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Defuse the Novell time bomb

Defending Free Software against harm from sale of Novell patents

• FSFE's statement from December 22, 2010
• FSFE's response to German FCO from April 6

On November 22, 2010, Novell agreed to be bought by Attachmate. While this move wasn’t particularly controversial in itself, a detail raised eyebrows. At the same time, Novell announced that it was selling 882 of its patents to a consortium made up of Microsoft, Oracle, Apple and EMC.

This is worrying. Given that Novell has been involved in Unix and Free Software development for a long time, it’s likely that a number of the company’s patents cover important Free Software technologies. In many markets such as operating systems, desktop productivity, or web servers, virtualisation and identity management, Free Software programs are the key competitors to those offered by the CPTN consortium members.

Allowing a consortium of Microsoft, Oracle, Apple and EMC to acquire patents that are likely to read on key Free Software technologies would do huge damage to competition in the software market. This is yet another reason to continue FSFE’s ongoing work against software patents.

CPTN filed for permission in Germany and the United States to form a joint venture in order to acquire Novell's patents. As a European organisation, FSFE has been working with the German Federal Competition Office (FCO) in order to try and minimise the risks to Free Software from this transaction.

December 22, 2010: FSFE expresses its concerns to the German competition office

On December 22, 2010, FSFE submitted a document (pdf version in German) detailing our concerns regarding CPTN's role and the intentions of the participating companies to the FCO.

Microsoft has used patent lawsuits to stifle competition from Free Software (e.g. TomTom), and has long used unsubstantiated patent claims for a continued campaign of fear, uncertainty and doubt against Free Software. Oracle also has used its patents aggressively against Google.

CPTN might also decide to sell the patents on to third parties. These could be patent trolls (“non-practicing entities”), or members of the consortium itself. In September 2009, Microsoft sold 22 patents related to GNU/Linux during an auction where only non-practicing entities were invited.

All these cases would be bad for competition in the software market. Microsoft in particular would be holding a stash of patents that everybody believes to relate to Free Software. At the very least, this would make their FUD campaign much more powerful. The company could also move into patent litigation much more aggressively, suing competitors out of the market. (Both the legal costs and the potential damages in a patent lawsuit are so large that they represent a serious threat to any company that’s not really, really large.) Or CPTN sell the patents to a patent troll and let that organisation do all the dirty work.

As a consequence, if the sale of Novell’s patents to CPTN is allowed to go ahead, this will significantly increase the legal threat level for Free Software.

April 6, 2011: FSFE responds to FCO's questionnaire to market participants

At the end of March 2011, the German FCO sent FSFE a "questionnaire to market participants". This contained a slight modification of the deal. While the FCO has asked us not to publish the questionnaire itself, we can provide a summary:

• each of the four CPTN investors will receive 25% of Novell's patents
• all investors and Novell (along with its affiliated companies) will get licenses to Novell's entire patent portfolio
• CPTN will be dissolved after the transaction is complete, i.e. within three months.

So CPTN is merely a vehicle to acquire the patents and distribute them between the investors.

It seems that the US Department of Justice and the German FCO between December and March signalled to the CPTN investors that there would need to be some changes in order for the deal to move ahead. The March 2011 questionnaire mentions the following modifications to the deal:

• Microsoft will sell its share of the Novell patents directly on to Attachmate. It will receive a license to those patents from Attachmate.
• EMC will not acquire 31 patents that relate to virtualisation.

In our reply , we make clear that this modification does not allay our concerns that Novell's patents may be used to limit competition. There are several reasons to be suspicious, notably:

• access to more patents will increase the respective dominant positions of the CPTN investors.
• What will Attachmate do with those patents? The company does not have an established track record in Free Software, and there is nothing to keep Attachmate from either selling the patents on to a third party, or trying to turn litigation into a revenue driver. Could Attachmate become a second SCO?
• Any financial relationship between Attachmate and Microsoft needs to be clarified.

As a remedy, we propose that the Novell patents which CPTN is seeking to acquire should be made available under conditions that allow implementation in Free Software, including under the GPL. This would be a royalty-free, perpetual license. Their owners could still enforce the patents against proprietary implementations. But there would be no further danger that they would be used to limit competition from Free Software.