Open Invention Network Round-Table Media Event, London, 4 October 2007

by Rowan Wilson on 5 October 2007 , last updated

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Introduction

On Thursday 4 October 2007, Jerry Rosenthal, the CEO of the Open Invention Network (OIN) hosted a media event in the head-spinningly upmarket environment of the Mandarin Oriental Hotel in Knightsbridge. The purpose of the event was to publicise the OIN’s work and perhaps initiate some coverage in the technology press. The attendees were:

  • Jerry Rosenthal. CEO of the Open Invention Network
  • Tim Philips, Journalist, Author and in this case Moderator
  • Laurent Lachal, Open Source Research Director at IT Analysts Ovum
  • Glyn Moody, Journalist and Author on open source issues
  • James Pennington, IT Director of the B2B Centre at the University of Warwick
  • John Powell, CEO of open source CMS vendor Alfresco
  • Mark Taylor, President of the Open Source Consortium
  • Iain Thompson, Managing Editor of VNU.net
  • Stuart Turton of PC Pro magazine
  • Rowan Wilson of OSS Watch

In this document I will try to give an impression of the discussions that took place, provide some background on the patent-related issues discussed and finish off with some further questions that have occured to me while writing. This document covers:

  • How the Open Invention Network proposes to protect Linux and its associated software from patent litigation
  • Some background on the varieties of patent threat that face Linux
  • Some opinions on the future of the US patent system
  • Some discussion of the Novell-Microsoft patent cross-licensing deal

What is the Open Invention Network?

Rosenthal began the discussion by describing how the OIN began. To recap some history: back in 2005, Unix vendor SCO was busy fighting a legal battle against IBM and Novell over alleged copyright violations caused by those firms’ contributions to Linux. While the case continued SCO had been approaching large companies that used Linux and offering to sell them a licence to the portions of Linux that SCO felt they owned. For major Linux vendors like IBM and Novell, it was clear that accusations of intellectual property infringement were going to be a big potential problem for the future. The SCO case was about copyright, of course, and the complex and intertwined history of the Unix source tree. Perhaps even more threatening though was the prospect of future action against Linux and its vendors for patent infringement. Software patents exist for many of the core mechanisms within modern operating systems, with major commercial players each holding a portfolio of essential patents. When potential infringements arise, these large technology companies tend to try to avoid so-called ‘injunctive relief’ - that is obtaining a court order to prevent an accused patent infringer from distributing the supposedly infringing product. It was a legal ‘nuclear option’ with an extremely high chance that the injuncted party would respond with an injunction of their own arising from their own patent portfolio. Thus a kind of Mexican stand-off had developed in which companies would apply for as many patents as possible while usually agreeing to license them to each other reciprocally rather than risk the economic disaster of mutual injunction.

With SCO prowling the edges of the Linux user base looking for licence fees, the disturbing question arose: how can Linux protect itself if a SCO-style case was brought involving patents? Individual vendors could fight for themselves, but there was no entity that could fight for Linux as a whole. Rosenthal explained that at this time he was about to retire from IBM where he had worked for 37 years. IBM was worried by Linux’s potential vulnerability to patent actions, as were other major distributors of Linux like Red Hat, Sony, Novell, Philips and NEC. Together these vendors decided to contribute into a large pool of money with which to buy up patents. Rosenthal was appointed the CEO and controller of this fund, the Open Invention Network. Its function is to lessen the risk of patent threats to Linux by deterring competitors from patent action and encouraging cross-licensing.

One of the OIN’s first acquisitions was the portfolio of failed e-commerce pioneer Commerce One for $15.5 million. These patents covered many aspects of doing business electronically, and thus could be extremely useful in deterring patent infringement injunctions from Linux competitors who engaged in that kind of activity, which was essentially all of them. Rosenthal has spent the last two years shopping for further patents and has amassed around a hundred so far.

One of the questions in my mind every time I read about the OIN is how they cover their costs. Their initial activity of collecting a defensive patent ‘arsenal’ is not revenue generating. Latterly they have begun providing licences to their entire patent portfolio to other companies in exchange for a ‘Patent Commons’-style pledge to foreswear patent litigation against Linux, an activity which is at best cost-neutral. Rosenthal explained that a couple of factors ensured OIN’s continued existence. Firstly, in response to a question from Glyn Moody, he explained that OIN’s overheads are very low. The permanent team consists of himself and an assistant. Where more effort is required, Rosenthal draws upon a ‘Space Cowboys’-style team of sympathetic retired IBM employees as consultants. The other factor is that the initial funding for the project was extremely generous. Rosenthal did not want to appeal for funds from his sponsors year on year, and so insisted on getting the money upfront. While he was not specific about the exact amount, Rosenthal commented that acquisition of the current portfolio had ‘barely dented’ the OIN’s bank balance, and that their running costs were easily covered by the bank interest on their funds.

The Discussion

Reform of the US patent system

Following on from the issue of how OIN is funded, Tim Philips asked Rosenthal if the OIN was concerned with reform of the US patent system as a whole. Rosenthal said that he felt others were taking on that battle adequately, and that the OIN would continue to concern itself with using the current system for defensive purposes. Iain Thompson asked about the Patent Reform Act that is - at the time of writing - awaiting approval by the US Senate. Some background: the Act has two main prongs. Firstly, it replaces the so-called ‘first-to-invent’ doctrine with a ‘first-to-file’ system more akin to the European model. In essence this means that much argument over when an invention actually took place can be avoided. The Act also attempts to deal with the regional variations in the treatment of patent cases which have lead to certain parts of Texas becoming patent litigation boom towns. Rosenthal welcomed the Act and pointed to other recent Supreme Court decisions as evidence that the US patent system is gradually becoming less of a problem. Specifically, the decision in eBay vs MercExchange did damage to what is known as the ‘patent troll’ business model.

To provide some more background: as well as risk from their direct competitors, technology firms also face a risk of injunction from companies whose only function is to amass patents and gather licence payments for them from those who must necessarily implement them. The pejorative designation ‘Trolls’ says a lot about how these companies are generally perceived: the image is derived from the story of the Three Billy Goats Gruff, and the desire of the troll to feed off the innocent goats simply because they want to use that most necessary and obvious of structures, a bridge. In the eBay case mentioned by Rosenthal, the Supreme Court ruled that, although eBay would have to pay MercExchange for their use of the ‘Buy It Now’ concept on their site, lower courts ought to reconsider their current policy of automatically granting injunctions if a patent is found to be valid and infringed. Instead, the Supreme Court decided, the lower court must weigh the extent to which the infringement was doing damage to the patent owner against the damage an injunction would do to the infringer, and as a result consider lesser possibilities like monetary damages before leaping for the button marked ‘injunct’. Implicit in this decision is a recognition that so-called ‘trolls’ are not suffering as much damage through infringement as an actual competitive manufacturer might. The greatest weapon of the ‘troll’ - automatic injunction - is thus made far less reliable to them as a means of extracting compliance. (Some have speculated that the recognition that patent ‘trolling’ was becoming a problem may have come when that ubiquitous tool of the great and the good, the Blackberry, was taken off-line for a while back in late 2005, when patent-owning company NPT injuncted the Blackberry’s inventor Research In Motion.) In his reply Rosenthal also highlighted the Supreme Court ruling in KSR v. Teleflex, where the definition of what was ‘obvious’ (and therefore unpatentable) was expanded. This, it is generally hoped, will have the effect of invalidating a number of obvious current patents and reducing the number of bad patents granted. This in turn ought to further reduce the effectiveness of the ‘patent troll’ business model, as - along with automatic injunction - over-obvious, difficult-to-avoid patents were a powerful weapon in their armoury.

Driving the discussion forward Tim Philips then asked whether - as we do not officially have software patents in Europe - OIN really had any relevance here. Rosenthal responded that it did for two reasons. Firstly, the non-existence of software patents in Europe is something of a myth. While inventors are not free to obtain patents on just any software, there exist ways of drafting an application that can result in what is functionally a software patent. Secondly, businesses who want to trade in America need to consider the US patent system, whether their domestic patent regime permits the protection of software or not. Jonathan Powell of Alfresco then explained why his company had become an OIN licensee. While they had no patents themselves, and no intention to file for them, Alfresco believe that the non-existent licensing costs of open source are an extremely important factor in customer choice. Powell also acknowledged that internal legal concerns had affected the decision, and that it was becoming increasingly difficult to calculate the degree of legal risk that involvement with open source entailed.

Is this just about Microsoft?

Next, Laurent Lachal gave his opinion that the OSS community was becoming less radical, giving the example of the OSI’s accreditation of the CPAL license with its mandatory attribution of creators (often refered to as ‘badgeware’ stipulation). Lachal also commented that the rising interest in exploitation of all forms of intellectual property was not an open source issue - it predominated across all sectors. Philips then asked whether the real problem that OIN was designed to tackle was the existence of Microsoft. Lachal responded that he did not think so, although clearly Microsoft’s existence and policies could be seen as a threat to Linux. The creation of uncertainty and fear around your competitor’s products, Lachal noted, was a feature of the entire software business, not just Microsoft’s strategy against Linux.

Rosenthal then commented that Microsoft’s strategy against Linux and open source in general was indeed a problem. The company had stated earlier this year that various elements of their patent portfolio were infringed by Linux and other pieces of Linux-related free and open source software. They had refused to be specific about which precise patents they believed were infringed by which pieces of software, however. While some might argue that this was standard business practice, Rosenthal said, he disagreed. You could argue that it would be unwise to name the patents because that would lead to a flurry of effort by the free and open source community to gather prior art, perhaps demonstrating that the patent is invalid and allowing a declaratory judgement invalidating it. While this might well happen, Rosenthal argued, a patent that could be invalidated in this way was - at root - worthless anyway. Indeed, Rosenthal added, even software patents that could not be invalidated through arguments of obviousness or prior art were of inderterminate value as the nature of software means that systems could frequently be reimplemented to provide similar functionality while avoiding the area protected by a patent.

The Novell-Microsoft cross-licensing deal

The issue of the controversial Novell-Microsoft cross-licensing deal then came up, with Rosenthal arguing that while he had no special knowledge of the deal’s specifics, he wondered if it in fact had anything to do with Linux. By all accounts, he argued, Microsoft had paid Novell to get the deal, implying that it was less an issue of Linux violating Microsoft patents and more an issue of Microsoft violating Novell’s patents. (A brief description of the deal and its controversial nature can be found in OSS Watch’s GPL v3 - What’s New? document on the final version of the GNU General Public License v3.)

The education sector

At this point Philips asked me what I had to say on the issue. I explained OSS Watch’s role in advising the education sector, and pointed to some of the recent concern within the community over the patent infringment action brought by Virtual Learning Enviroment vendor Blackboard against competitor Desire2Learn. I pointed out that some of the potential benefits of open source release of sector-generated software were being chilled by a sense of unquantified risk surrounding software patents. At this point Glyn Moody asked Rosenthal if OIN would be prepared to defend an educational establishment if it were to be attacked over alleged patent infringement in a Linux-related software release. Understandably Rosenthal was not prepared to say categorically that they would, although he did not rule it out. “You have to pick your battles” he added.

The perspective from business

James Pennington then spoke a little about the challenges that IT presents to small business. His impression was that in the UK small and medium-sized enterprises have enough trouble dealing with IT acquisition and maintenance, and thus have little time to worry about potential additional liabilities.

Mark Taylor then added a perspective from larger business in the UK, saying that to his knowledge at least one big City law firm uses free and open source software internally. There was some doubt among the group as to whether this necessarily indicated that they had read the associated licence, but Taylor assured us that they had. He also said that a large high street chain had recently replaced their entire IT system with an open source solution. In general, Taylor argued, confidence in free and open source was high among larger UK businesses. Laurent Lachal added that potential invalidity was not a problem limited to free and open source software licences, and that business just dealt with these potential imperfections in a pragmatic manner.

Jonathan Powell echoed Mark Taylor’s confidence that free and open source software was being taken seriously within larger business, pointing to the fact that increasingly open source solutions are considered during acquisition cycles, and that three out of the five largest investment banks use his company’s product Alfresco. Rosenthal responded that Linux was very heavily used in the financial industry as a whole because of the ease with which it can be adapted to build bespoke systems.

Patent ‘trolls’ and intellectual property

Into this increasingly rosy picture, Iain Thompson introduced some darker tones. He argued that up to now the number of patent ‘trolls’ has been increasing, and their legal actions becoming more frequent and aggressive. Rosenthal responded by again pointing to the impending Patent Reform Act and the Supreme Court’s apparent wilingness to reframe the way that patent infringement cases are handled by the lower courts. He also pointed to the Peer To Patent Project - in part sponsored by IBM - which aims to increase the extent to which patent applications are exposed to scrutiny by skilled practitioners using online tools.

Lachal then commented that what was needed was not weaker protection but stronger protection for the right intellectual property. He argued that if we are to achieve the oft-stated objective of becoming a ‘knowledge economy’ then the big question in intellectual property management is not ‘who owns this?’ so much as ‘how can we use this to create value?’ Systems for protecting intellectual property must have as a primary goal the facilitation of exchange and combination of ideas to create better outputs with greater value.

Glyn Moody then objected to the repeated use of the term ‘intellectual property’ saying that it was confusing and unhelpful as it lumped together so many disparate elements. The free and open source movement generally rejected software patents, but made full use of copyright and trademarks. Many agreed that this argument - associated strongly with Richard Stallman of the Free Software Foundation - had great merit.

The future of the OIN

Finally, to round off the event, Philips asked Rosenthal what were his predictions for the future of the OIN. The worst case scenario, Rosenthal said, was that they ended up having to sue Microsoft or some other large Linux competitor. However, he did not believe that this scenario would happen. Opponents of Linux would continue to try to scare Linux’s users as that was a fundamental strategy in business, but the patent threat would recede as the patent system became more reasonable and better adapted. “If the problem goes away,” Rosenthal said, “then we go away.”

Conclusions

Overall it was an extremely illuminating day, especially for someone who had never seen an all-marble urinal. The aims of the OIN are laudable and their tactics aptly chosen to suit the current environment. Rosenthal deflects criticisms from those who find any engagement with the patent system odious by repeatedly pointing out that the OIN will cease to be when/if the patent threat to Linux recedes. Having said that, some questions remain in my mind. The OIN is devoted to protecting the Linux-using community as a whole, and has Novell as one of its sponsors. Yet Novell have subsequently entered into a deal with Microsoft that protects only their customers from potential action by Microsoft. Should it ever be necessary for the OIN to take action against Microsoft, Novell will be in the curious position of sponsoring an action against a close business associate. The explanation for this schizophrenic position probably lies in Novell’s pressing need to gain customers, and the fact that they paid into the OIN upfront. Rosenthal commented during the discussion of the Novell-Microsoft deal that he had been told by a senior Novell executive that Novell customers had demanded the deal, citing intellectual property worries as one of the major drags on their deployment of Linux. The increase in sales of SUSE Linux since the announcement of the deal seems to bear this out.

It is difficult to fully accept Rosenthal’s suggestion that the Microsoft-Novell patent cross-licensing deal is unrelated to Linux, given the unconventional way in which the deal is framed - providing protection not to the companies themselves but to their customers. This appears to be a deliberate and effective method of permitting Novell’s SUSE Linux distribution to continue to be distributed under the GPL v2 while also providing some patent indemnity to its recipients that is not available to recipients of other distros.

Although OSS Watch cannot give legal advice we do have more information on software patents.

Further reading

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Related information from OSS Watch: