The GPL meets the UCC: does free software come with a warranty of no infringement?

• Author: McJohn, Stephen
• Position: General public license - Continuation of IV. The GPL Exclusion of Warranties May Not Include Infringement Claims through VIII. Conclusion, with footnotes, p. 32-62

The GPL disclaimer carefully abides by Section 2-316. (218) The GPL avoid making express warranties, simply by not making any. (219) The GPL excludes also all implied warranties. (220) First, it explicitly states that "...WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE." (221) Second, the GPL explicitly provides that the software is provided "AS IS." (222) Under 2-316(3)(a), that likewise excludes all implied warranties. (223) This belt-and-suspender approach thoroughly excludes all express and implied warranties. (224) One might think that a warranty must be either express or implied, so an exclusion of all express and implied warranties would include all warranties. (225) But, under U.C.C. Article 2, warranties go beyond those express and implied. (226) The U.C.C. defines its terms with specificity, not always with the meaning that one would ordinarily expect. (227) In the world of the U.C.C., a bank account is not an "account," (228) cattle may be "equipment," (229) and a consignment is not a "consignment" if it is known to be a consignment. (230)

Under the UCC scheme, there is another set of warranties, which are neither express nor implied warranties:

[section] 2-312. WARRANTY OF TITLE AND AGAINST INFRINGEMENT; BUYER'S OBLIGATION AGAINST INFRINGEMENT.

(1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that

(a) the title conveyed shall be good, and its transfer rightful; and

(b) the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.

(2) A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.

(3) Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications. (231)

Section 2-312 first provides a warranty so fundamental that it is often overlooked. (232) Seller effectively promises, "These goods are mine to sell." (233) If the goods belong to someone else, Seller will breach that warranty of title to Buyer. (234) Because a buyer would normally expect such a warranty of ownership, the UCC provides that it is not excluded by a general exclusion of warranty, rather "will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title." (235) In other words, if the goods may not belong to Seller, Seller must make that quite clear with specific language. (236) A general warranty disclaimer, such as "As-Is" or "WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED" will not exclude the warranty of title. (237) As the Official Comment states,

The warranty of subsection (1) is not designated as an "implied" warranty, and hence is not subject to Section 2-316(3). Disclaimer of the warranty of title is governed instead by subsection (2), which requires either specific language or the described circumstances. (238) Suppose an art dealer had a painting to sell. The dealer was aware that there was a claim to ownership of the painting (that it was conveyed under an invalid will or it was wrongfully misappropriated during the war or the painting had been loaned or ....). The art dealer believes the claim is baseless, but you never know. The art dealer could sell the painting and disclaim the warranty of title. To do so, the sales contract would have to say quite specifically that there was no warranty of title. A general disclaimer, such as "As-Is" or "No Warranties" would be insufficient. Buyers expect to own what they buy. If the seller is to avoid making that basic promise, the U.C.C. requires her to warn the buyer with specific language. Seller says "I'll sell you whatever rights I have in this, but the risk is on you that it actually belongs to someone else."

In addition to Seller promising that the goods will become Buyer's personal property, Seller promises that Buyer's use of the goods will not violate anyone's intellectual property rights. (239) This is the warranty of property rights that is important for software. (240) Section 2-312(3) creates a warranty of noninfringement. (241) A merchant selling goods warrants not just that she owns them, but that buyer will not infringe third party rights. (242) If buyer purchases the goods and they are seized for infringement (of copyright or patent or trademark or trade secret, etc.), then seller will be liable to buyer. (243) Likewise, if using or reselling the goods infringes third party rights, buyer can recover from seller. (244) For example, where a company purchased software for an interactive voice recognition system from a supplier, the company was entitled to recover for breach of the warranty of noninfringement, when the company was sued for infringement of a patent covering the technology. (245)

The warranty of noninfringement will be breached if a substantial claim of infringement is brought by a third-party. (246) Courts hold that a judicial finding of infringement is not required. (247) Rather, it is sufficient if there is a "non-frivolous claim of infringement that has any significant and adverse effect, through the prospect of litigation or otherwise, on the buyer's ability to make use of the purchased goods." (248) That interpretation is especially important for software transactions. (249) As noted, the great number and broad language of software patents make it a real risk that anyone dealing with software could be sued for patent infringement. (250) The warranty of noninfringement warrants not just that the buyer will not infringe any patents, but that no one will even claim that the buyer is not infringing any patents. (251) That is a very broad warranty that few software distributors would care to make.

That raises the question of how a seller can avoid making the warranty. Section 2-312 does not state specifically how to exclude the warranty of non-infringement. (252) Subsection 2, which requires specific language or special circumstances to exclude a warranty, refers specifically only to the warranty of title in Subsection 1. (253) By contrast, subsection 3 simply provides that the Seller will make a warranty of title "unless otherwise agreed." (254) That seems to provide the parties more flexibility to exclude the warranty. If that is the case, the GPL might exclude the warranty of noninfringement even though it does not specifically refer to noninfringement or the like. The next section discusses whether the GPL could be interpreted to exclude the warranty of noninfringement because such exclusion is "agreed." (255) The following section follows another possibility. (256) The Uniform Commercial Code seeks to adapt to commercial practices. (257) It will incorporate into the transaction terms that are sufficiently widely used in the field, under the rubric of "usage of trade." (258)

It is worth noting that the UCC is consistent with the recent attempt of the American Law Institute to state the principles of software law. (259) The ALI Principles of Software Contracting would provide for an indemnity of infringement, the equivalent of a warranty of noninfringement. (260) The ALI would require specific language to exclude the warranty, thus making it even more likely that the GPL and similarly worded languages do not exclude the warranty. (261) The indemnity would be excluded only by an exclusion that is "conspicuous, and uses language that gives the transferee reasonable notice of the modification or notice that the transferor has no obligation to indemnify the transferee." (262) However, like the UCC, the Principles would allow for exclusion based on usage of trade. (263) The Principles provide, however, that no indemnity of infringement would be made where no money was charged for the software, which would mean that most free software would not be subject to the indemnity obligation. (264) The commentary specifically noted that this would make sense, where parties contribute free software without a charge. (265)

5. Whether the GPL Excludes the Warranty of Noninfringement by Agreement

   Under 2-312, the parties to a transaction may agree to exclude the warranty of noninfringement. (266) This rule is more flexible than with the exclusion of the warranty of title, which must be excluded by specific language, such as "seller hereby forsakes and quit claims all of his right, title, and interest in acts two buyer." (267) The language must be specific and certain. (268) The statement that seller sold his "'right, title and interest'" and that to "'his knowledge there was no title and existence by way of registration with the state of Michigan or with any other state or with any notion'" was insufficient. (269) By contrast, "the warranty against infringement in section 2-312 is applicable '[u]nless otherwise agreed.' This phrase does not appear to be as stringent as the specific language requirement in 2-312(2)." (270)

   One might argue that the GPL excludes the warranty of noninfringement by agreement where it clearly states that the software is transferred "WITHOUT WARRANTY OF ANY KIND." (271)

   However, there are several obstacles to this position. (272) First, within the context of the paragraph excluding warranties, the exclusion is directed only at warranties of quality. (273) It expressly mentions the implied warranties of merchantability and fitness for a...