Open Source Patent Licenses: Pitfalls and Opportunity
Contributed by Chad Landmon and Drew Hillier, Axinn, Veltrop & Harkrider LLP
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Open-source licensing is nothing new, but the Covid-19 pandemic has once again led life science and tech companies to consider how they can “do good” either by making intellectual property freely available to fight the public health crisis or by using the IP of others without risk of infringement.
One of the leading new initiatives on this front is the Open COVID Coalition, an international group of attorneys and scientists that has developed the Open COVID Pledge for IP owners to make their patents and copyrights available to fight against the COVID-19 pandemic.
Although this new initiative is highly commendable, when considering participation in the Pledge, both IP owners and those who plan to use the pledged IP need to be aware of the pitfalls and opportunities that the Pledge creates. Being mindful of the issues that may arise is critically important for companies, particularly as the goodwill surrounding Covid-19 response efforts fade. Although this article focuses on the Open COVID Coalition, many of the points apply to any open-source license opportunity.
COVID Open License Overview
The Open COVID Coalition involves a two-step process. First, an IP-holder makes the Open COVID Pledge “to make our intellectual property available free of charge for use in ending the COVID-19 pandemic and minimizing the impact of the disease.” Then, the IP-holder issues a license. The license can be either the standardized “Open COVID License,” a license that modifies the standardized license with additional, customized, non-contradictory terms, or a license drafted from scratch that is consistent with the Open COVID Pledge. Discussed below are three variations to the standardized Open COVID Licenses promulgated by the Coalition, all of which provide a non-exclusive, royalty-free, worldwide, fully paid-up license.
Patent (OCL-P) V1.1
The scope of the OCL-P license is limited to the “Pledgor’s patents’ … to make, have made, use, sell, and import any patented invention, solely for the purpose of diagnosing, preventing, containing and treating COVID-19.” The OCL-P license will “last until one year after the World Health Organization declares the COVID-19 Pandemic to have ended, but in any event not beyond January 1, 2023, unless otherwise extended by the Pledgor.”
Patent and Copyright (OCL-PC) V1.1
The OCL-PC 1.1 license is similar in scope and duration to the OCL-P license, except that it also includes copyrights within the license grant.
Open COVID License (OCL-PC) V.1.0
The OCL-PC 1.0 license contains a license to
… make, have made, use, sell, import, reproduce, adapt, translate, distribute, perform, display, modify, create derivative works of and otherwise exploit all patent, copyright and other intellectual and industrial property rights (other than trademarks and trade secrets) in products, services, compositions of matter, machines, articles of manufacture, processes, and works of authorship that we have the right to license under these terms (the “Licensed IP”), for the sole purpose of ending the “COVID-19 Pandemic” (as defined by the World Health Organization, “WHO”) and minimizing the impact of the disease, including without limitation the diagnosis, prevention, containment, and treatment of the COVID-19 Pandemic.
This license lasts “until one year after WHO declares the COVID-19 Pandemic to have ended.” As discussed below, each of the licenses offers a number of pitfalls and opportunities to licensors and licensees alike.
Pitfalls and Opportunities
What Is the IP and How Can It Be Used?
Pitfalls: A major pitfall in each of these licenses is the inexact scope of the license grant. For example, both OCL-P 1.1 and OCL-PC 1.1 limit the scope of the license “solely for the purpose of diagnosing, preventing, containing, and treating COVID-19.” A licensee could assert that the grant broadly includes any IP that arguably helps to “contain” or “prevent” Covid-19, such as a meal-delivery app that uses Uber’s IP to keep individuals at home or a chemical formulation for a common household cleaner. A licensee might also argue that a telecommunications patent is within the scope of the license grant for similar reasons, or even widespread and (copyrighted) computer software. On the other hand, the licensor can argue that the selection of the words “diagnosing, preventing, containing, and treating” limits the scope to medical and related activities.
OCL-PC 1.0 poses additional problems because its scope includes the “sole purpose of ending” the Covid-19 pandemic, as defined by the World Health Organization, “and minimizing the impact of the disease, including without limitation the diagnosis, prevention, containment, and treatment” of the pandemic. Thus, unlike the other licenses, which are directed to the virus itself, a licensee under OCL-PC 1.0 must act both with the purpose of “ending” the pandemic and minimizing the “impact” of the disease. For example, IP used for palliative care or for merely treating a symptom arguably minimizes the impact of the virus, but might not be said to have the purpose of “ending” a pandemic.
This license also does not make clear what constitutes an adequate definition of the pandemic by WHO or whether the operative “definition” is one purportedly existing at the time of the license grant or whether it could be changed at some time in the future. It is untested whether courts will consider this particular “definition” to be sufficiently ascertainable. In some ways the OCL-PC 1.0 license is still a better choice than the OCL-P 1.1 and OCL-PC 1.1 license because those licenses use the capitalized term “COVID-19 Pandemic” without attempting to define the term at all.
Finally, Covid-19 has “impacted” virtually every aspect of the economy, and a licensee could take the aggressive position that the “including without limitation” language means that this license opens up all of a company’s IP so long as the licensee tries to lessen the “impact” by making a product more available and less expensive to companies and individuals financially impacted by the crisis. Licensors can, of course, dispute this by pointing to the requirement that the activity have the purpose of “ending” the pandemic. Either way, licensors and licensees alike are left with uncertainty about the scope of the license grant.
Opportunity: The best practice for companies that wish to engage in an open-source license is to identify the specific patents or copyrights that are licensed. Not only will this highlight the company’s contribution, but it will also provide clarity on what IP is actually being licensed. For companies that use open-source licensing to promote the use of the company’s technological platform, specifically identifying the licensed IP allows for a targeted business strategy.
Licensors doing this should consider adding an exhibit to their open license listing the licensed IP by patent and copyright number. The relatively small up-front costs of identifying and listing this IP now can prevent the much greater expense of litigation in the future.
Pitfalls: Each of the licenses provides a termination clause that can hinge on WHO’s declaration that the pandemic has ended. But, as with the pandemic definition, the licenses are not clear about what constitutes an official WHO declaration for purposes of termination. This lack of clarity potentially invites litigation about whether a statement by the WHO director-general, an action by the WHO executive board, a resolution by the World Health Assembly, or some other step is required to terminate the license.
Opportunity: Rather than key termination to a declaration by WHO, licensors and licensees can enjoy more certainty and eliminate the risk of litigation by adopting a license that is keyed to a date certain with an automatically renewable period subject to termination upon notice.
Pitfalls: None of the standard licenses say whether they impact prior licenses that already exist. For example, a licensor who has previously granted a royalty-bearing license for a patent may not be in a position to forego royalties from a particular licensee. Likewise, a company that has an exclusive license to a particular patent held by an open-license pledger may view the act of issuing a broad open license as a breach of the prior exclusive license.
Opportunity: These pitfalls can be avoided. Specifically listing the licensed IP will help identify potentially problematic overlap. Licensors that have previously entered into exclusive license agreements for IP should make sure to specifically exclude such IP from their open licenses. Licensees with exclusive licenses should ask their licensors to do so. It is also a best practice to include a clause making clear that the open license does not supplement or modify existing agreements, and that in the event of a conflict, the existing agreement will control.
No Good Deed Goes Unpunished
Pitfalls: The standard licenses do not articulate a choice of law or forum selection clause. Litigating about the proper forum, a court’s jurisdiction, or the correct choice of law are frequently needless and avoidable expenses in IP licensing litigation. Likewise, the standard licenses do not provide any warranty or indemnity regarding the licensor’s practice of the licensed patents or copyrights. Thus, this leaves open the possibility that practicing the licensed IP will still violate the IP rights of third-parties.
Opportunity: If a licensor and licensee enter a dispute about the scope or termination of an open license, both sides will generally be well-served by clauses that specify the forum for any disputes, state that the parties submit to the personal jurisdiction of that forum, and select an appropriate choice of law. While it may not be commercially feasible to insist on warranties and indemnification, clearly identifying the proposed product can allow the licensee to assess the risk of third-party infringement before moving forward with an open source project.
Frequently, the IP involved in open source projects is so old that any patent protection has expired. Evaluating this risk before launching a product can be well worth the cost. This is especially true because as goodwill fades surrounding the Covid-19 pandemic, there is a real possibility that non-practicing entities that do not answer to shareholders or the public will come out of the woodwork to assert their IP rights, even against those who have admirably devoted resources to fighting the global pandemic.
The intersection of IP, licensing, and open source projects raises unique legal pitfalls for life science and tech companies. Each of these pitfalls, however, can be addressed with a sound licensing strategy with an eye toward avoiding unnecessary litigation. Each individual situation, of course, requires an independent legal and strategic analysis. Although it is certainly admirable that companies are willing to participate in open source arrangements to fight the Covid-19 pandemic, it is critical that such companies consider the long game so that they can avoid any unnecessary disputes and litigation once the pandemic is over.
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