Showing posts with label OSI. Show all posts
Showing posts with label OSI. Show all posts

Saturday, November 7, 2015

Hypocritical Red Hat hopes to leverage patents to cement its Linux market leadership: Microsoft deal

This commentary on the Microsoft-Red Hat partnership is a back-to-the-roots post for me. This blog started as a Free and Open Source Software Patents blog--hence the FOSS Patents name-- and only because of all the (ultimately not too meritorious, let alone impactful) patent attacks on Android, it effectively became a smartphone patent wars blog (but by then it was too late to rename it without losing traffic).

While I don't mean to endorse everything Dr. Roy Schestowitz has written about Microsoft on his TechRights blog (and certainly not everything he's ever written about me), I agree with him that media reports on the Microsoft-Red Hat deal could have dug deeper, especially into the patent aspects of that deal. I furthermore agree that Red Hat is apparently happy about making it easier for Microsoft to impose a patent tax on Linux and that Red Hat has simply sold out FOSS values. According to TechRights, Red Hat executives tried to dissuade Dr. Schestowitz from his vocal criticism of the deal, but failed.

I've been saying for years that Red Hat is utterly hypocritical when it comes to patents. It has a history of feeding patent trolls and fooling the open source community. There is, to put it mildly, no assurance that all of its related dealings actually comply with the GPL.

Sometimes I like the positions Red Hat takes in its amicus curiae briefs on patent issues, but more than once I got the impression that those filings were written primarily in an effort to create the appearance of defending the FOSS cause in this context. It was just window dressing.

The fact of the matter is that Red Hat seeks to be a major beneficiary of the software patents mess.

Red Hat is large enough by now that it can just make the trolls go away by paying them off, giving them funds and legitimacy to go after other companies, including other open source companies.

Red Hat has also accumulated a certain amount of patents over the years, which puts it into a better position than individual open source developers and smaller companies in this space to retaliate in the event of a strategic attack by a competitor.

Red Hat now wants to tell Linux users that the way to be protected with respect to patents is to use Red Hat Linux. "Reduce your exposure, buy from us." That is a way of seeking to benefit from software patents.

All of this is no surprise when considering that Red Hat has always just been about taking advantage of something. In terms of its product and licensing policies, Apple may be the very opposite of a "free software" company (no matter what it may do with respect to its Swift programming language). But you have to grant them one thing: they're not fooling anybody about their philosophy. They never even tried. They don't "openwash" anything. They don't pretend to be a charity. They want to make money, more than any company before them. But one could not create products more independently and single-handedly than Apple. And all by themselves they have brought about a revolution that the likes of Nokia and Microsoft would never have created.

By contrast, Red Hat's business model is parasitic (though some like to euphemistically describe it as symbiotic). While Red Hat has been a major contributor to Linux, Red Hat became what it is not because of what it did but because of what Linus Torvalds and others had done. And Red Hat is not nearly as honest as Apple. "Not nearly" may even be an understatement.

The question of whether covenants not to sue over patents (which appears to be the structure of the Microsoft-Red Hat deal and would be consistent with a Microsoft Android patent agreement that was filed publicly last year) violate the GPL v2 has not been addressed by a court of law yet. I would actually like to see someone sue Red Hat for breach of the GPL and obtain clarification, but even the Free Software Foundation and its satellite organizations are not as principled as they pretend to be. They never compromise their values per se, but they have their strategic priorities when it comes to where and how forcefully to defend them. It will be interesting to see their reaction to the Microsoft-Red Hat announcement--not in terms of what they say but in terms of what, if anything, they will do. I guess they won't do anything. Why? Red Hat is a donor, Red Hat is a code contributor, the deal offers benefits for "GNU/Linux" as they call it...

I want to give Simon Phipps (with whom I've often disagreed) credit for distinguishing between the positive and not so positive ramifications of this partnership from an open source point of view. The Open Source Initiative is an organization on whose board Simon Phipps serves with, among others, a Red Hat lawyer.

Without the Red Hat connection, Simon Phipps would presumably have criticized Red Hat clearly as opposed to just making it sound like Microsoft should do more. He says Microsoft should relinquish its patent rights because that's how he defines "love" for Linux. However, he doesn't talk about what Red Hat could have done. Red Hat could have challenged any Microsoft patents that allegedly infringe Linux: in court (declaratory judgment actions) and through reexamination requests. That course of action would have done free and open source software a greater service than a deal.

I, too, have a (past) Red Hat connection, but it's none that I would be proud of. Over the decades I've done work for a variety of companies, and Red Hat is the only one I wish I had never worked with. They supported my NoSoftwarePatents campaign in late 2004 and early 2005, probably because they just thought a sponsorship was useful for currying favor with the FOSS community. They were far larger than MySQL AB but contributed a far smaller amount. In terms of commitment relative to company size, MySQL AB was like 100 times more committed to the cause. But the worst part was that shortly before the European Parliament's decisive vote on a software patentability bill, Red Hat tried to keep the legislative proposal alive. The Red Hat lawyer who did so later responded to that, and he never denied the simple truth that he wanted the legislative process to continue.

On this blog I announced, years ago, working relationships with Microsoft and Oracle. Both are a thing of the past. But I would never say that I wasn't proud of them.

The Microsoft I worked with as a consultant was not the Microsoft under Bill Gates that made artificial scarcity of software a strategic objective and got into serious antitrust troubles. I found Microsoft to be no better or worse than the vast majority of companies in this industry. I overestimated the merit of their allegation that Android infringed on many of their patents, but I corrected that assessment more than a year ago based on the results of numerous Android-related patent lawsuits and, after a second-class settlement between Microsoft and Google/Motorola, declared Google the strategic winner. The number one priority of my work for Microsoft was about giving FRAND meaning, a cause I continue to promote (see today's post on Apple v. Ericsson). In that regard, Microsoft was the victim of abusive tactics by Motorola. Sure, that was just Motorola's retaliation for Microsoft's patent assertions against Android, but two wrongs don't make a right (as Microsoft accurately said in the FRAND context).

Oracle has been a longstanding advocate of reasonableness with respect to standard-essential patents, and of open (and ideally free-of-charge) standards. I'm happy to have helped them in that regard, too. As for their Google copyright lawsuit, everyone can see on this blog that I've always taken the same pro-interface-copyright positions. I took them before (going back to a conference in the European Parliament in 2004) and after working against Oracle's acquisition of Sun Microsystems, and before and after doing work for Oracle. I view Google's position on API copyrights as a wholesale attack on the copyright protection of all computer software. Google doesn't call for the abolition of software copyright, but there appears to be no limit to the collateral damage it's willing to inflict to software copyright only to avoid paying Oracle for using Java in Android.

I am now in the most independent position to comment on IP, antitrust and industry policy issues ever. I'll continue to be consistent, just like I'll continue to draw the necessary conclusions from new intelligence (as I did when all those anti-Android patent assertions turned out to have no merit in most cases and negligible merit in the remaining cases). That's why I can just say what I think about the Microsoft-Red Hat deal. I think it's great for Azure, and I like Azure, though my app development company is using it only to a small extent and will use a different cloud service provider for most purposes. The free and open source software community should, however, be opposed to this and shouldn't trust Red Hat with respect to patents. They weren't trustworthy with respect to the European legislative process on software patents; they weren't trustworthy with respect to various settlements with patent trolls; and they aren't trustworthy now in connection with what appears to be a covenant not to sue, which is a license by any other name, with Microsoft, when the alternative would have been to bring a declaratory judgment action that says "Linux does not infringe a single valid Microsoft patent claim and we're now going to prove it."

It's one thing to be a Linux parasite. It's another to be a Trojan horse. And the worst option is to be both at the same time.

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Friday, April 8, 2011

Analysis of new Novell patent deal structure according to OSI statement

Having just read the Open Source Initiative's latest statement on the sale of 882 Novell patents to CPTN Holdings LLC, I see a probability of 90% that the consummation of the transaction is now imminent. There's a deadline on Tuesday, April 12, and most likely the deal will close by then. It seems to me that the regulatory agencies have obtained very significant concessions from Microsoft and EMC, and I can't see what else the antitrust authorities could realistically do to address concerns by competitors and open source organizations.

[Update on Apr 14, 2011] A new SEC filing by Novell shows that the US Department of Justice decided to let the April 12 deadline expire, which means that while the DoJ could theoretically still challenge the transaction, it apparently doesn't have any more objections at this stage. In all likelihood closing is now a mere formality. [/Update]

OSI still declares itself unhappy, but I believe they must realize that competition law has its limits. I doubt that the regulators could have imposed the changes that apparently occcurred to the transaction if they had ever had to defend those in court. To me this looks like a deal that the companies agreed upon in order to avoid further delays, not because of a firm legal obligation.

The Bundeskartellamt (the German Federal Cartel Office) gave the OSI permission to publish its latest submission to the regulators and a "non-expert summary" of how the deal has changed since the original announcement. I previously blogged about that late November announcement, was first to publish the names of the four companies who jointly own CPTN Holdings LLC (Apple, EMC, Microsoft, Oracle), and commented on a statement by EU competition chief Joaquín Almunia, who said the transaction didn't require EU-level notification.

Changes to the deal structure (according to OSI)

The original deal envisioned that CPTN Holdings LLC would become a long-term owner of the 882 patents to be sold under the deal. Now it appears that CPTN Holdings LLC will be dissolved shortly after the transaction. Each of the four owners will

  • be granted a perpetual license to 100% of the acquired patents, and

  • get to own 25% of the acquired patents,

  • but

  • Microsoft will sell its entire 25% allocation right away to Attachmate, i.e., Novell's acquirer, and

  • the parties appear to have promised that EMC's allocation won't include any of 31 patents previously identified by EMC as virtualization-related patents.

The OSI also states that "[a]ll patents will still be subject to all existing licenses, covenants not to sue and similar restrictions." However, I am not sure whether this is any "change". If the license grants made by Novell in the past were already worded in a way that made them survive changes of ownership, then this part is merely declaratory and doesn't signify any modification of existing agreements.

Let me clear up the confusion that may arise from a non-trivial deal structure having changed. Under the deal structure described above, CPTN Holdings LLC will end up like a non-returnable patent bottle, bound to be forgotten, and the lasting net effects will apparently be that

  • Novell sells 882 of its patents, but it will retain hundreds of patents and its new parent company, Attachmate, will own 25% of the 882 patents sold (see further below),

  • Apple, EMC, Microsoft and Oracle will never have to defend themselves against any Novell patents (not just the 882 that are sold but all others as well),

  • Apple buys whichever 25% of those 882 Novell patents,

  • Oracle buys whichever 25% of those 882 Novell patents,

  • EMC buys 25% of those 882 Novell patents, which can also be any of those 882 patents except that 31 patents identified as virtualization-related (the core business of EMC subsidiary VMware) won't be among them,

  • Microsoft's patent portfolio will be the same after all of this as it was before because

  • Attachmate, Novell's new parent company, will own the 25% of those patents that Microsoft could otherwise have received as a result of the dissolution of CPTN Holdings LLC.

The resulting relative growth of the patent portfolios of Apple, EMC and Oracle is fairly limited, given that those companies already own large numbers of patents and file for new ones on a daily basis, so if each of them gets to own approximately 220 more patents, it doesn't make much of a difference.

Competition logic

As I stated in a previous post on this subject, I didn't see any deal-specific theory of harm. I certainly support significant parts of OSI's criticism of software patents and would actually like to see them and their member companies communicate those concerns more effectively to policymakers. But I thought the concerns were generic -- relating in principle to all software patents and to all owners of such patents -- as opposed to particular reasons for which the sale of 882 Novell patents to CPTN Holdings LLC would have had to be blocked by antitrust regulators.

There's a vibrant secondary market for patents, and so far I'm not aware of any antitrust intervention against any such transaction. By the way, just to show how much is going on in terms of patent transfers, Google's $900 million bid for thousands of Nortel patents was made public earlier this week. I haven't blogged about that bidding process yet, but I commented on Google's aggressive pre-auction bid on Twitter (as reported by The Guardian's Technology Blog) and I answered questions I received from the Financial Times, the Los Angeles Times, BBC News, and law.com.

I have done a fair amount of work in connection with competition enforcement, and I believe that no one can blame the regulators for having achieved too little in connection with the Novell deal. Realistically, the regulatory agencies would have had a very hard time defending a blocking decision in court. I, personally, doubt very strongly that they could have won such a case. But there is always some leverage in the ability of a competition authority to delay a transaction by additional reviews and requests for information. There are companies that elect, under those circumstances, to make concessions in order to accelerate the process. The changes on which Attachmate, Apple, EMC, Microsoft and Oracle agreed look like what a regulator would usually consider sufficient remedies. And that's why I guess we're only days away from the closing of the deal, which according to earlier reports is scheduled for next Tuesday (April 12, 2011).

While I don't think there was a legally defensible case against the deal even in its originally contemplated form, it's easy to see that the concessions made by the companies reflect the idea that the acquisition of additional patents in a certain field by a company dominant in that field could, theoretically, raise concerns.

Microsoft was found dominant in certain markets by regulators a while ago. While many (probably most) of Novell's patents relate to markets in which Microsoft isn't dominant, my best guess from the outside is that it would have been too time-consuming to sort out exactly which patents relate to Microsoft's core business and which ones don't, so they apparently accepted not to get to buy any of them at all. A recent SEC filing already indicated such a concession.

EMC's VMware subsidiary is a major force in virtualization. I haven't examined that market, but I guess the regulators believed they could perhaps make a dominance case here, which is why VMware accepted to exclude virtualization-related patents from the deal.

Apple and Oracle are free to buy any of those patents because

  • at this stage it would be very difficult to claim that Apple is dominant in the market for mobile communications devices as a whole (its market share isn't high enough for a simple, straightforward dominance case), and

  • while Oracle may or may not be dominant in the database management systems market at this point, I doubt that any of the patents in question would change Oracle's position in that market in any non-negligible way.

OSI's remaining demands are legal nonsense

In its latest statement, the OSI still makes demands concerning remedies it wants the regulators to impose. I have looked at those and, frankly, those are just a political statement that doesn't make any legal sense whatsoever.

OSI basically claims that even after the changes I outlined above, they still think Novell was a great open source-friendly patent owner and companies like Apple and Oracle, and to some degree even EMC, aren't similarly open source-friendly in OSI's opinion. Therefore, they want commitments that none of those patents will ever be asserted against software published under an OSI-approved license.

There's no way that a regulatory agency anywhere in the free world could put open source software above the law. If you don't want patents to be asserted against open source software, you must abolish software patents altogether (I would love that). But if those patents exist, the use of particular kinds of licenses cannot constitute a carte blanche to infringe patents. Open source must abide by the law, including intellectual property law, and considering how widely adopted open source software has become under the legal framework as it stands, there can be no doubt that open source and software patents cannot only coexist but open source can even thrive despite the existence and enforceability of such patents.

If the OSI had come up with any remedy proposal that would make legal sense, maybe the regulators would have given it some thought and held up the deal. But with demands of the just-wishful-thinking kind, OSI effectively admits that the regulators have done whatever they could, and it's time to move on.

OSI's theories include, among others, the fear that "Oracle [could] take Android down based on legal assertions of Middleware and Virtualization patents [and] would [thereby] significantly weaken [OSI's] efforts in promoting open source to mobile developers." OSI claims Oracle is "dominant" with Java. I think this is just propaganda. I'm sure that Google can work out a deal with Oracle anytime if Google recognizes the rights Oracle asserts and accepts reasonable terms. Android's intellectual property issues are unprecedented, and some of those issues will have very significant impact on the market, but that doesn't mean that companies enforcing their rights in connection with Android are no longer allowed to acquire patents.

Two days ago, the Linux Foundation's Executive Director, Jim Zemlin, said that patent and copyright concerns related to Linux (and Linux-based Android) are just "FUD". I don't agree with Zemlin's unsubstantiated and desperate attempt to brush aside legitimate concerns, and the fact that he feels compelled to make such statements is interesting in and of itself, but by making up unrealistic doomsday theories for Android, the OSI clearly contradicts the LinuxFoundation and exposes itself to accusations of "FUDding" whenever Zemlin gives his next speech.

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Tuesday, January 18, 2011

EU competition chief has no concerns over Novell patent deal

The EU is not going to intervene against the Novell patent deal about which the Open Source Initiative (OSI) and Free Software Foundation Europe (FSFE) recently complained. European Commission vice president and competition commissioner Joaquín Almunia has told a Member of the European Parliament that the sale of 882 Novell patents to CPTN Holdings LLC appears "unlikely" to require an EU-level review, and "the Commission has currently no indication that the mere acquisition of the patents in question by CPTN Holdings would lead to an infringement of EU competition rules."

The EU's competition chief said so in reply to a written question put forward by Emma McClarkin, a British conservative from the East Midlands. The question was submitted on 20 December 2010, subsequently published on the European Parliament's website, and answered yesterday (17 January 2011).

I'll quote and comment:

"Subject: Microsoft and competition rules"
"A constituent has written to me"

British MEPs are always very exact about "constituents" because unlike the MEPs in most other countries, they are elected in certain districts. So in all likelihood, someone from the East Midlands wrote to Emma McClarkin. That email may have been orchestrated by FSFE or OSI, but it may also have been someone's independent initiative based on early media reports on the deal.

"expressing concern about Microsoft recently purchasing a large number of patents from Novell. This move strengthens the hold Microsoft has over its competitors, which could potentially harm consumer choice and increase prices. Is the Commission aware of this situation? If so, does the Commission believe there have been any infractions by Microsoft of EU competition laws?"

This focus on Microsoft shows that the MEP wasn't fully informed when posing the question. The question was dated 20 December 2010. Four days earlier, I published the names of the four companies (Apple, EMC, Microsoft, Oracle) that have formed the CPTN Holdings consortium.

There still seems to be some confusion out there concerning Microsoft's role. When the acquisition of Novel by Attachmate and of those 882 patents by "a Microsoft-organized consortium" became known in November, the other companies weren't disclosed until they appeared on the website of the German competition authority. But the fact that Microsoft "organized" the consortium only means that Microsoft had a key role in bringing the partners together. It does not necessarily mean that Microsoft still leads the consortium following its foundation. All that's known so far is that Microsoft had the role of a midwife. Any assumption that Apple, EMC and Oracle decided to let Microsoft run the organization thereafter is purely speculative, and in my view, unlikely in light of the weight and pride of those partners.

Anyway, here's the vice president's answer:

"E-10547/10EN
Answer given by Mr Almunia
on behalf of the Commission
(17.1.2011)"

"The Commission is aware of the proposed acquisition by CPTN Holdings, a consortium of technology companies which includes Microsoft Corp, of a portfolio of 882 patents from Novell. On the basis of the information currently available at this stage, it appears unlikely that the proposed transaction requires a notification to the Commission under the Merger Regulation."

This means that this is so far from being an EU competition issue that it doesn't even have to be reviewed. Finally:

"Furthermore, in addition to the consideration under the Merger Regulation, the Commission has currently no indication that the mere acquisition of the patents in question by CPTN Holdings would lead to an infringement of EU competition rules."

This means that there's no problem with the sale of patents per se. The use of patents has played and is currently playing a role in some EU competition cases, but companies can sell any of their patents pretty much like they sell products, their office furniture, used company cars, or real estate.

I have seen the positions taken by OSI and FSFE. I couldn't find any real substance in them. Those complaints came down to indicating a dislike for patents and distrust for the companies behind CPTN Holdings. But they didn't raise any legal issues that would be specific to this deal.

My own position is known: I used to run a campaign against a software patent bill. However, politicians don't stop patent offices from granting them. So let's come to terms with it: this is the law of the land. As long as those patents exist, they can be sold.

Finally, if it confuses you why the deal was notified to the German competition authority while the EU (of which Germany is a member) doesn't see a need for notification, that's because the EU is a supranational body and its member states still have their own laws. Those can't be in conflict with EU rules in areas where the EU has harmonized the rules, but there can be some differences in details, such as one country requiring notification of joint ventures of a type that the EU doesn't investigate. In order to coordinate everything efficiently, the European Commission works closely with the member states' competition authorities through the European Competition Network (ECN).

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Friday, October 8, 2010

Google answer to Oracle patent suit possibly wrong on Java history

Earlier this week, Google filed its answer to the patent infringement suit Oracle started in August. At the time, I looked into certain licensing issues, explained why this represents nothing short of a debacle for the Open Invention Network, analyzed a recent Google submission to the US Supreme Court with a view to Google's position on software patents, and last month I criticized the Free Software Foundation's belated reaction for its grossly misleading content and spam tactics.

When I read Google's response, I was unsurprised and underwhelmed. I tweeted this assessment:

#Google response to #Oracle #Java lawsuit over #Android denies and disputes everything. No surprises at all in the document.

When V3.co.uk asked me for comment on Google's defense strategy, I said that Google can obviously afford to deny and dispute everything and stressed that Google "knowingly and willing did what it did", while I didn't see any indication of Oracle having lured Google into a trap. That was my way to comment on one of Google's arguments, the so-called "unclean hands" defense, meaning that Google blamed Oracle/Sun for reproachable behavior.

A short and simple description of Google's defense strategy as a whole is that Google would prefer the suit to be dismissed before it even begins; it tries to have all seven patents declared invalid; if they are valid, Google denies there's an actual infringement; if there's an infringement, Google claims it had the right to use those patents anyway; and if all else fails, then Oracle isn't entitled to anything because it's kind of evil.

David "Lefty" Schlesinger, an open source licensing expert with significant knowledge of patent matters, tweeted his amusement at Google's wholesale denial, which he paraphrased like this:

"Yup, that looks like a patent. Beyond that, we know, much less admit, absolutely nothing."

Again, it's understandable -- and had to be expected -- that Google exercises its rights of defense to the fullest. Others in Google's situation would do the same. But it's unrealistic to assume that Oracle's suit would be dismissed. This case won't go away anytime soon unless Google makes concessions that Oracle regards as a satisfactory outcome. I'm afraid that won't happen quickly, so the two companies will have to fight this out in court. If Google wants to get away unscathed, even a large number of unconvincing arguments won't help. It will need to make some really compelling points, and at least for the time being I don't see those.

I'll keep following those developments, of course. I didn't see any other observers being impressed by Google's defense either. The engadget website published an analysis that accurately points out Google will be in major trouble if only one of Oracle's seven patents is deemed both valid and infringed. I would liken this to a tennis match where your opponent has seven match points at a time. In tennis, the theoretical limit is actually six, and in this legal process, one "killer" argument could theoretically do away with everything, but there's still no reason to assume Google really has one. Therefore, I tend to agree with engadget's prediction that "when all's said and done we'd guess the state of Java on mobile will be very, very different."

Besides a legal defense on all counts and all fronts, Google also raises points in its response that appear to be written for the court of public opinion more so than the court of law. Google talks about how Oracle/Sun never really made good on the promise to open up Java and about what Oracle demanded back in 2007, more than two years before it actually acquired Java as part of Sun.

Open source ethics and expectations aren't a legal concept. Someone's voting record in a standards-setting body isn't tantamount to granting a patent license, especially not a license to patents they get to own only a couple of years later.

My personal opinion is that a filing with a court should respectfully focus on what the court needs to know rather than place a great deal of emphasis on what would more appropriately form part of a position paper to be shown to the open source community.

So far it seems that Google's open-source-specific arguments don't convince this community either. Simon Phipps, a member of the board of the Open Source Initiative (OSI) and the former chief open source executive at Sun, tweeted that paragraph 7 of the "Factual Background" section of Google's filing "also suggests their lawyer is being badly advised" and described it as "not actually factual."

That paragraph 7 mentions the Apache Software Foundation's interest in ensuring compatibility with Sun's Java software. Since Google incorporated some of the code of an Apache project (Harmony) into its Dalvik virtual machine for Android, the Apache-Java connection could be interesting. However, what Google quotes relates to compatibility testing, not patent licensing. At any rate, I am sure that Simon was the Apache Software Foundation's liaison at Sun, so if he (who certainly isn't an Oracle apologist) has a different recollection and/or different assessment of the situation, something may be flawed. Maybe we'll find out more about that some other time. However, like I said before, the legal case will hinge on different issues, particularly on patent validity and patent infringement.

Even if Google ultimately convinced the community that Oracle committed some wrongdoing that's outrageous from an open source perspective (which so far doesn't seem to be the community view, apart from a general dislike for software patents and litigation), they'd be barking up the wrong tree, I guess. Oracle isn't going to be susceptible to community pressure. Oracle is the epitome of toughness in this industry.

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