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 JoaquĆ­n 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:

Answer given by Mr Almunia
on behalf of the Commission

"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).

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents.

Share with other professionals via LinkedIn: