United States: A Brand GNU Ruling On Pleading Infringement Of The GNU General Public License

Last Updated: May 28 2014
Article by Anthony Tartaglio

Motion to Dismiss Granted in Part, XimpleWare, Inc.v. Versata Software, Inc. et al. , Case No. C 13-05161 (Magistrate Judge Paul Grewal)

The GNU General Public License is the most popular free software license in the world and covers many widely-used programs, such as the Linux kernel.  So IP attorneys and open-source activists alike should take note of Magistrate Grewal's recent decision in the XimpleWare, Inc. v. Versata Software, Inc. litigation.  With the exception of one defendant, XimpleWare failed to adequately plead that the moving defendants improperly "distributed" software in violation of the General Public License.  The ruling requires patentees to more stringently plead when downstream customers violate the GNU General Public License.

The General Public License contains restrictions on "distributing" covered software.  XimpleWare accused Versata of distributing XimpleWare's code to Versata's customers without satisfying those conditions.  Magistrate Grewal found that XimpleWare adequately pled that allegation.  But XimpleWare also accused Versata's customers of unlawfully distributing the code they received from Versata to their independent contractors, franchisees, and producers.  Here is the allegation from XimpleWare's complaint: "On information and belief, and without entering a commercial license with XimpleWare and without strict compliance with any of the conditions for the GPL license, the Customer Defendants have distributed without authorization DCM and VTD-XML to thousands of non-employee independent contractor or franchisee advisors or 'producers.'"

Magistrate Grewal held that this allegation did not satisfy Twombley and Iqbal, which require the plaintiff to plead specific facts, not boilerplate legal conclusions.  But he also held that XimpleWare's allegations as to Ameriprise passed muster under Twombley and Iqbal.  XimpleWare more specifically accused Ameriprise of distributing software to over 7,400 independent franchisees.  Judge Illston found in another case that these allegations were enough to properly plead copyright infringement.  Unsurprisingly, Magistrate Grewal similarly found that these allegations were enough to sustain a claim of patent infringement.

Magistrate Grewal then turned to XimpleWare's allegations that Versata directly infringed its patents.  The allegations put Versata on notice of what the patents claim, which open source software the patents cover, and how XimpleWare's software allegedly benefits Versata's business.  Although "far from illuminating," this was enough to satisfy the liberal requirements of Form 18.

Magistrate Grewal also ruled on XimpleWare's indirect infringement allegations.  He promptly disposed of the indirect infringement claims as to the Versata customers (except Ameriprise) because XimpleWare failed to adequately plead an underlying act of direct infringement.  He also wasted little time in dismissing the indirect infringement allegations against Versata because XimpleWare had failed to plead that Versata knew about the patents-in-suit, which is a basic requirement of inducement and contributory infringement.  For the same reason, he dismissed XimpleWare's allegations of willful infringement.

Versata's customers shouldn't crack open their Champaign bottles quite yet because XimpleWare was given leave to amend its complaint.  But anyone who uses open-source software should be heartened by Magistrate Grewal's order, which imposes very real and meaningful pleading requirements on patentees seeking to sue downstream software customers and users.

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