Instead of trying to show that he did not copy Jacobsen's software, Katzer attempted to defend himself by asserting that the terms of Jacobsen's Open Source license were not valid and could not be enforced on Katzer, and that JMRI was essentially in the public domain.
The judge agreed with Katzer. This put a shadow over almost every Free Software license, bringing further into question whether any of them could be enforced. If the terms of JMRI's license weren't valid, what of the Wikipedia, the GNU project, Linux, Creative Commons, the Apache project, etc.? All of their licenses had some similarities to Jacobsen's.
The judge's decision was appealed in the Federal Circuit Court. A large number of Open Source projects and their attorneys, working for free, filed a "friend of the court" brief. What the appeals court found was, essentially, that the Free Software license was a license, rather than a contract, that it does not require that both parties agree before it can be binding, that its terms can be enforced, that if you violate the license you're a copyright infringer, and that violation of an Open Source license causes real economic damage to the copyright holder even though the copyright holder doesn't charge money for his software.
The court's finding actually seems rather enthusiastic about Free Software. I can't blame them - most of the people who come to that court have motivations other than a desire to share their own work for free. And having made their finding, the appeals court sent the case back to the lower court. With Katzer's key defense rejected by the appeals court, Jacobsen now has a pretty good chance of prevailing against him.
Now that a reasonably high court in the U.S. has made such a finding, Open Source developers are sure that they aren't restricted to the legal penalties against people who violate contracts, which are generally just the amount of money lost, but can pursue the far greater penalties against copyright infringers. So, all of the tools that publishers, movie studios, and record companies have managed to win from a too-willing Congress over the past century are suddenly available to the Free Software developer to enforce their licenses.
That doesn't mean that the Open Source developers will form their own MPAA or RIAA and go after college students and the poor. Their motivation is to share.
So, Katzer's quest for money has so far only resulted in making Open Source stronger, while so far gaining Katzer nothing. Thank you, Mr. Katzer, and a more sincere thanks to the many attorneys who helped to win the appeal, and to Jacobsen's attorney, all of whom are providing their services to Jacobsen for free.
A Larger Question
Which brings us to a related question: Why would anyone violate a Free Software license in the first place?
People who just use Open Source in their own operations will have little reason to ever consult the license, unless they're out to sue the Free Software developer, which is a losing proposition in any case.
People who put Open Source in their own products must heed the license, but its terms are not nearly so bad as those that come with proprietary software, nor are the Free Software developers even one percent as litigious as proprietary software companies.
The developers aren't asking for money. They want to protect themselves, as much as possible, from lawsuits, so that they can continue to give away their own software. Sometimes, they are asking for the people who improve their software to share the improvements, just as the original developers shared their own work. But they aren't doing that without limit - for example, the GPL license as it's applied to the Linux kernel doesn't ask for the source code to applications that run on top of Linux.
In my consulting, enforcement, and expert-witness work, I've found that nobody ever violates a Free Software license for a smart reason. Mostly, it happens because engineers and attorneys aren't connecting well in their own companies. I teach classes for management, legal staff, and engineering on how to avoid these problems, and they aren't very long classes.