October 18, 2007

The patent infringement suit: A playbook

Author: Lisa Hoover

Last week's announcement of a patent infringement suit against Red Hat and Novell set in motion speculation about motives, theories, agendas, and behind-the-scenes players. If you've been feeling like you need a scorecard to keep up, then you're in luck.

The players:

Three of the players in this little drama need no introduction. Red Hat and Novell distribute the two market-leading commercial Linux distributions. You may also be familiar with a third company involved -- Microsoft.

The two more unfamilar names are Acacia Technologies Group, a company that is "in the business of acquiring, developing, licensing, and enforcing patents," and IP Innovation, LLC, a subsidiary of Acacia that helps clients "gain insight into the patenting activities of their established and emerging competitors."

The issue:

On October 4, Microsoft CEO Steve Ballmer told a group attending a presentation in London that Red Hat customers are using Microsoft's intellectually property without permission and suggested they should be required to compensate Microsoft accordingly. On October 14, Red Hat denied it was violating any patents and, in fact, insisted, "We are also aware of no patent lawsuit against Linux. Ever. Anywhere."

Meanwhile, on October 9, Acacia Technologies, on behalf of IP Innovation, filed a lawsuit claiming that Red Hat and Novell are infringing on three patents originally filed by Xerox and now owned by IP Innovation. The suit alleges that the Linux-based operating systems distributed by both companies contain user interface components that neither company has permission to use.

Reaction to the chain of events was instantaneous and remains heated.

What the analysts say:

Pamela Jones of Groklaw was among the first to point out Ballmer's apparent clairvoyance with respect to the filing that was timed so close to his speech in London. She suggests that the hand of Microsoft may be reaching out from Redmond to orchestrate some of the events, since Acacia apparently employs a number of Microsoft employees, including Brad Brunell, former general manager of intellectual property licensing at Microsoft, who was named Acacia's senior vice president on October 1.

Why would the Microsoft be involved? The most likely answer is to erode the growing market share of Linux-based operating systems, as consumers grow increasingly frustrated with the challenges and vulnerabilities of Windows products and the inherent limitations of Apple software for the Mac.

Others, however, aren't convinced that Microsoft is manipulating things behind the scenes, or that there are ulterior motives or hidden agendas at work. Richard Turner, a Washington, DC-based attorney with Sughrue Mion and former examiner for the US Patent and Trademark Office, says, "[T]hese suits cannot be prepared overnight. The preparation and research on this one had to be well underway prior to Ballmer's comment." In fact, Turner says there's very little originality to the suit and says it's being so closely watched by the open source community "only because the community is rather anti-patent, or at least anti-software patent."

Turner says, "There are no implications to this suit beyond that of the run of the mill patent suit. Just because a product is open source does not make it immune to inadvertent copying of some else's prior idea. Perhaps this will spur more open source innovators to protect their own ideas using patents."

Turner notes that Red Hat has filed many patent applications of its own and "more than 25 of them have already been published this year alone."

Brian Proffitt, managing editor of LinuxToday.com, doesn't necessarily see a strong connection to Microsoft either. In a post on the Web site last week, he says it's unlikely that Microsoft would sue one of its own partners, and, furthermore, Ballmer clearly said that it is Red Hat customers who are in the wrong, not the company itself. Proffitt comments, however, that he is "honestly not sure which side to come down on. Occam's Razor pushes me over to the simpler this-is-just-a-patent-troll explanation. Our collective experience with Microsoft tends to push me towards the more complicated conspiracy theory."

Indeed, many feel the core issue isn't about two software vendors at all. ZDNet's Dana Blankenhorn suggests that patent laws must be completely overhauled to address the intracacies of patenting something as complex as computer software, "before we're all bound so tightly into law courts that we destroy this nation's ability to innovate at all."

Some fear that this lawsuit is the first of many that the open source community is likely to see in the coming years as Linux-based products continue to gain traction in the software market. Edward J. Naughton, a Boston-based attorney specializing in intellectual property litigation, says that idea isn't really too far-fetched -- and was probably inevitable.

"As many have recognized, open source software has evolved from a hacker's hobby into big business: Red Hat and Novell are among the most well-recognized names in tech, and Linux is in virtually every major corporate data center," says Naughton. "Its commercial success makes open source an attractive target for patent owners.... But there's another thing to keep in mind: given the manner in which it is developed, open source software projects often are not inclined or able to put in place the kinds of patent and IP-related safeguards that proprietary companies do. It shouldn't be surprising, then, that Linux, a massive program with millions of lines of code, might infringe some patents."

What the players say:

Although Red Hat declined to comment, the policy statement on its Web site indicates a marked disdain for software patents and outlines the steps Red Hat is taking to effect patent change and reform. The policy goes on to say that because the company is "forced to live in the world as it is, and that world currently permits software patents," it has "develop(ed) a portfolio of software patents for defensive purposes.... We do so reluctantly because of the perceived inconsistency with our stance against software patents; however, prudence dictates this position."

Bruce Lowry, director of global public relations at Novell, tells Linux.com, "We're assessing this filing now. Obviously, we'll defend our interests, but it's too early at this stage to talk about specifics on this case, including whether there might be a role for a joint approach with Red Hat."

According to a statement released last week, the Linux Foundation practically embraces the suit and hopes it will encourage patent reform. "This case will aid those of us who are advocating the cause of patent reform by demonstrating the wasteful drain that the current process imposes on innovative activities. We are committed to continuing our vigorous support for meaningful amendment of the software patent laws."

Though Acacia has not issued a formal statement, Chairman and CEO Paul Ryan told Internetnews.com the company is simply doing its job. "Acacia and its subsidiaries do not philosophically differentiate any company, but rather seek to consistently and fairly monetize patent rights from those companies which incorporate patented technology."

In the statement, Ryan also insisted that "Microsoft, as they publicly stated, has no involvement with IP Innovation LLC, and Acacia and its subsidiaries are only aligned in the spirit that investment and research which yields patents should be economically rewarded."

What's next?

How is this all likely to play out? "There are a whole bunch of potential outcomes," says Raven Zachary, open source research director for The 451 Group. "The case could get dismissed; prior art could be discovered that proves this case has merit; the judge could find for the plaintiff or the defense; or the companies could settle."

Zachary points out that "these are very general concepts they're suing for and I don't think Linux is the first infringer. In fact, it could just as easily apply to other companies, too. If the case is going to have some potential to harm the Linux operating system, then it certainly has the potential to harm other operating systems as well."

Zachary notes that patent infringement cases of this nature are so common in the business world that they don't often make headlines. "There is an oversensitivity in the open source world though, because [these suits] are so new that there's less of a track record."

Will this suit lead to patent reform? Not necessarily. "Among tech companies, particularly in the software and IT industries, 'patent reform' is often held up as if it were a magical amulet that would ward off all 'patent trolls.'" Naughton says that while there are "serious problems with the current patent system, and there are reforms that would likely make our system work better," this case isn't likely to spur that kind of response from the Congress and the US courts. For that to occur, Naughton says there needs to be an egregious abuse of the current system, which is not the case with Acacia's current suit.

"[T]his does not appear to be a case where an inventor obtained a weak patent because some patent examiner didn't do a thorough review of the prior art, and is now using that patent to extort royalties," says Naughton. "Apple faced this patent just about six months ago and settled quickly, which suggests that the patent has some real substance."

No matter the outcome of the case, Zachary encourages the open source community to remain open-minded to the decisions Red Hat and Novell may make in the face of the a protracted court battle. "Choosing to license technology is not an admission of guilt, it just may be a cheaper solution."

Zachary acknowledges that an out-of-court settlement could have a ripple effect. "If Red Hat makes payments to get this case out of the way, these same plaintiffs would just go to other operating systems and make similar requests." Though that scenario seems unpleasant, future suits are also something that's likely to happen anyway as "patent trolling cases become more manipulative." In light of that, he says Red Hat and Novell need to do what makes the best sense for them as publicly owned companies with shareholders and customers who expect them to stay afloat.

"At the end of the day, it's a business," he says, "and if it's more cost-effective for them to license, then they'll license. Don't pass judgement too quickly -- let's hear their cases first."


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