Wednesday, June 30, 2010

Versata complains against SAP: patent aggressor demands interoperability, requests antitrust intervention

Today I read about a new EU antitrust complaint in which the important issue of interoperability is raised: a US software company named Versata has lodged a complaint with the European Commission, accusing SAP of "withholding information necessary to interoperate" with its enterprise resource planning (ERP) software. Versata would like to make its pricing software named "Pricer" interoperate with SAP's core product R/3.

This antitrust complaint isn't the first clash between the two companies. Previously, Versata sued SAP for the infringement of five patents. According to TheRegister, Versata "sapped" $139 million out of SAP.

The complaint may be legitimate per se

I don't know the details of Versata's antitrust case against SAP, so I can't (at least not now) offer an opinion on whether its antitrust complaint is well-reasoned.

Even in the event the complaint doesn't have merit in a legal sense, I do believe that all significant market players -- including SAP -- should allow others to interoperate with their products. This means making the necessary information available, offering commercially reasonable licensing terms to everyone, and in some cases that may also have to include the unbundling of components (making components that are marketed together available as separate products).

One of Versata's demands is that SAP be required to unbundle its own pricing software from its ERP product. I don't know yet whether that's a reasonable thing to ask for in this case. But I'm convinced that there are indeed many situations in this industry in which an unbundling is indispensable for interoperability.

On the surface it seems that there may be some parallels between Versata's demands and those of French open source startup TurboHercules, which filed a complaint against IBM with the European Commission in March, asking for an unbundling of IBM's z/OS mainframe operating system from the mainframe hardware.

Versata bases its complaint on the underlying logic of the EU's decision in the spectacular Microsoft case. I don't have enough information to be certain that the related reasoning is applicable in that particular case, but it may be at least in part. What I know more about is the situation in the mainframe market. I took an interest in that issue because of IBM's patent aggression against the 11-year-old Hercules open source project. I'm convinced that TurboHercules's complaint against IBM does have very clear and strong parallels with the original Microsoft case.

Versata's patent infringement suit against SAP

I'm still trying to find out more about the patent dispute between Versata and SAP. I don't like any kind of patent aggression. I just make a distinction between different ways in which patents are used and consider strategic patent holders with exclusionary objectives the worst problem, even worse than non-practicing (often also called "non-producing") entities ("trolls").

The information I've obtained so far doesn't make it clear whether Versata would have been willing to grant a license on commercially reasonable terms to SAP. If they made such an offer and only went to court as a last resort, that's one thing. If all they wanted from the beginning was an injunction, then that would make them fall into the worst category of patent holders.

Glyn Moody saw an SAP position paper arguing for software patents and, understandably, expressed hope that losing to companies like Versata might make SAP learn the hard way that software patents are a bad thing on the bottom line.

I understand Glyn's perspective, and I agree on that particular aspect. Yes, if a company advocating software patents gets sued over such patents, the more they end up having to pay, the better, because that may be the only way they could ever change their political position on the subject. That's my feeling concerning any company: it doesn't matter whether it's Microsoft, Oracle, SAP or IBM, or even smaller ones who support the patentability of software.

However, the best outcome of any software patent infringement suit in my view is that the aggressor ends up losing his patents. Once patents are asserted in court, counterclaims aiming to invalidate the patents in question are routinely a part of the defendant's strategy.

Patent busting (taking out individual patents) isn't good enough to solve the problem as a whole. But if there's litigation, the best news is always if the patents are thrown out.

There are different legal reasons for which a patent can be invalidated. The best outcome from the anti-software-patent point of view is invalidation due to subject matter. This means that a software patent gets thrown out just because it's software (no matter how "good" the patent is in all other respects). Unfortunately, that doesn't happen too often anymore. It hasn't happened in the US in decades (this week's Bilski ruling certainly couldn't be used as a basis to invalidate even one existing US software patent), and European courts increasingly also uphold software patents.

If a court doesn't object to software being patentable, there are still other reasons for invalidation. The most important ones of those are "non-novelty", meaning that by the time the patent application was filed, someone else had already invented the same thing ("prior art") and either published it or filed for a patent, and "lack of inventive step", meaning that the prior art that is presented to the court isn't exactly the same but the difference between the prior art and the new patent application isn't sufficient to justify a (new) patent. That kind of invalidation doesn't address the problem of software patents per se, but it's still much better than no invalidation at all.

Defensive use of patents

There are only two exceptions in terms of scenarios in which I would keep my fingers crossed that a patent does not get invalidated. Both relate to the defensive use of patents. If a company makes all of its patents available to all other defensive parties, such as through the upcoming Defensive Patent License (DPL), then I want it to succeed with lawsuits against companies who don't commit to the same defensive terms because this could over time create a strong incentive for others to join the defensive alliance. Also, if a company gets sued over patent infringement and then countersues, I'd like the aggressor to regret his original action.

In Versata's case, there's no indication that it has a purely defensive patent strategy. That's why I'm torn now when looking at its action against SAP. But I'll watch the case with interest, and even though Versata is not a FOSS company, interoperability is an issue of tremendous importance to FOSS.

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Tuesday, June 29, 2010

Who lost Bilski vs. Kappos besides Bilski & Warsaw? Ten answers

Yesterday's Supreme Court ruling in re Bilski was unfortunately a clear victory for those favoring an expansive patent system and the patent inflation it entails. The two "inventors", Bernard L. Bilski and Rand Warsaw, saw their patent application thrown out, and that makes them the losers of the court proceeding, but few people will care about them now. Steven Vaughan-Nichols accurately wrote that Bilski loses, but the patent madness continues.

There are many losers of this outcome, and here's my top ten (besides Bilski and Warsaw -- may they live long and prosper without the patent they applied for):
  1. The free software and open source communities
  2. Software patent abolitionists
  3. Small and medium-sized companies who can't or don't want to play the patent game
  4. The proponents of bogus treatments: Linux Foundation, Open Invention Network etc.
  5. The Patent Absurdity movie
  6. Red Hat
  7. Google's foray into new markets (Android, WebM)
  8. (Marc Benioff)
  9. The "captive court" theory
  10. IBM's open source credibility
Let's go over them one by one.

1. The free software and open source communities

The notion of Free Software is fundamentally incompatible with software patents. CiarĂ¡n O'Riordan, the director of the campaign, made a statement at a European Commission hearing four years ago where he accurately said that software patents and free software don't mix whether you cut the price of a patent in half or double it.

But the other part of FOSS, the open source community, is equally affected. While it doesn't emphasize the concept of freedom as much as Richard Stallman and his followers, I know many open source advocates who are no less opposed to software patents than RMS is.

I venture to guess that the Bilski ruling will represent an obstacle to GPLv3 adoption. I wish the whole world could accept the patent clause in GPLv3, which is meant to counter patent licensing deals by FOSS companies and other entities, but under the circumstances it will be very hard to convince businesses and other contributors to FOSS development that this our-way-or-the-highway approach works in the world we (currently) live in.

I am forced to say this to my dismay. I know that some may try to hold this against me but I spell it out like it is.

2. Software patent abolitionists

As the founder and former director of the NoSoftwarePatents campaign, I'm part of this movement. This isn't a concession speech on behalf of the cause. But we are at a juncture where we have to face the recent lack of progress in the political arena as well as in courts. No one is ever beaten unless he gives up the fight -- but if a certain approach doesn't work over an extended period of time and on different continents, then it may be time for a better mousetrap, ideally one that can pave the way toward abolition further down the road.

The majority of the justices took a clear pro-patent position. A minority of the court -- which is also among the losers, especially Justice Stevens -- supported certain pieces of well-reasoned criticism of the institutionalized excess of the patent system.

The SCOTUS determined that courts will have to support software and business method patents unless lawmakers intervene. However, the massive support that big industry lends the system and the parameters that globalization brings with it favor the other camp.

Pieter Hintjens, a former president of the FFII, once predicted that the abolitionists of software patents (if not all patents) would succeed more quickly than the opponents of nuclear energy. The anti-nuclear movement has achieved something. It took that movement decades to score a few partial victories, but then they didn't have BlackBerries, Wikis, Twitter and Facebook to organize themselves in the beginning. The problem with abolishing software patents is that it's almost binary: you either do away with very large parts of the entire patent system (which may be the right thing to do, but it's quite a challenge) or you have to content yourself with minimal restrictions. That's tough.

3. Small and medium-sized companies who can't or don't want to play the patent game

While big industry is united behind the patent system, not just in the IT industry but beyond, small and medium-sized enterprises (SMEs) are different.

Most patent trolls are SMEs, and they obviously cheer the Bilski decision. There are also some companies who are indeed practicing entities but their products or services are very limited. Think of someone selling a copy protection mechanism on which he has a patent or two: he likely won't need anyone else's patents to build his product, so the system works for him.

The SMEs who suffer are those who build larger programs. In a few hundred thousand lines of program code, any single line could theoretically infringe someone's software patent. Practically, you could probably find thousands of patents that might read on such a program. If you don't have the legal department and other resources to fend off infringement claims, and if you just don't have enough patents yourself to cross-license with large players on attractive terms (ideally without money changing hands), then the Bilski ruling has just made it even harder for you to innovate.

In light of that, I think SMEs -- like the FOSS ecosystem, which includes many SMEs -- should increasingly make the distinction between more and less harmful ways in which others use their software patents. I wrote about that recently. Trolls are a problem, but strategic holders with an exclusionary agenda are even worse.

4. The proponents of bogus treatments: Linux Foundation, Open Invention Network etc.

I have been vehemently opposing for a long time any attempts to lull the FOSS community (and others, especially political decision-makers) into a false sense of security concerning the risk that software patents represent.

I criticized IBM's "pledge" of 500 patents back in January 2005, on the very day it was announced. Five years later, I published evidence for IBM's betrayal of the pledge.

In a November 2005 slashdot op-ed, I explained why patent "pledges" and "pools" are fundamentally flawed approaches. That was the day on which the Linux Foundation (then named OSDL) started its Patent Commons, which I guess has never helped any FOSS developer the slightest because programmers don't look up a list of "pledged" patents when they go about their work. They want to go ahead and write code and deal with patents subsequently.

In recent weeks, I have discussed the Open Invention Network (OIN). I described it in this "OIN demystified" posting. Last week I discussed its less than informative press release on its new Associate Member program. But I actually wish the OIN could do a better job and give itself a trustworthy legal structure. That's why I suggested four alternative ways to address the biggest problem I have with the OIN, which is its ever-changing and arbitrary scope of licensing.

After the disappointing Bilski ruling, I encourage everyone else in the community to ask yourselves three questions:
  1. Haven't all those smokescreens been a major distraction from the planning and pursuit of better initatives? That wasn't only my concern. Richard Stallman and Bruce Perens also made such statements back in 2005.

  2. How can the existing initiatives be improved? For the OIN, I tossed out suggestions, and I'll think more about this.

  3. Do new initiatives such as the Defensive Patent License (DPL), possibly coupled with active patenting by the community, have new elements to offer that can make a major difference?

5. The Patent Absurdity movie

Two months ago I criticized the Patent Absurdity movie for several reasons.

Obviously, Patent Absurdity wasn't meant to be a pleading for the SCOTUS to consider, although some hoped it could indirectly influence the outcome. But given that the decision didn't even mention software patents directly (although it is a very strong indirect endorsement of them), the movie's close connection with the Bilski case makes it even less useful.

The idea was a good one. It needs a better implementation. One of the technology policy movies that I really like is Epic 2014. Video can be quite powerful, and I hope that a successor to Patent Absurdity will make a more compelling case and will be less interview-centric, especially since at least a couple of the persons interviewed aren't perfectly credible opponents of software patents in my view.

6. Red Hat

Unlike Novell (which has a licensing deal with Microsoft in place) and Canonical (which became the first GNU/Linux distributor to sign a deal with MPEG LA), Red Hat has so far refused patent licensing as "a tax on innovation". Red Hat's CEO Jim Whitehurst recently blasted software patents, but he may have to bite the bullet.

Red Hat has also contributed to the mess. Red Hat's own patent promise is weak, and many in the community know it. The DPL may be an opportunity for Red Hat to prove it's truly defensive. What's far worse is that Red Hat partners, commercially and politically, with IBM and other proponents of software patents on different initiatives -- pretty much all of the ones I mentioned on my list of bogus treatments (section 4 of this posting). A lot of that was driven by a former Red Hat lawyer who has meanwhile left. He even lobbied alongside some pro-patent companies to keep the EU software patent directive alive when we had already defeated it in July 2005.

It would be best if Red Hat could clearly dissociate itself from activities that contribute to the mess or help sustain it. Red Hat should act in accordance with the recent declarations of its CEO, which are so far only lip service.

It would be unfair to call Red Hat's business model -- they are the largest Linux company but only contribute about 10% of Linux development -- purely "parasitic", but describing it as "symbiotic" is a euphemism. At any rate, Red Hat may have to invest more in innovation and take out more patents, not only in absolute terms but also relative to sales.

7. Google's foray into new markets (Android, WebM)

Like many other patent holders, Google wants to have its cake and eat it: they love their own patents (especially in the search engine business) and don't like everybody else's. That's not realistic, and I think Google may increasingly realize it. Google should have been opposing all software patents for a long time, instead of telling others in the industry how important their search engine patents are for their core business and how proud they are of those.

What I really appreciated was a statement by Google's chief lawyer, David Drummond, that Google considers the use of patents against open source a bad idea and won't ever do it (quoted in this blog posting).

I'd also love to see a patent-unencumbered codec. However, WebM does raise the legitimate questions of patent clearance and indemnification -- especially after Bilski. But if there aren't satisfactory answers, then I tend to believe that MPEG LA isn't the biggest patent-related problem of all the ones that open source faces. Its licensing terms don't appear outrageous.

Android also faces patent issues. The Bilski ruling doesn't support HTC and other vendors of Android-based phones in their dealings with Apple.

Google's exclusionary use of patents in its core business (search engines) and its aforementioned support for the patent system may now come back to haunt Google as it forays into new markets in which the incumbents have already set up major patent thickets. I wouldn't be surprised to see Google rethink its stance on the desirability of patents in the coming years. In fact, I hope so.

8. (Marc Benioff)

Some may call founder and CEO Marc Benioff a "bigmouth" but he certainly does have guts. Instead of doing a licensing deal with Microsoft (which many others such as previously did), he decided to stand up and fight. The NoSoftwarePatents movement would love him to prevail in court.

But if he reads the Bilski ruling, he should pay particular attention to the court's reference to "technologies for conducting a business more efficiently". That's exactly the category of patents -- software-implemented business methods -- that represents the greatest threat to The Bilski patent application per se wasn't such a patent. The SCOTUS opinion, however, makes it clear that software-implemented business methods should be patentable in general.

9. The "captive court" theory

In the current debate over EU patent reform but also in other contexts, the "captive court" theory -- which came up in a SCOTUS ruling years ago -- was the most important element of the criticism that our movement voiced. I also mentioned it on multiple occasions, such as in my recent presentation at LinuxTag.

The theory is that courts that are patent-focused are essentially part of the patent system and more likely to favor the interests of patent holders as well as a broad scope of patentable subject matter, including software patents. The assumption is that people whose own career and influence is very much linked to the strength of the patent system are more favorable to such concepts as software patents. Even if it's not a matter of grabbing more power (to many of those people it probably isn't), everyone believes in the good that his profession can do and that's a kind of bias.

I still think the concern isn't wrong, but what can no longer be claimed now is that independent courts are willing to abolish software patents. Recently the German Bundesgerichtshof (Federal Court of Justice) declared software patents perfectly legal, in a ruling on an XML/HTML document generator. The BGH is the German equivalent of the SCOTUS, and the ruling is more specifically focused on software patents but has a Bilski-like overall effect.

10. IBM's open source credibility

They say that the first victim of war is the truth, and sometimes that's also the case in legal disputes. In this case, I don't think the truth is top of the list but there was one incident in the process that was really outrageous: IBM claimed that software patents liberated programmers and fueled the explosive growth of open source software development. That claim is unfathomable and insulting to the FOSS movement.

That amicus curiae brief was filed last year and previously written about by Glyn Moody, slashdot, and the software patent wiki.

On the occasion of the Bilski decision I felt it was necessary to remind people of it (and to inform those who weren't previously aware). IBM has a big credibility problem because it tries to have its cake and eat it: one the one hand, IBM claims to support open source and open standards, and on the other hand, IBM is the world's largest patent bully.

I don't deny that IBM has made important and useful contributions to open source (even to free software, although that is not IBM's ideology). However, if push comes to shove, its patents are dearer to IBM's heart than FOSS. IBM is also the primary sponsor of the bogus treatment schemes I listed in section 4. Through donations to various organizations such as the Linux Foundation, IBM has systematically silenced many critics of software patents (even Linus Torvalds welcomed one of IBM's bogus treatments for patents, which was very disappointing because he is genuinely against software patents).

As long as IBM doesn't decide on a fundamental departure from its patent-mongering ways, it will be an open hypocrite as opposed to a sincere open source advocate. The Bilski situation is another example of the credibility problem that IBM has more than any other company in the IT industry. It's high time it did something about it.

If you'd like to be updated on patent issues affecting free software and open source, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents.

Monday, June 28, 2010

Bilski decision a major disappointment: doesn't invalidate even one software patent

The Supreme Court of the United States (SCOTUS) has finally handed down its opinion in re Bilski, a business method patent case. The patent application in question relates to a method for managing certain risks related to price changes in the energy market.

Like many other critics of the patentability of software, I hoped that the Supreme Court would not only uphold the decision of the previous instance (the US Court of Appeals for the Federal Circuit), which had declared the claimed "invention" ineligible for patentability: that was widely expected. This case would also have been a splendid opportunity for the Supreme Court to draw a line and establish a reasonably restrictive set of rules that would either do away with many business method patents or, ideally, go even further and up the ante for software patent applications.

Unfortunately, the Supreme Court delivered an opinion that doesn't help the cause of partial or complete abolition of software patents at all. Within the range of possible ways in which the Supreme Court could justify its decision to affirm the rejection of the relevant patent application, the court's majority position is about the most liberal reasoning that it could have been. Only a decision to grant a patent on the Bilski application could have been any less restrictive.

Simply put, the Supreme Court's decision does not do away with even one software patent that already exists, nor does it raise the bar for the future.

The Supreme Court decided that the business method in question wasn't patentable because it was an abstract idea but simultaneously stressed that business methods can indeed be patentable. The court cited a long-standing principle in US patent law according to which "ingenuity should receive a liberal encouragement". In case of doubt, the scope of patentable subject matter should always be broad rather than narrow. In today's technology landscape, that approach means software patents without any meaningful limitations. Plain and simple.

Only new legislation could restrict the scope of patentable subject matter beyond the Supreme Court's permissive stance. The ruling makes reference to an earlier decision, according to which the courts "should not read into the patent laws limitations and conditions which the legislature has not expressed."

But restrictive legislation is a long shot to say the least. In the Bilski case, major corporations particularly from the IT industry issued warnings against any limitations of the scope of patentable subject matter. IBM even made the absurd claim that software patents liberated programmers and made open source development so very popular. Against that kind of support from industry, it is hard to see how the opponents of software patents could successfully lobby the United States Congress.

The Supreme Court's decision does leave it to the appeals court to develop new legal tests that could make certain claimed inventions patent-ineligible. However, the Supreme Court opposes the notion that the traditional machine-or-transformation test could serve as the sole test of patent-eligibility of processes. Since the Supreme Court also made it clear that even business methods should be patentable in principle, it's hard to imagine that the appeals court would now develop any seriously restrictive case law.

Like I wrote further above, the Bilski case would have been an opportunity to affect at least in part the patentability of software in the United States. The decision announced today makes it clear that a majority of the Supreme Court wanted to give the abolition of even only a small percentage of all software patents the widest berth possible.

The petitioners in the Bilski case lost because their application won't result in the grant of a patent. But the free software and open source movements lost something even more important: a rare chance to achieve at least a partial victory.

This US decision is even more disappointing when taking into account the global trend. New Zealand's parliament was temporarily inclined to abolish software patents, but a trend reversal was brought about by IT industry giants lobbying the legislature. The German equivalent of the Bilski case, a decision on an XML/HTML document generator, also ended in a resounding victory for the pro-patent camp.

The anti-software-patent movement has clearly had a bad year, and it hasn't made any noticeable progress in a number of years. I know a lot of people in this community don't like the notion. Nor do I. But we must face the facts.

The position that software patents should be abolished isn't nearly as popular among judges and politicians as it is in the free and open source software community.

In recognition of that fact, it's time to think of new approaches. Let us be open-minded about strategies that could have a certain positive effect under the circumstances, such as the upcoming Defensive Patent License (DPL).

[Update] I have put together a list of the top ten losers of the Bilski case (besides the petitioners Bilski & Warsaw) [/Update]

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IBM's Bilski brief spits in the face of the free software and open source movements

Later today, the Supreme Court of the United States (SCOTUS) will most probably publish its long-awaited opinion in re Bilski, a decision that appears to relate to a business method patent but could also become the first landmark SCOTUS ruling on software patents in a long time.

A fellow activist recently pointed me to an outrageous document: In an effort to dissuade the SCOTUS from imposing restrictions on software patentability, IBM tells the court the blatant lie that software patents have made open source popular.

Even worse, IBM describes software patents as a liberating factor, making mockery of the whole software freedom movement founded and spearheaded by Richard Stallman. RMS has always opposed software patents. He travels the world to fight them (a speech he gave at a demonstration in Munich last year is on YouTube: part 1, part 2). But IBM shamelessly claims that it took software patents to liberate software developers and make Stallman's idea fly.

In a footnote on page 25 of its amicus curiae brief (submission to the court) in the Bilski case, IBM makes the following claim that is not only the exact opposite of the truth but also shows the ruthless and cynical enemy of open source that IBM is in the patent context:
"Patent protection has promoted the free sharing of source code on a patentee’s terms---which has fueled the explosive growth of open source software development."
I read this again and again, and I find it nothing short of appalling. This is absolutely in contradiction to the GPL, the Apache Software License and the spirit and the letter of other FOSS licenses.

The worst lie ever in the software patent debate

The absurd assertion that patents -- the most fundamental threat to software freedom -- promote "the free sharing of source code" and therefore open-source development is the most preposterous argument in favor of software patents that I've ever heard. And I've heard many, including many stupid ones, in countless debates in which I participated over the years. But this one is in a class of its own, in a negative sense.

Let me speak from my experience as a participant in so many public debates on software patents as well as private conversations with politicians and their advisers.

Those who advocate software patents will say a lot of things that are factually wrong just to get their way. During the legislative process concerning the EU software patent directive, the strategy of the pro-patent camp was to flatly deny that the law was about software patents. They claimed they just needed the law to make computer-controlled devices such as automatic transmission systems or new generations of washing machines work. The NoSoftwarePatents campaign, which I founded and managed until 2005, called this "the mother of all lies."

Another lie was to claim that the proposal would have restricted the European Patent Office in its practice of granting software patents. OpenForum Europe, a lobby organization whose biggest and most influential member is IBM, was among those spreading that message, falsely claiming to represent the open source community.

Many debates never got to the point of whether or not software should be patentable because it took so long to dismantle those lies about the legal meaning of the proposal that there usually wasn't any time left for the fundamental question of what's best to incentivize innovation.

The lesser evil: denying negative impact

When we had the chance to discuss the heart of the issue, we also saw many claims that FOSS could prosper under a software patent regime. Those claims were meant to alleviate concerns of FOSS-friendly politicians, almost all of whom opposed software patents. As part of that political strategy, IBM made its original "open source patent pledge" in January 2005. They wanted to lull politicians as well as the FOSS community into a false sense of security. This was in their interest with a view to the European process, so the timing wasn't a coincidence. Of course, their interests concerning the open source community go beyond Europe.

This ZDNet article, published on the day of the announcement of the pledge, quotes me as calling IBM's 500-patent pledge an act of hypocrisy because they were actively lobbying for software patents in Europe. I was fighting their lawyers and lobbyists all the time, and I told the ZDNet reporter who then called up politicians to double-check.

Mark MacGann, then the chief executive and lobbyist of a big IT industry association (with IBM among its members), is quoted in that article with his spin, calling IBM's pledge "a strong example of the compatibility of computer-implemented invention (CII) patents with the OSS development model." I haven't talked to him in several years, but next time I see him, I'll ask him what he thinks of IBM's betrayal of the pledge.

Still, it's the lesser evil if someone just denies that there's a negative impact and grossly overstates the benefit of pledges. What IBM does in its Bilski brief is much worse: IBM attributes the rise of free and open source software to the liberating effect of software patents, which is not just wrong but turns the facts upside down.

Right or wrong, it serves their purposes. I can only hope that the judges figured it out.

IBM probably tells the same story around the globe

IBM recently also lobbied for software patents in New Zealand, where the abolition of software patents was a political possibility but it seems that a trend reversal has occurred, with IBM and Microsoft advocating software patents. I don't know what exactly they said. New Zealand is antipodal to where I live, and I don't have any contacts there. Presumably, IBM will have made pretty much the same points as in its Bilski brief.

I don't deny companies their right to push for software patents, just like I have the right to oppose them. That's democracy, but there's a right way and a wrong way to make the case. Mockery of freedom is simply unacceptable.

I don't know how IBM discusses software freedom internally. I guess it's similar to the attitude of CNN reporter Rick Sanchez:
"What, what the hell does that mean, freedom? The biggest tent is freedom? Freedom?! I mean you gotta do better than that."
Whatever freedom may mean, Messrs. Sanchez and Sutor, software patents aren't part of it.

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Saturday, June 26, 2010

The OIN's Linux System: the only constant is arbitrary change

The Open Invention Network (OIN), on which I already commented last month, reared its head again on Tuesday with the announcement of its Associate Member program.

The secretive style of the announcement added to my uneasiness over that organization, which claims to protect Linux from patent attacks but still, five years after its inception, hasn't produced any evidence for its suitability to the stated task. Actually, I see strong indications to the contrary (the situation surrounding HTC is an example).

In this posting I would like to elaborate on one major issue I have with the OIN's patent license agreement: its arbitrary scope of protection. I already explained that in my first posting on the OIN but I can see that the OIN still attempts to confuse and mislead journalists researching the issue, and their readers. ZDNet blogger Dana Blankenhorn interviewed the OIN's chief executive Keith Bergelt and wrote:
[...] Bergelt said the group’s definition of the Linux System is clearly listed on the group’s Web site [...]
This is a textbook example of trying to mislead people by saying something nobody called into question instead of addressing the actual issue, which is a very serious one for anyone dealing or planning to deal with the OIN on the basis of its patent license.

Let me explain the issue in this posting in greater detail, starting with why the OIN's definition of "the Linux System" is so very important, then explaining the things that could go wrong with this, and finally outlining ways for the OIN to address the problem at least in part.

The OIN Patent License Agreement isn't a general-purpose peace treaty for patents

I will use an analogy. Let's assume we both have patents. I have some patents on an air conditioning system and you have some patents on an underfloor heating. We could cross-license our patent portfolios on a general-purpose basis, the effect of which would be that I can't sue you if you use my patented air conditioning methods in any room of any house you own or rent, and in exchange for that you can't sue me for using your patented underfloor heating methods in any room of any house I own or rent.

In that scenario we'd have a total non-aggression pact in place as far as patents are concerned. It would be a peace treaty signed by you and me.

If we wanted to do the same kind of deal not just amongst ourselves but with as many likeminded people as possible, we could both join the Defensive Patent License (DPL) in the future (its authors are still working on it but it should be available soon). The DPL is a cross-license between all who join the club by declaring themselves in acceptance of the DPL's terms. But there will be no restriction on how to use one's patents against non-members, creating an opportunity for making money and simultaneously fighting patents with what I call the "Fair Troll" concept.

Unfortunately, the OIN Patent License Agreement isn't such an all-purpose peace treaty. The OIN Patent License Agreement is a purpose-specific license, which is stated clearly on its About page is:
"Patents owned by Open Invention Network are available royalty-free to any company, institution or individual that agrees not to assert its patents against the Linux System."
In other words, if you become an OIN licensee, you make your own patents available on those terms and get everyone else's on the same terms, but you can still use your patents against fellow OIN licensees (or they can use theirs against you) if the patents are used for a purpose outside the scope of "the Linux System."

In the analogy I used, this means for the deal between you and me that we let each other use the relevant patents only in particular rooms of particular types of buildings. For an example, we could agree that those rooms must have a size of no more than 25 square meters, and they must be in a ten-story or higher building. If you use my patented air conditioning system anywhere in a five-story building, I can sue you because you'd be operating ouside the boundaries of our purpose-specific deal. If you use it in a qualifying building but in a room that's 26 square meters big, I can sue you because that's one more square meter than we agreed. And vice versa for my use of your patented underfloor heating system.

The problem: they can pull the rug out from under you -- whenever they want

It gets worse. Far worse. The example I just gave with the patent license that's tied to particular types of rooms in particular types of buildings would be limited, but at least it would be fair and reliable within its specified scope.

What makes the OIN so unfair und unreliable is that the scope of protection (meaning where you may infringe the patents you license) isn't based on any objective criteria. It's just called "the Linux System". That doesn't mean "GNU/Linux and every other open source software that runs on top of it", even if many of us would like to understand it that way. It doesn't work that way under the law. In the Definitions section of the OIN Patent License Agreement, the "Linux System" is described in the following way:
“Linux System” shall, at any time, have the meaning set forth, at that time, on
That definition is absolutely outrageous. Let me explain it with the analogy I provided:

This would be like if you and I did a purpose-specific deal (the deal where the patents can only be used in certain rooms in certain types of buildings), but only one of us would have the right to define what the license relates to and could change that anytime. If I'm the privileged one, then I can change any moment, as often as I want and in whichever way I want, the scope. If we agreed initially on use in ten-story or higher buildings, I could simply change it to twenty-story buildings. If you originally trusted me and moved into a twelve-story building, you were safe under the agreement at the time we concluded it, but now I changed it against your will and can sue you all I want. And by pure coincidence I would live in a twenty-story building so you can't...

Unfair to a despicable extent

To someone who understands what reasonable license agreements look like, this shows that the people who conceptualized the OIN had nothing good in mind. They designed a mechanism that is unfair to a despicable extent. They built in a backdoor so they would be able to use the OIN for future purposes that could even harm developers, distributors and users of Linux and other open source software.

The ones who have the prerogative to redefine the "Linux System" are the six companies who effectively own the OIN (IBM, Philips, Sony, NEC, Red Hat, Novell). I don't know whether they have to reach a unanimous agreement among the six to make changes to that definition. Maybe a majority is sufficient. Maybe IBM contributed most of the money and can change it singlehandedly. Who knows. They don't tell.

The current version of the list of program files that constitute the "Linux System" is available on this webpage. For each file, they also specify a program version. For an example, by the time I'm writing this, the version of PostgreSQL that's part of the list is version 8.1.0 (by the time you read this, this may already have changed). If you infringe any OIN patent with any other version of PostgreSQL than the one on the list, you're at risk.

They don't even have an obligation to notify you. It's your responsibility to reload that list all the time and see if anything has changed, or else you're at risk.

This means that PostgreSQL's developers, when adding new features, don't even know if they will face patent problems with the OIN when finished. Again, PostgreSQL is just an example. There are many other projects that face the same problem.

Example of a refusal to add a new version of a Linux-based program to the list

Now let's assume a scenario in which this could be a really serious issue. Let's assume PostgreSQL adds some functionality to its version 9.0.0 that IBM doesn't like because its own DB2 database could then face strong competition from PostgreSQL, much stronger than today. And let's also assume that IBM has patents that it can use against software providing that functionality.

IBM could then use its influence over the OIN to ensure that the definition of the "Linux System" won't be updated with respect to PostgreSQL. They could ask for PostgreSQL to be removed completely from the list, or they could make sure that it only stays on the list in an older version that doesn't have the features in question. In that scenario, even an OIN licensee could be sued by IBM over the use or distribution of PostgreSQL.

I'm sure you understand that this gives enormous strategic leverage to the six companies that own the OIN: they will try to boost their products (and those of their strategic allies) by always adding the latest version to the OIN's definition of the "Linux System". But they can shut out software that's key to their competitors, even if a common sense understanding of "Linux System" would include it.

It's easy to see why IBM wouldn't want the list to include the Hercules open source mainframe emulator. Its patent pledge shows that it likes to redefine its commitments. But if Red Hat and Novell determined that some OIN patents might hurt a competitor of theirs like Mandriva, they could also use the OIN for that purpose.

The OIN's definition of the "Linux System" changes all the time. Since it's version-specific, that's inevitable until they adopt a fair, reasonable, non-discriminatory, reliable and transparent approach instead of the current scheme.

What the OIN could/should do in order to address the problem I described

I'm constructive and I want to outline different ways in which the OIN could address the problem. Those different ideas have varying degrees of effectiveness, but any one of them would be way preferable over the current status quo, which is not just unacceptable but also an insult to human intelligence.

1. The ideal solution: OIN on DPL basis

The OIN should take a serious look at the Defensive Patent License (DPL) whenever it becomes available (likely to happen soon). Provided that the DPL meets expectations (and I'm optimistic but of course we all need to see), the OIN should drop its own unfair license in favor of the DPL, meaning that the OIN, which holds a number of patents it acquired, and its six backers should join the DPL.

This way the license would be an all-purpose patent peace treaty for all who want to be peaceful. It would solve the problem for the "Linux System" and way beyond, even beyond the realm of free and open source software.

2. The second-best solution: define the scope once and for all as "all existing and future FOSS"

If the OIN's backers don't want to adopt the DPL because they have hostile intentions, they should at least give peace of mind to the whole FOSS world. They should define the scope of the agreement as "all software available now or in the future under an OSI-approved or FSF-approved license" (the approval could be tied to a date that would be updated from time to time, such as licenses approved as of June 1, 2010).

Dual licensing (same software also available on a non-FOSS licenses) is acceptable to Richard Stallman and should also be supported. For the commercialization of proprietary (non-FOSS) licenses to programs that are available as FOSS, I would propose fair, reasonable and non-discriminatory licensing of OIN patents (royalty-free would be better, but I understand if a distinction is made between closed and open source, favoring the latter).

3. The third-best solution: define the scope once and for all in a GNU/Linux-specific way

Similar to proposal 2, but this way they could exclude any other operating system than GNU/Linux if they wanted to. The definition would include "existing and future versions of GNU/Linux and existing and future versions of (existing and future) GNU/Linux-based free and open source software." This would mean they could still use patents against closed-source software and also against free and open source software that runs on a system competing with GNU/Linux.

Like the two options outlined before, this approach wouldn't require any list of program files.

4. Better-than-nothing approach: a changing list but based on a transparent decision-making process and objective criteria

If the OIN's backers want to keep things complicated and aren't prepared to make a true commitment to peace on the patent front, they should at the very least abandon the concept of arbitrary changes to the list.

They should modify the definition in the OIN Patent License Agreement in several ways at the same time. Obviously it would depend on the exact wording whether any of this is actually helpful, but let me just outline examples of what they could do if they wanted to show good faith:
  • Software commonly shipped with major Linux distributions should be included on a mandatory basis.

  • Whenever a program gets added, not only all past and current versions but also all versions released into the public domain until three years (a reasonable cycle for a major upgrade) after the decision to remove the program from the definition should be included.

  • Changes to the list should become available to licensees as well as anyone interested in the general public in the form of a well-structured monthly summary (on the Web with optional email subscription).

  • The decision-making process on which programs to include or remove should be more transparent. The OIN should announce each such decision on its website. If a decision is not unanimous, those OIN backers who disagreed shall have the right to be named at their request.

  • Licensees (not only financiers) should have the right to propose GNU/Linux-based programs that should be included in the definition. If the OIN turned down the request, it should be required to state its reasons. In the event a licensee considers the decision inconsistent with the standard the OIN applied to previous decisions, there would have to be an appeals process (in a public court or by means of AAA arbitration) to resolve the dispute. In case of doubt, inclusion of programs should be the norm and exclusion an exception requiring appropriate justification.
The problem is clear, and it's serious. There's no shortage of possible solutions if there's good faith. The sole remaining question is: will the OIN's backers prove with their deeds -- not with empty words -- that their alliance is a good-faith initiative? In other words: is the OIN a patent troll in disguise or truly meant to protect the Linux ecosystem? It's time for the OIN to get real.

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The Open Invention Network's Associate Member Program: what's that?

I recently commented on the Open Invention Network (OIN), an alliance of six companies that claims to protect Linux from patent threats but hasn't ever proven any success in that regard. I outlined some of my concerns in the aforementioned posting and concluded that a company-independent solution is needed. The Defensive Patent License (DPL) may soon be a much better choice.

An enigmatic press release

On Tuesday (June 22), the OIN announced that Canonical (the Ubuntu company) became the first "Associate Member" of the OIN. The announcement is one of the most unspecific press releases I've ever seen. It looks like a parody of the proverbial politician who talks a lot but says nothing. They announce a new Associate Member program and don't even say what sets an Associate Member apart from a full member (they say "Founding Member") and from a mere Licensee (which is what Canonical was prior to its promotion to Associate Member).

Here's how they "define" the term:
Associate Members are recruited from Linux-related companies, including those that are leaders in advancing Linux's migration into emerging growth markets. Associate Members make a commitment to the Linux Community by virtue of their commitments to and membership in OIN and help to ensure that patent issues do not impair Linux's growth.
What in the world is that supposed to mean? Nothing. The first sentence says you have to be a Linux-related company. Since the OIN's patent licensing terms are specific to what they call "the Linux System", there's no reason why anyone who isn't in one way or another "Linux-related" (very broad terminology!) would join the OIN as whatever type of member. The second sentence equally applies to the other two member categories: even a Licensee must make a commitment not to assert his patents against "the Linux System". So how's this different for an Associate Member? There must be a difference, but they won't really tell what it is.

That nebulous language isn't just due to a lazy PR person. It simply reflects the OIN philosophy (which, of course, is in no small part a reflection of the attitude of the OIN's financiers).

Systematic secrecy

I'd never expect them to be too open for their own good: if they become involved with a patent dispute, I understand they won't disclose their case-specific strategy in public.

But there are many things that they certainly could talk about without any adverse effect on their activities. If they wan't to be secretive, why do they issue such a press release in the first pace? If you want to announce something, you usually want people to get at least the basic message. All they said was that Canonical is now called an Associate Member, whatever that may be.

Journalists are also puzzled

TheRegister also mentioned the lack of clarity concerning the meaning of the term "Associate Member", accurately stating that "it's far from clear what Canonical will do as an associate member."

DaniWeb informed its readers of the announcement and published my comments. AlcanceLibre did so in Spanish and Pro-Linux quoted a part of my statement in German.

ZDNet blogger Dana Blankenhorn tried to obtain more information the OIN's chief executive Keith Bergelt. However, what the OIN told him still doesn't really add much information. "Associate Members pay an unspecified fee and will exist somewhere in the middle [between Founding Members and Licensees]", Dana concluded from what he was told.

Linux Pro Magazine has also asked the OIN and Canonical for more information and will publish it when available. We'll see if the self-proclaimed protector of Linux is going to be more forthcoming now.

The OIN should be at least as transparent as MPEG LA

I understand the reservations of many opponents of software patents concerning MPEG LA, which like the OIN is a non-practicing entity administrating patents on behalf of practicing entities that effectively own it. Our community doesn't like the idea of having to pay for multimedia codecs (Canonical recently became the first Linux company to pay patent royalties to MPEG LA for H.264, by the way).

But MPEG LA says a whole lot more about the way it conducts its business than the OIN does. That's a fact. Not only does MPEG LA provide a lot more information on its website than the OIN but it also provides reasonably informative answers to individual questions. I recently had doubts about MPEG LA's annual royalty cap as well as the protection of licensees against infringing competitors, and I got clear answers that I published in this recent blog posting.

They gave that information even though they knew that I'd like to see software patents abolished, which would spell the end for their business model.

It goes without saying that I don't mean to promote MPEG LA. It just beats me that the OIN can't be at least as open as MPEG LA, and this adds to my impression that the OIN has something to hide.

Next steps

In my next blog posting I'll discuss one of the biggest problems I have with the OIN, which is its arbitrary, ever-changing scope of "protection".

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Thursday, June 24, 2010

NEON to lodge antitrust complaint against IBM with the European Commission

The Wall Street Journal was first to report today that NEON Enterprise Software, a maker of mainframe software, will lodge an antitrust complaint against IBM with the European Commission one of these days.

Meanwhile NEON has issued a press release confirming its intent to do so.

In December, NEON filed an antitrust lawsuit in the US against IBM over its practices in the mainframe market, which NEON calls "anticompetitive". In January, IBM then filed a countersuit against NEON, alleging an infringement of its intellectual property.

This SYS-CON Media article puts NEON's announcement into the context of other complaints against IBM and says that Allen & Overy, a law firm that previously helped such clients as Sun Microsystems with EU antitrust matters, is drawing up NEON's EU complaint.

French FOSS startup TurboHercules previously filed an EU antitrust complaint against IBM

Even though NEON's software is proprietary, I want to talk about the matter on this blog because there's a factual connection between NEON's complaint and the one previously lodged by TurboHercules, the French free and open source software startup that received a patent threat letter from IBM. NEON's press release also mentions TurboHercules.

By the way, after IBM's threat letter to TurboHercules became public, some IBM allies and apologists tried to muddy the water by claiming that IBM sent the threat letter only in reply to a question from TurboHercules, and others came up with the excuse that IBM was merely defending itself against an antitrust complaint. So if you heard any of those gross misrepresentations, you can easily verify that IBM asserted an infringement of "intellectual property" (as a synonym for patents) several months earlier. Apart from timing, an antitrust complaint could never have triggered the defense clause contained in IBM's patent pledge. IBM simply doesn't want to provide interoperability where its business interests collide with the concept of customer choice, even though IBM does a huge amount of lobbying to demand interoperability from others. Double standards. Open hypocrisy.

Differences and parallels between the problems NEON and TurboHercules have with IBM

NEON and TurboHercules are different companies that appear to have no connection whatsoever. NEON is a 15-year-old US company that sells proprietary, closed-source software. TurboHercules is a European FOSS startup.

NEON's founder, John Moores Sr., is a billionaire philanthropist and one of the founders of BMC Software, a major mainframe software company. TurboHercules' founder, Roger Bowler, is a mainframe fan and started the Hercules open source project about a decade before incorporating TurboHercules.

What NEON and TurboHercules have in common is that both are victims of IBM's bullying tactics.

Both just want to provide mainframe customers with much-needed cost-effective choice for their legacy software: hundreds of billions of lines of program code that are still in use, a very large part of it written in COBOL. NEON's zPrime software makes such legacy workloads eligible for execution on lower-cost (but fully functional) coprocessors. TurboHercules emulates the mainframe (System z) CPU on Intel servers.

But IBM wants to milk its locked-in mainframe customer base, hugely overcharging for everything that's needed to run legacy software.

NEON and TurboHercules are both very innovative in their way. IBM uses intellectual property, which should spur and protect innovation, as a destructive weapon against those companies. IBM told some mainframe customers using NEON's product that in IBM's opinion they're not allowed to do so and alleges that NEON wants to "induce" those customers to breach their license agreements with IBM. Many of you may be familiar with the Digital Millennium Copyright Act (DMCA), and IBM bases a part of its claims against NEON on that piece of legislation.

By the way, here's a YouTube video that NEON produced to explain why it believes mainframe customers have the right to use its zPrime product.

Procedural situation in the EU

Now NEON is about to file its EU antitrust complaint, and the European Commission is looking at TurboHercules' recent complaint. Previously, in January 2009, an EU antitrust complaint against IBM had been filed by T3 Technologies. The Commission still has to decide how to proceed with that one, too. If the regulator decides to lauch a full-blown investigation, IBM may have to defend itself against three complainants.

The European Commission isn't on any hard deadline for this but under its best practice guidelines a decision in the coming months is reasonably likely.

Some of the world's most critical data processing applications still run on mainframes. When any of us make a wire transfer, chances are that the bank will process it on a mainframe. Still today. Its demise was predicted a long time ago, but the mainframe isn't going away anytime soon. It's going strong. So it's an issue of major relevance to the worldwide (and European) economy to ensure that innovative solutions such as the ones provided by NEON and the Hercules open source project are available and that IBM doesn't bully anyone: neither customers nor solution providers. Enough is enough.

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Wednesday, June 23, 2010

MPEG LA's AVC/H.264 licensing terms: further analysis

There's still a lot of controversy over the video codec question, in connection with HTML 5 and generally. I have commented on this on several occasions, most recently on Google's announcement of the "free" WebM (VP8) codec (this posting) and the subsequent modification of the WebM license.

I have received some useful clarifications from MPEG LA concerning its AVC/H.264 licensing terms and would like to share that information and comment on it in this posting. Prior to doing so, let me explain my approach to the controversial subject.

Separating politics and economics

As a long-standing opponent of software patents, I'm all for patent-free formats but I want to understand from a pragmatic point of view what the risks and opportunities are for the average software developer (FOSS as well as non-FOSS) when adopting one video codec or another:
  • For WebM/VP8, there's a vague assurance by Google that its own patents, which are licensed on a royalty-free basis, are all you need. But Google doesn't publish a detailed analysis, nor do the license terms include indemnification. So it's pretty much a "trust us" story. I've seen opinions that agree with Google's view, and others who disagree. If Google offered indemnification, that would change the situation, but they don't.

  • For MPEG LA's AVC/H.264 codec, patent royalties are due unless one does something that falls under an exception (such as certain kinds of non-commercial use) or the number of units sold is below a certain threshold. The patent pool is huge and from many companies, mostly large ones. Since AVC/H.264 is already extremely widespread, third parties owning patents that read on it would likely have enforced them already, which makes it reasonably likely that MPEG LA controls all of the essential patents.
From a philosophical point of view, I wish there weren't any software patents. In that case, there wouldn't (have to) be an MPEG LA. But I try hard (and encourage everyone else to try equally hard) to separate my political/philosophical preference from practical/economic considerations under the circumstances we have to live with.

In that respect, the licensing terms for AVC/H.264 play a key role. If they are reasonable (under the circumstances), then one might accept them as a practical, totally unemotional choice. There are patent holders who don't make licenses to their patents available on any terms, or not on any reasonable terms. Those strategic patent holders with an exclusionary strategy are the biggest problem as I recently explained.

Further analysis suggests the AVC/H.264 royalty cap works the way it should

MPEG LA has a royalty cap so that companies selling high-volume products know beforehand the maximum amount of royalties they'll have to pay to MPEG LA in a given year. The current $5 million cap really isn't much for a big player possibly generating many billions of annual revenues with products that include an AVC/H.264 encoder and/or decoder.

More importantly, this makes it economically possible for entities like Mozilla and Opera to give away huge numbers of web browsers to end users on a free-of-charge basis (note that Mozilla, unlike Opera, offers truly free software -- free as in free speech, not just free beer).

Two weeks ago I attended an event at Google's Brussels office: a roundtable on open source business models. Its roughly 30 participants were from a diversity of companies as well as the European Commission. When the codec question came up, I mentioned the AVC/H.264 royalty cap, and someone at the event basically claimed that I shouldn't believe what MPEG LA's website says about it because MPEG LA could charge different fees for different types of products. According to the house rules of the event, I can quote what was said but without naming the person who made the statement. So I asked that person for permission to name the source when quoting that particular statement on my blog, but the person prefers not to be named and clarified that "for most companies, they probably don't see much more than one overall fee."

That was basically a retraction of the original claim. Nevertheless I wanted to know from MPEG LA, the licensing firm that manages the AVC/H.264 pool, whether the $5M per-customer per-year royalty cap has anything to do with product categories such as smartphones versus other devices.

Here's the answer I got from an MPEG LA spokesperson:
The royalty cap for AVC Product in our AVC License includes the combined sales of all of a Licensee’s AVC Product (encoders, decoders or combination device equals one unit) in that calendar year. Therefore, a Licensee would not pay more than $5 million in royalties for any combination or amount of AVC Product it sells in 2010, regardless of what type of device it is. It should be noted that caps and royalties are subject to possible increases to be determined for the renewal term 2011-2015.
I'd like to add that MPEG LA made a commitment to keep those increases within a specified limit (see the last item on this FAQ page).

That answer suggested the cap works the way it should. I still wanted to know more about the cap: Are there any customers who for whatever reason may have to pay more than $5M in a given year? And if so, why?

And this is what MPEG LA told me:
Caps apply to each of AVC Product, OEM AVC Product distributed through a PC operating system incorporated in the end PC product of another party, and AVC Video. While rare, there are instances of a Licensee and its affiliates being subject to caps for both AVC Product as well as AVC Video in a given year. There is also instance of a Licensee being subject to caps for both AVC Product and OEM AVC Product for PC operating system product.
To avoid a misunderstanding, that doesn't mean there's a cap for each product (in which case a company with 20 products could pay up to $100 million). The term "AVC Product" means a license type. MPEG LA has three types of licenses that are relevant here and I'm quoting from the license agreement, which was provided to me on a confidential basis with permission to quote these definitions:
  • AVC Product(s): "any product or thing in whatever form which constitutes or contains one or more fully functioning AVC Decoder(s), AVC Encoder(s) or AVC Codec(s). AVC Product(s) shall not include OEM AVC Products."

  • OEM AVC Product(s): "AVC Product(s) sold to an OEM Licensee Customer."

  • AVC Video: "video encoded in compliance with the AVC Standard"
Let me put it in more colloquial terms: If you obtain an "AVC Product(s)" license, it covers the products you build that include an H.264 codec in some form. The "OEM AVC Product license" category is a special case for companies selling a PC operating system to OEM customers (computer manufacturers who then bundle the product). And "AVC Video" is a license for those offering H.264 video content. All licenses relate to the same patent pool but to different business models.

In terms of the cap, there can be cases where companies need more than one of those three licenses. Most companies won't, but those who do may pay, for an example, twice the cap. But that doesn't mean that their costs are totally unlimited. They simply have more than one license fee account and each account has a cap.

I asked a third question about the cap: Is it true that if companies infringe your patents and have to pay back-royalties, the cap doesn't apply but they may have to pay more?

MPEG LA answered:
That is not correct. The caps applicable to any given year in which a new Licensee owes Back Royalties (with applicable interest, if any) still applies. For example, a new Licensee owes AVC Product royalties for 2007 would be subject to the cap of $4,250,000 for that year.
All things considered, the royalty cap appears reliable to me and I don't have the impression that MPEG LA tries to mislead anyone about it.

Patent enforcement: are licensees protected against infringing competitors?

I recently talked to someone who said that MPEG LA goes after some but not necessarily all patent infringers, which means that if you're a company in a given market that is forced to pay royalties and you have competitors that are not, you may be at a strategic disadvantage with others undercutting your prices. Therefore, my fourth and final question to MPEG LA was: Is it true that if a company pays royalties to you and faces significant competition from an infringer of your patents in its core market(s), the legitimate licensee has no contractual basis to require MPEG LA to go after the infringer?

MPEG LA answered:
It is correct that there is no requirement in the AVC License for litigation to be brought against an unlicensed, infringing company or organization. We actively pursue unlicensed companies or organizations that may be using the AVC standard to offer them the license, but, any litigation against a non-Licensee would brought by patent rights holders, not by MPEG LA.
The first part confirms that a licensee doesn't have a guarantee that his infringing competitors will be pursued. The second part is a legally technical thing: MPEG LA collects royalties on behalf of the actual patent holders but can't assert those patents against infringers in court. That's why litigation would have to be brought by the actual patent holders. I understand, but nevertheless I think it would be good for MPEG LA's licensees to have a legal commitment from the patent holders that they will either collect royalties from all significant players in a given market or from none of them.

One might assume that MPEG LA's obvious desire to maximize its royalty income would practically guarantee that all significant companies infringing its patents would be pursued. But the worldwide market is huge and if you have a country that's only medium-sized, then MPEG LA may decide for efficiency reasons to collect royalties only from the market leader. That one would face a risk of litigation if refusing to pay, but if that licensee's competitors don't pay because MPEG LA doesn't go after them for the time being, then that's an awkward situation for the licensee.

So while I'm (for now) satisfied with MPEG LA's answers on the royalty cap, I would like them to give some real protection to licensees in the scenario I just described, for the sake of undistorted competition. Even though litigation would be the prerogative of the actual patent holders, the license agreement could alternatively waive the obligation to pay if a licensee faces significant competition from infringers who don't pay.

I will keep following the codec debate and continue to look at licensing terms and practices.

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Monday, June 14, 2010

IBM discredits the open standards lobby

On Thursday and Friday of last week, I saw hypocrisy of the worst kind: two IBM vice presidents preaching open standards values to EU decision-makers and FOSS community members instead of practicing them at their own company, which would really need that kind of lecturing.

IBM advocates openness and interoperability but actually refuses to be interoperable with open source only to keep customers locked in.

The first thing those guys should learn is that interoperability, by definition, always goes both ways. This isn't only a problem for them and the customers they're milking and the companies they don't allow to provide interoperability. As the EU is finalizing and will later be implementing its European Interoperability Strategy and Framework, IBM's open hypocrisy harms the cause of open standards.

There's increasing awareness for the fact that IBM, the biggest and most vocal backer of open standards lobby organizations in Europe (OpenForum Europe and ECIS), does in its core business the exact opposite of what it demands from others in their core business.

Something like that can work for a while. But once the decision-makers find out, being exposed as a hypocrite is a surefire way to lose in politics.

Neelie Kroes (European Commission Vice President): we must practice what we preach

European Commission Vice President Neelie Kroes, formerly known for her relentless pursuit of the Microsoft and Intel competition cases and now the Digital Agenda commissioner, addressed the OpenForum Europe conference on Thursday and said:
I am still a big fan of open standards. I believe in openness, and I believe in practicing what one preaches.
Google's chief legal officer David Drummond and Oracle vice president Don Deutsch gave examples of how their companies contribute to the cause. In light of what they said and what Mrs. Kroes had said before, I put a question to both of them: Aren't you concerned that IBM's use of patents against open source (in order to prevent interoperability) creates a credibility problem for the lobbying effort in which IBM is your partner?

Google's chief lawyer: you won't see us use patents against open source

David Drummond pointed out that I can't hold them responsible for what IBM is doing, and I didn't mean to do that. But through OpenForum Europe they walk side by side with IBM on this particular issue. They meet politicians together. They publish joint position papers. So a credibility issue for one of them in this particular context jeopardizes their collective effort.

After clarifying that he didn't want to comment on a particular company, David Drummond said something great:
"Anyone using patents against open source is a bad idea -- you won't see us do it."
This is obviously not a formal and detailed promise of non-assertion. But for a quick statement on a conference panel, and coming from Google's chief legal officer (the lawyer who advised Google's founders back in 1998 when they started), this was clear enough. We need more such commitments from large companies. And we need them to adhere to that principle.

IBM vice presidents afraid to talk

Later that day, IBM's vice president of technology and strategy, Michael Karasick, gave a presentation on openness in the cloud (here's the conference program).

There's the Simple Cloud API supported by (among others) IBM and Microsoft, and he talked about that initiative as well as other examples of open interfaces for cloud computing. It was designed to be a pitch to EU decision-makers with a special focus on e-government. He defined the cloud as a different form of "consumption" and talked about virtualization and "fundamental platforms."

So I asked him why his list of open interfaces doesn't include the mainframe instruction set, given that governments around the globe use mainframes for very critical purposes. Otherwise, IBM would transform its current mainframe hardware monopoly into a new cloud-related monopoly.

He simply didn't want to answer. Instead, he chose to talk about an earlier question that had already been answered by another panelist. How weak.

Silence at LinuxTag

The following day I was in Berlin at LinuxTag, where I gave a talk on EU processes relevant to Linux (and Free and Open Source Software in general). Before my own session I went to a presentation by IBM vice president and standards advocate Rob Weir on "the mutual advantage of open source and open standards".

It was bewildering to see him list (on page 8 of his presentation) the four freedoms from the Free Software definition. Software can be "open" even with patents, but it certainly can't be free as in free speech (and hardly free as in free beer) with them. If IBM truly believed in those freedoms, it would have to oppose software patents instead of lobbying for them, piling up more of them than anybody else and using them in really bad ways.

Rob Weir talked a lot about the Open Document Format and warned against the dangers of a standard being controlled by a single owner. I told him that he was probably preaching to the choir at LinuxTag when it comes to open standards, but I asked whether it wouldn't be a good idea for him to do the same kind of advocacy inside his own company, given the way IBM fights against open source and interoperability only to preserve its mainframe monopoly. Like his colleague the day before, he didn't want to answer the question.

Still at LinuxTag, one of IBM's leading mainframe Linux experts, Karl-Heinz Strassemeyer, was asked by RadioTux (a web radio program on Linux and open source topics) about the Hercules open source mainframe emulator, and he said he doesn't comment on "legal affairs".

Instead of muzzling its employees, IBM should practice what it preaches. They won't do that just because I say so. But they should heed what the European Commission says.

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OpenForum Europe and ECIS want software patents for their members but oppose those of others

Before I report in more detail on the OpenForum Europe Summit 2010 that took place last Thursday in Brussels (and from which I went directly to LinuxTag 2010 in Berlin for a presentation on relevant EU processes), I'd like to provide an overview over the key players of those organizations and their intentions.

In a nutshell, they're in favor of their own software patents but don't want to pay royalties for those of others. Their story is that some other companies' patents are needed for free for interoperability's sake, instead of advocating the abolition of all software patents including their own.

They don't want to address the root cause of the problem because they want to have their cake and eat it, too. The only way in which this approach is open is that it's open hypocrisy.

Two organizations with a mutual nucleus of three companies

There are two organizations in Brussels, the de facto capital of the EU, using the noble cause of open standards and interoperability as a pretext for a rather different agenda: OpenForum Europe (OFE) and the European Committee for Interoperable Systems (ECIS).

OFE is a lobby organization that now plans to work more closely with academics to give itself a think tank image.
ECIS brings about antitrust complaints and also engages in lobbying.

OFE's current list of members includes IBM, Google, Oracle, Red Hat, and Deloitte.
ECIS' members are Adobe, Corel, IBM, Nokia, Opera, Oracle, RealNetworks, and Red Hat.

So there are three companies who are members of both organizations: IBM, Oracle, Red Hat. Here's their background concerning software patents:

Discontent with European Commission's Digital Agenda and draft European Interoperability Strategy/Framework

Right now they're unhappy that the EU isn't inclined to become their gofer. ECIS admits it without mincing words while OFE tries to spin-doctor around and play European Commission Vice President Neelie Kroes off against her colleagues. Others have previously attempted to play commissioners off against each other, and failed.

In her speech at the OpenForum Europe conference on Thursday, Mrs. Kroes certainly expressed a personal preference for royalty-free standards. OFE claimed to welcome that in its usual hypocritical way. I like that preference for fundamental reasons: I would prefer to see software patents abolished, which would take care of the royalty problem. Broadbased support for the Defensive Patent License could also have that effect.

But no matter how much we want that, it's simply not accurate to claim or imply that Mrs. Kroes supports the OFE's demands. Politicians have lots of preferences for what companies should do. What truly matters is whether or not they use their decision-making power to impose conditions. OFE would like the European Commission to use its European Interoperability Strategy and Framework -- a set of procurement guidelines with political implications going well beyond -- to require all vendors who want to do business with the public sector to adhere to rules that would force them to make licenses to their interoperability-related patents available on a royalty-free basis. And that's what the Commission is absolutely not inclined to do. Instead, the Commission fully accepts the notion of patent-encumbered standards.

In his summary of the OFE event, the OFE's chief executive Graham Taylor wrote: "We could not have hoped for a better keynote speech from European Commission Vice President Neelie Kroes." But in her speech, Mrs. Kroes actually said: "I have nothing against intellectual property being brought to the standard-setting table, but it must be disclosed." She also talked about a new legislative initiative on interoperability that "would likely involve some form of pricing constraints." That's another way of recognizing that there will be royalties. If something is royalty-free, you don't need to talk about "pricing constraints."

So the OFE's summary spins the commissioner's words in a way that I consider unreasonable. Then the OFE tries to drive a wedge between Mrs. Kroes and the other commissioners: "We at OFE believe there should be a complete re-write of the EIF. If this doesn't happen Vice President Kroes may not achieve the goals she is working so hard towards."

But what Mrs. Kroes said, especially when paying attention to the things I quoted from her speech, is simply consistent with the current draft of the European Interoperability Framework.

The Commission is a lot more consistent than the OFE.

OpenForum Europe lobbied European politicians for software patents, falsely claiming to speak on behalf of the open source community

When I first heard about OpenForum Europe six years ago, there was an extremely bad reason: OFE's chief executive (back then and still today), Graham Taylor, had lobbied European politicians to support software patents, and he falsely claimed that he represented the open source community.

That claim was refuted by Bruce Perens, the author of the original Open Source Definition, in an op-ed published by TheRegister. Bruce wrote that Graham Taylor "does not have the credentials to represent the Linux, Open Source and Free Software developer communities, especially when he contradicts our extremely strong opposition to software patenting."

The FFII knew that Graham acted as an astroturfer at the behest of IBM and other OFE members, but tried to engage in a facts-based dialog with Graham Taylor. The FFII wrote two open letters to him, and the introductory paragraph of an FFII page on OFE starts with the following strong and accurate statement:
Open Forum Europe is lobbying the European Parliament in the name of "open source companies" in order to make software directly patentable and to ensure that interoperable software may not be written.

Graham Taylor is not the only OFE executive to have been criticized harshly by the FFII. Paul Meller, now research and communications director at the OFE, was probably disliked by the anti-software-patent movement more than any other Brussels-based reporter writing in English. The FFII accused him of repeatedly spreading "extreme misinformation", alleging "a large number of errors and lack of objectivity", and even less flattering things were said on certain mailing lists.

While I also found that his articles were in most cases overly sympathetic to the positions of those pushing for software patents, there are explanations. Some of his articles appeared in the New York Times, others on IDG's website, so with a view to professional audiences he felt he had an obligation to listen to both sides of the argument. Unfortunately, one of those sides (the pro-patent camp) made a very professional PR effort from the beginning whereas the FFII didn't always handle its communications very well (as its core activists admitted at the time). I had several facts-based, constructive conversations with Paul at different points in time. Now, of course, he's no longer independent.

ECIS: ten commandments for the EU but none for its own members

The key person driving all of ECIS' efforts as its lawyer and spokesman is Thomas Vinje, a partner at Clifford Chance. He was also invited to speak at the OFE Summit on Thursday and unlike the host organization, he made it very clear that the EU's Digital Agenda and the current draft of the European Interoperability Framework fell short of his expectations. He didn't speak there in the name of ECIS but again, he is ECIS whether or not he formally introduces himself on that basis.

Thomas Vinje went on to propose ten ways to modify the document in order to make it meet the objectives ECIS considers important. A single one would have been sufficient: abolish software patents. Given where ECIS' members stand, it's no surprise he won't say that.

But he certainly forgot to insert an extremely important commandment in front of all others: do as you say.

Why doesn't ECIS hold its own members to the same standards it advocates?

Either there isn't any code of ethics in place for its members or it isn't any good, because otherwise IBM would have to be excluded from the organization given that it promotes interoperability only in markets in which IBM stands to gain from it but refuses to be interoperable and open where it generates half of its profits.

The same could be said about OFE as well: if you're serious about openness and interoperability, you have to demand that IBM provide interoperability right here and now, or you have to exclude the black sheep of the family. IBM probably pays you (and ECIS) a lot in membership dues but that's only your problem. If you don't get your house in order, you can't expect political decision-makers to buy your claims.

If you'd like to be updated on patent issues affecting free software and open source, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents.