Property, intangible

a blog about ownership of intellectual property rights and its licensing

Revoking an Implied Nonexclusive Copyright License

Jason Waggoner developed a software program in the 1990s.  Later, he and two other shareholders created a company called Nearstar, Inc., which distributed “Dataserver” software which was based almost entirely on Waggoner’s software.  Nearstar distributed the software for nine years, including versions 3.2, 4.0, 5.0, 6.0 and 6.2.  Waggoner admitted that he granted Nearstar permission to copy, distribute, market, and modify the Datasource source code, although nothing was put in writing.  Then Waggoner quit Nearstar, Nearstar sued Waggoner for breach of contract and copyright infringement, and Waggoner sued back for copyright infringement.

Nearstar filed a motion for summary judgment, conceding for purposes of the motion that Waggoner owned the software, but arguing that it at least had an unlimited, irrevocable license to use, modify and sell Dataserver.

Here are the fundamentals of an implied, non-exclusive copyright license:

An implied nonexclusive license arises when the following occurs: (1) a person (the licensee) requests the creation of a work, (2) the creator (the licensor) makes the particular work and delivers it to the licensee who requested it, and (3) the licensor intends that the licensee-requestor copy and distribute his work.  A nonexclusive license may be irrevocable if supported by consideration.

So how did Nearstar do? Far from successful on summary judgment, for a couple of reasons.  First, Nearstar didn’t request the creation of the work – recall that it existed before Nearstar did.  Second, a license is only irrevocable if there was consideration.  Waggoner had been paid a salary and distributions like the other partners, but continued at-will employment is not consideration to support an irrevocable license.  An equitable estoppel defense was raised only in the reply brief so could not be considered, but even if it had been considered there were questions of fact. Summary judgment denied.

Nearstar, Inc. v. Waggoner, No. 4:09cv218 (E.D. Tex. March 2, 2011).

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