a single, unmodified copy of the program against considerable license fee or obligation to pay royalties.

On the contrary, open source software (OSS) is made available to the public in source code form under permissive license terms allowing use of the software for any purpose for free. One of the advantages of OSS licensing model is that users are allowed to further develop the program to respond their needs and even share the improvements with their friends, other software developers and public in general – even at zero marginal cost. In the long run this will benefit the society as whole to far greater extent than supporting the monopolistic right to exclude others from freely using, improving and sharing software programs – and not only software programs, but also innovation, knowledge and human inspiration in the first place.

In addition to private users, also proprietary technology companies are often interested in OSS due to its low acquisition costs and its unquestionable effectiveness that is caused by the high quality and maternity of OSS. However, technology companies may face challenges in connection with including OSS as part of their commercial products. One of the challenges is the discrepancy between the need of the companies to secure their own proprietary copyrights, patents and trade secrets while simultaneously remaining in strict compliance with the obligations of OSS licenses. Technology companies may be afraid of contamination of their proprietary code by OSS licenses’ source code distribution requirements or dilution of their patent portfolios in case the component released by them under an OSS license is covered by patent claims. Dilution may result, in addition to patent exhaustion triggered by the first authorized sale of the component covered by relevant patent claims, also from an explicit or implied patent grant under the applicable OSS copyright license.

“So what?” you could ask as the risk of dilution is of course the very desirable objective from the OSS community’s perspective considering that any intellectual property rights embodied by software components as monopolistic, exclusive rights prevent users from exploiting the programs freely. However, the key is that the necessary step in the battle of extending the use of OSS among proprietary technology companies is to shed light on the practical effects of the OSS license terms on the businesses of these companies.

Determining patent portfolio’s exposure to OSS licensing model may be difficult, though. For example, many widely used OSS components are licensed under terms such as BSD license or GPL v2 which say nothing about patents. However, despite the absence of explicit patent grant, BSD and GPLv2 licenses may include an implied patent grant as an express, written license grant of the patent is not necessary to effectuate patent license. That is why the question of implied patent license becomes so essential. Implied patent license is an equitable fair use defense against patent infringement. The doctrine may lead to preclusion of the right to claim royalties or injunc-tion against use and distribution of patented components released on the markets by the right holder.

Under the doctrine of implied patent license, the right holder or some other person, like distributor under the right holder’s authorization, grants an implied license to recipients of component to practice any right holder’s patent claims covered by the component. Implied patent license may be inferred from any conduct of the right holder which induces reasonable belief in the existence of the license. The circumstances inducing reliance may include any statement of the patent holder, or only the way that he acts.

By way of example, any wording of an OSS license, such as the BSD license’s grant of the rights to use, copy, modify, create derivative works as well as to distribute the software may induce reliance based on the statements of right holder. Consequently, as the right to exclude others from using patented product belongs to the exclusive rights of the patent holder, it may be fairly argued that BSD grants an implied patent license. Without this implied patent grant, mere copyright license would not have any value, if the software could only be copied under the copyright license but not used in the absence of patent license. Further, even silence on patents may sometimes be interpreted to grant an implied patent license, as “silence is a sign of approval”. On the other hand, an explicit disclaimer of patent license in connection with OSS license (which permits such an additional restriction) inevitably precludes reasonable reliance on patent implied license.

Further, as to patent holder’s acts, merely the release of code under OSS or free software license may induce reasonable reliance on implied patent grant. That is because said act implies the message that “This is free software, take it!” or “Share and share alike.” However, mere release of software under OSS license as such may not alone be sufficient in concluding the existence of an implied patent license. Also the place where the software is released or where the patent is granted may have relevance, because not all jurisdictions embody the concept of implied patent license as part of their legal regimes.

Consequently, in analyzing the existence of implied patent license the “totality of the circumstances” is the decisive test. According to the test the relevant question before the court is, whether the preclusion of an implied patent license is fair from the perspective of licensee in the prevailing circumstances. If the licensee reasonably believes based on these circumstances that he has an implied patent license and begins to practice the patent, the patent holder can not prevent it.