In a move designed to protect the free and open source software (FOSS) community, the U.S. Justice Department has intervened in an intellectual property case involving four dominant IT enterprises. The transaction involves software developer Novell and a consortium made up of Microsoft, Oracle, Apple and EMC.
The case could be a landmark in broadening the use of the Linux operating system and other open source software worldwide.
As part of a US$2.2-billion deal to be acquired by Attachmate, Novell agreed to transfer 822 patents to the consortium, CPTN Holdings, for $450 million.
The Justice Department, however, had reservations about the patent transactions. The department said that as originally proposed, the deal would have jeopardized the ability of open source software such as the Linux OS to “continue to innovate and compete in the development and distribution of server, desktop, and mobile operating systems, middleware and virtualization products.”
As a result of DoJ’s concerns, the members of the consortium agreed to major changes in the patent transfer arrangement.
“The parties’ actions address the immediate competitive concerns resulting from the transfer of Novell’s patents. To promote innovation and competition, it is critical to balance antitrust enforcement with allowing appropriate patent transfers and exercise of patent rights,” said Sharis Pozen, deputy assistant attorney general of DoJ’s antitrust division.
The changes are as follows:
- Microsoft will sell back to Attachmate all the Novell patents it otherwise would have acquired, but it will continue to receive a license for the use of those patents, as well as the patents acquired by the other three CPTN members, and any patents retained by Novell;
- EMC will not acquire 33 Novell patents and patent applications that have been identified as related to virtualization software;
- All the Novell patents will be acquired subject to the GNU General Public License, a widely adopted open source license vehicle, and the Open Invention Network License, a major license vehicle for Linux.
- CPTN does not have the right to limit which of the patents, if any, are available under the OIN license; and
- Neither CPTN nor its owners will make any statement or take any action with the purpose of influencing or encouraging either Novell or Attachmate to modify which of the patents are available under the OIN license.
“Although we recognize that the various changes to the agreement recently made by the parties are helpful, the department will continue to investigate the distribution of patents to ensure continued competition,” Pozen said.
Open Source Breakthrough
“The agreement represents a true milestone in the evolution of the relationship between open source software and the economy,” Andrew Updegrove, a partner with Gesmer Updegrove, told LinuxInsider.
“The regulators truly understand the importance of open source software and will act to protect it. That puts proprietary vendors on notice that their actions will be scrutinized, and helps set up a zone of government protection around open source development and use that did not exist before,” he added.
The DoJ coordinated its action with Germany’s Federal Cartel Office, which also had concerns about the original Novell agreement with CPTN.
“The important thing about DoJ’s action is that it legally recognized and made explicit what is already implicit about the added value of the open source space. Open source is not just a technology — it’s a modality for unlocking and enhancing value, versus the silo approach of proprietary systems,” Keith Bergelt, chief executive officer of the Open Invention Network, told LinuxInsider.
“I think it’s significant that DoJ recognized the propensity of one of the parties in the consortium for a potential restriction of technology,” Bergelt said.
As a result of the agreement, the competitive landscape will change significantly, Updegrove noted.
“The clear winners are the multiple stakeholders in the open source ecosystem, who now have fewer potential patent claims to worry about. That includes the developers of open source code, the users of open source software, and the many types of vendors that directly or indirectly profit from the existence of robust, unencumbered open source code,” he said.
“The losers are the parties to the purchasing group who will no longer be able to put some of the patents they planned to purchase to some or all of the undisclosed purposes they had in mind for those patents,” Updegrove continued.
Based on the DoJ’s public statements, “it appears that some of the patents purchased would have been asserted against users of open source software, including Linux,” he pointed out.
“We are pleased that the CPTN transaction has been approved and that Novell’s merger is also moving ahead,” a Microsoft spokesperson said in a statement provided by Waggener Edstrom’s Kim Kuresman. “Microsoft looks forward to continuing our collaboration with Novell into the future, to bring mixed source IT solutions to customers.”
However, that future will be significantly different, Updegrove said.
The outcome of the regulatory intervention “will cause a ripple effect through all manner of tactical discussions that occur within proprietary vendor meeting rooms well into the future,” he explained. “It also means that vendors that have not already fully incorporated open source-based strategies into their business plans would be well advised to do so now. Otherwise, they will be at a disadvantage to their more forward-looking competitors.”
DoJ’s review delayed the merger between Novell and Attachmate, which had been set for mid-April.
“We have agreed to a closing date of April 27,” Ian Bruce, director of global public relations told LinuxInsider. The company had no further comment beyond its April 20 filing with the Securities and Exchange Commission (SEC).
As a result of DoJ’s inquiry, “the consortium agreed to certain undertakings with respect to the patents and patent applications that would be acquired pursuant to the patent purchase agreement,” Novell says in the filing. The company and CPTN agreed to “memorialize those undertakings.”