Patent trolls are getting smarter

When you're driving down the highway and you see a spotless white tanker truck with a big green tree painted on the side, you can be pretty sure that it's full of hazardous waste.

Likewise, companies with "innovation" in their names are generally innovation-hostile patent trolls. The problem isn't just that they file for obvious patents, or patents on things that someone else already invented, but that they drag the enormous transaction costs of the patent system into the flexible world of software, where transaction costs are low.

Red Hat, which comes out against software patents, just announced that it's "putting a patent issue to rest." They've struck a deal with a patent troll to leave them alone that also covers the related open source project and other companies that ship it.

Richard Fontana, Open Source Licensing and Patent Counsel for Red Hat, told me, "The real takeaway is that this agreement is really historically unprecendented in the extent to which it covers not just us, the company that was sued, but also an entire ecosystem."

Red Hat is settling, on undisclosed financial terms, a lawsuit over Hibernate from two trolls, DataTern and Amphion Innovations PLC. Hibernate, part of the JBoss system, is a useful building block for Java developers, and if you're running Java-based business software you're probably using it. (Useful intro at JavaWorld.)

Matt Asay called RHT's action "a truly open-source friendly way to tackle patent lawsuits." The settlement also applies to the upstream software projects that go into Red Hat projects, and to any derivative works based on upstream or on Red Hat's products—current or future. Yes, if you download a copy of Hibernate and go into business competing with Red Hat, you're covered. Yes, if someone builds something better than Hibernate and Red Hat starts using it, that new software is covered.

PJ at Groklaw says the settlement "makes history". FSMLabs first released a GPL-compatible patent license in 2001, to allow its realtime Linux patent to be used not just in one vendor's Linux, but in all Linux and derived works. More companies have followed. And another troll, Blackboard, has backed off and agreed not to enforce a patent against open source.

But it is the first time that all the pieces have come together: a lawsuit against an open source vendor followed by a settlement in which the troll grants a broad open source patent license.

Patent troll 2.0?

Red Hat made the right move here considering the situation, but what we're really seeing here is a skillful example of patent gamesmanship by the troll. Open source companies can't pay off a troll with per-user royalties, since they can't lock down the software per user. A Novell-style "non-license license" only works if the patent holder refuses to disclose which patents it applies to. As soon as contributors to the project are put on notice that they actually infringe a known patent, they have to remove that functionality from the software—as Linux kernel hackers inside and outside Novell are committed to doing for the kernel.

Faced with the DataTern/Amphion suit, Red Hat's only options were to make a one-time payment to the troll, to pull the software and release a non-infringing version if possible, to get a court to rule that no claim of the patent actually reads on the software, or to get the patent thrown out. None of those options turn into long-term or per-user revenue for the troll, and it's clear that Red Hat can't afford to pay much to license a patent for non-customers. Even if Red Hat did pay the troll, it's not the kind of payday that a troll could expect from a proprietary software company that can agree on a per-user settlement and pass the costs on to users as they license the software.

Symantec agreed to pay off Trend Micro to license the same patent that Barracuda is fighting, not because Barracuda CEO Dean Drako is a better poker player, but because Barracuda can realistically say that the option of licensing is off the table.

KSR v. Teleflex

Last year, the US Supreme Court unanimously ruled in favor of a patent infringement defendant in KSR v. Teleflex, helping to bring the legal definition of an "obvious" invention much closer to the obvious definition of "obvious." With one ruling, the Court likely brought the value of many software patent portfolios down to whatever the holders can get at the paper recycling center.

Did the KSR v. Teleflex case motivate the troll to settle? Possibly, Fontana says. Red Hat's defense in the original case was based on "anticipation and obviousness based on the existence of prior art," he adds.

KSR "has changed the climate surrounding patent litigation in a way that is beneficial to Red Hat and other defendants," he says. "So many software patents are, I believe, vunerable on obviousness grounds."

What does this mean for companies using open source?

No matter whose software you use, some of your suppliers are going to get hit with patent lawsuits. Most software patents don't hold up in court against a determined defense, but one does occasionally get through, as web developers found when Microsoft had to change its Internet Explorer browser to get around a troll patent. Patents are going to cost you no matter whose software you use.

Trolls need to collect money to survive, and open source vendors can't give it to them. The good news from this settlement, and Blackboard's, is that trolls are realizing that hitting an open source company is like robbing a store where the safe is on a time lock. They can do damage and hurt people, but the money isn't available to them.

If you depend on software that you download outside of a vendor indemnification agreement—if, for example, you get it straight from a developer site and build it yourself—you do have one more set of paperwork to keep up with.

There's no publicly available document on the Red Hat settlement yet, but if you run Hibernate and you're not a Red Hat customer, you're going to need to find one for your files. (I'll put up a link when I know of one, but it might make more sense to keep all the open source patent permissions in one place. Linux Foundation?) Your "license" to the software you run isn't always just the license file bundled with it, but might include other documents.

By now, even the Mainstream Media is safely aware of the need to get rid of software patents. When a Cato Institute scholar is writing an anti-software-patent op-ed for the New York Times, you can't get much more Mainstream than that.