Friday, April 29, 2011

Red Hat is now a regular customer of patent trolls: another settlement announced

While most of the world was watching the wedding ceremomy at Westminster Abbey, Acacia Research Corporation (a publicly traded non-practicing entity that collects royalties on patents) was doing business as usual and announced a new "confidential settlement agreement" of one of its subsidaries, named Site Update Solutions LLC, with Linux distributor Red Hat. All that was announced about the settlement is the following:

"The agreement resolves patent litigation that was pending between the parties in the United States District Court for the Eastern District of Texas, Civil Action No: 2:10-cv-00151-DF, related to U.S. Patent No. RE40,683."

Given that this case was not even at claim construction stage (a Markman hearing was scheduled for this summer) and going to go to trial next March, it's a safe assumption that Red Hat was required to make a payment. Acacia is not the kind of patent holder whow ould let anyone off the hook easily.

This is the second time in about half a year that an Acacia subsidiary received a check from Red Hat. In early October, Red Hat's settlement with Software Tree LLC concerning U.S. Patent 6,163,776 (on a "system and method for exchanging data and commands between an object oriented system and relational system") became known, and Red Hat drew criticism for its intransparency concerning the terms and conditions of the deal, which may or may not be in compliance with the GPL open source license.

Acacia should launch a frequent licensee bonus program, such as "you pay for 10 patents and get a license to an 11th patent for free." For Red Hat this might pay off within a few years. It could even become a Gold Member.

There's another non-practicing entity that made good money on Red Hat. In fact, Amphion Innovations' wholly-owned subsidiary DataTern owes about 25% of its total revenues over the last few years to just one patent license deal with Red Hat. Since 2008, that company claims to have generated revenues of approximately $17 million, and I recently found out that Red Hat paid $4.2 million to that entity a couple of years ago.

I'm pretty sure Red Hat has done more patent license deals over the years. Red Hat claims to be open but actually isn't when it comes to those dealings. If they aren't even forthcoming about settlements related to software licensed under the GPL, it's likely that they keep some deals entirely under cover.

Furthermore, things aren't going well for Red Hat in another case involving a patent that a jury found Google to infringe by using Linux. Red Hat may ultimately have to take a license to that patent as well in order to protect itself and its customers. There are efforts underway to have that patent declarede invalid, and the USPTO has started to reexamine it, but it's possible that the patent in question will be upheld, just like the jury in the Google case deemed it valid.

Details of the Site Update Solutions LLC case

The patent-in-suit is U.S. Patent No. RE 40,683 on a "process for maintaining ongoing registration for pages on a given search engine". According to the plaintiff's allegations, Red Hat infringed at least claim 8 of the patent-in-suit because it "updates internet search engine databases with current content from its websites, including at least,, and, by using an XML Sitemap ('Sitemap') and submitting it to various search engines."

This is a search engine optimization (SEO) issue as opposed to an issue concerning the Linux kernel. However, every patent license deal into which Red Hat enters, even if Linux-unrelated such as in this case, encourages other patent holders to collect royalties from them.

Also, it's quite possible that GPL-licensed software is used by Red Hat for the activities that allegedly infringe the patent-in-suit.

Site Update Solutions LLC filed its original complaint in May 2010 against 35 legal entities, including Internet businesses like, Facebook, LinkedIn and Monster as well as hotel chains like Accor and Starwood, retailers like Target and Wal-Mart, media companies like NBC and Thomson Reuters, and software companies like Adobe and Intuit. They amended the complaint twice. The second complaint targeted 37 companies. Red Hat was added as a defendant at that time (October 7, 2010) -- interestingly, very shortly after Red Hat's opaque settlement with another Acacia subsidiary.

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