Perspective: How to fight against patent terrorism

Microsoft's recent announcement of a software indemnification policy has moved the once ignored issue of intellectual-property liability protection onto center stage.

Software companies increasingly are dangling the offer of intellectual-property liability indemnification in front of customers concerned about protecting themselves against the threat of lawsuits. Some may wonder whether the hubbub over software indemnification is just much ado about nothing, but chief information officers know better.

It may seem strange to nonlawyers that U.S. copyright and patent laws do not provide complete protection against the "innocent infringement" of rights. While damages may be reduced for acts performed before notice of rights is given, "innocent" purchasers are liable for damages and subject to an injunction if they continue to use or sell copies of the software.

The SCO Group's lawsuits against large corporate users of Linux have focused attention on Linux and open-source software. What we find is that it is relatively easy for patent and copyright holders to find infringements of their intellectual property in open-source software because of free and unfettered access to the source code.

U.S. copyright and patent laws do not provide complete protection for the "innocent infringement" of rights.

Elsewhere, intellectual-property holders have had some success in suing proprietary software companies for patent and copyright infringement--witness the recent case by Eolas against Microsoft (though the case is on appeal). And as proprietary software companies increasingly share their source code with partners and customers, it will become easier to identify infringing code.

While the potential liability is clear, some have argued that the SCO case is merely an aberration and that the likelihood of intellectual-property lawsuits against customers is relatively low. The argument is that there is little to worry about because companies like Microsoft and Sun Microsystems are unlikely to sue Linux users for patent infringement. Companies are interested in winning those customers for themselves; they would be reluctant to start the relationship off with a lawsuit.

Undoubtedly, if customers--and not developers or distributors--are the only targets of a patent infringement action, then most rational patent holders would indeed choose not to sue. But rather than wondering which companies might sue, it's more worthwhile to focus on the more pernicious problem posed by what I call patent terrorists.

Patent terrorists are companies whose business models are based on patent litigation as a threat and licensing as a revenue source. With no interest in selling a product or winning new customers, these companies are not bound by the norms of customer relationship building. They would not think twice about suing large software customers if it fit into their legal strategy.

The result is competitive jockeying between companies offering their own indemnification policies in response to the liability risks faced by corporations deploying IT solutions. When it comes to indemnification policies, companies that create open-source and proprietary software are continuously evolving their thinking. Novell, Hewlett-Packard and Red Hat offer varying levels of legal protection to customers for their Linux products. Rather than offering traditional patent infringement indemnification, however, Novell promises to countersue with its own patent portfolio--presumably with the intention of settling on the basis of a cross-license.

Patent terrorists are companies whose business models are based on patent litigation as a threat and licensing as a revenue source.

If the litigant is a patent terrorist, however, the countersuit would have little deterrent effect. Microsoft has taken indemnification to a new level by protecting its customers against all patent and copyright claims, and promising to pay for any legal fees or damages resulting from those claims.

The burden is on CIOs to seriously consider the indemnification policies of their vendors before concluding big software purchases. Indemnification should not be the primary factor driving purchasing decisions but rather a key factor in calculating the total cost of ownership for any solution.

For those interested in purchasing open-source solutions but unhappy with the indemnification policy of their vendors, new companies are emerging to provide additional insurance against the threat of intellectual-property litigation. This is really the continuation of a trend of insurers providing coverage against intellectual-property infringement suits.

CIOs have traditionally viewed indemnification provisions as standard boilerplate portions of agreements--and often not as something that can even be negotiated. It's time to rethink that assumption. Indemnification policies and insurance can be important tools to reduce or eliminate long-term risk and maximize the present value of the products purchased.

CIOs may increasingly face the very real threat of patent terrorism. But they can only benefit from the growing competition among software providers to better protect customers from intellectual-property lawsuits.

Biography
Richard Wilder is a partner with law firm Sidley Austin Brown & Wood and is intellectual-property counsel for the Association for Competitive Technology.

More Perspectives

[rbochan]

Idiocy

Thanks so much, Richard Wilder, for adding to the idiocy and labeling more stuff as "terrorism". It's nothing more than a headline-beating, idiotic crock, that usually occurs when a writer is truly nothing more than a hack and can't come up with an intelligent, articulate, rational thought on his own.
"Journalists" like yourself are a big part of what's wrong in the US these days.

I will therefore, from this moment on, refer to terrorists as "Wilders".

[cbazza]

FYI: Some clarification

"Richard Wilder" seems to be a laywer and not a journalist. Also his choice of wording, specially "Patent Terrorism" is completely valid, logical and truthful. Companies like Eolas are simply legal-terrorists in the technology industry due to an oversight of the government to allow software patents in the first place.

[David Mohring]

Dealing With Terrorists:Expose and Exterminate

First Rule: Limit any dealing with organizations that threaten or encorage terrorism and acts of extortion though barratry.
http://tuxedo.org/article.pl?sid=03/08/21/1824254
http://news.com.com/2008-1082_3-5065859.html

Second Rule: Expose to the public gaze any organizations and individuals who make any threat through barratry or sponsor those that do.
http://www.opensource.org/halloween/halloween10.html

Third Rule: Analyze any and all public evidence with a view to negating or mitigating any such threat.
http://www.groklaw.net/

Forth Rule: Appeal to the authorities responsible for regulating the threating organization.
http://www.pubpat.org/Microsoft_517_Rejected.htm
http://users.rcn.com/srstites/jacuse/sec.complaint.v4.html
http://itheresies.blogspot.com/2004_03_01_itheresies_archive.html

Fifth Rule: Publicly expose the relative risk that the other side faces. http://www.newsforge.com/comments.pl?sid=39617&cid=96494

Sixth Rule: Get organizised to promote political intervention.
http://www.nosoftwarepatents.com/en/m/intro/index.html

Seventh Rule: Failing all other means to reach peaceful co-existance, or at least a state of detente (
http://www.historylearningsite.co.uk/detente.htm
), you can always follow the current USA policy model and take steps to exterminate the threating party.

Terrorists organizations and organizations that sponsor terrorists represent a threat to our way of life. ANY individuals, for it is individuals who make up any organization, who threaten any form of terrorism must now expect to face a DIRECT similar threat against themselves personally.
http://www.expertlaw.com/library/pubarticles/Business_Law/corporate_veil.html

Terrorism? You should be fired.

The author of this article and the editors who gave it that headline should be fed to Osama Bin Laden so they can have a better understanding of what terrorism truly is.

Main Entry: ter·ror·ism
Pronunciation: 'ter-&r-"i-z&m
Function: noun
1 : the unlawful use or threat of violence esp. against the state or the public as a politically motivated means of attack or coercion
2 : violent and intimidating gang activity <street terrorism> ?ter·ror·ist /-ist/ adj or noun ?ter·ror·is·tic /"ter-&r-'is-tik/ adjective

n : the calculated use of violence (or threat of violence) against civilians in order to attain goals that are political or religious or ideological in nature; this is done through intimindation or coercion or instilling fear [syn: act of terrorism, terrorist act]

[Konrad]

You should go to school Private None

I gather from your ignorant comments you have a poor grasp of the English language and probably don't understand what a metaphor is. I surmise that your only education is from Fox News newsbytes, and growing up with a 3rd grade education in some small trailer park community. I forgive you because I have Jesus in my heart.

I will begin by defining "indemnity," "metaphor," "terrorism" and how their relation to this article.

Main Entry: in·dem·ni·ty
Pronunciation: in-'dem-n&-tE
Function: noun
Inflected Form(s): plural -ties
1 a : security against hurt, loss, or damage b : exemption from incurred penalties or liabilities

Main Entry: met·a·phor
Pronunciation: 'me-t&-"for also -f&r
Function: noun
Etymology: Middle French or Latin; Middle French metaphore, from Latin metaphora, from Greek, from metapherein to transfer, from meta- + pherein to bear -- more at BEAR
1 : a figure of speech in which a word or phrase literally denoting one kind of object or idea is used in place of another to suggest a likeness or analogy between them (as in drowning in money); broadly : figurative language -- compare SIMILE
2 : an object, activity, or idea treated as a metaphor : SYMBOL 2
- met·a·phor·ic /"me-t&-'for-ik, -'fär-/ or met·a·phor·i·cal /-i-k&l/ adjective
- met·a·phor·i·cal·ly /-i-k(&-)lE/ adverb

Main Entry: ter·ror·ism
Pronunciation: 'ter-&r-"i-z&m
Function: noun
: the systematic use of terror especially as a means of coercion
- ter·ror·ist /-&r-ist/ adjective or noun
- ter·ror·is·tic /"ter-&r-'is-tik/ adjective


Mr. Wilder is pointing out the value of indemnification clauses in purchasing and licensing agreements to protect against putative licensors who have a distorted view of the scope and applicability of their intellectual property. This situation is not uncommon when an IP owner's primary revenue comes not from innovation of IP, but innovation in litigation. See SCO suit. A typical patent suit for example costs several million dollars to defend, EVEN IF THERE'S NO INFRINGEMENT! See http://www.patenting-art.com/economic/economic.htm

I believe the analogy to terrorism is very apt! Licensors will use litigation as a coercive method to obtain a license. From an economic perspective, it may be cheaper to pay $10K/yr in royalties as opposed to defending a patent suit regardless whether the licensor's claim has merit OR NOT! Fundamentalist Muslims for example use the Koran as a justification for their activities, whether the victims are in compliance OR NOT! Some people bow to these fruitcakes on the premise of longer life expectancy. The net result for non-compliance of either paradigm is fiscal death (IP) or physical death (infidels).

Call Mr Wilder!

Having lost family and friends in the World Trade Center, and through a bombing in Israel, I find it mind boggling that Mr. Wilder is now labeling intellectual property theft a terrorist act. May he never be invited to write for CNet again.

Give him a call or write him an email to let him know your thoughts.

[e-mail] Phone [phone]

[Johnny Mnemonic]

Language is not static...

Terrorism is not simply a modern phenomenon. Rather, the word, along with terrorist, first appears in English in 1795 in reference to the Jacobins of France. They ruled France in what was called the Reign of Terror from 1793-94. By 1798, the term was being applied generally to anyone who attempted to achieve political goals through violence and intimidation.

The word is thought to have been coined by the Jacobins themselves, but the French terrorisme is not recorded until 1798. If the Jacobins did coin it, they are the only ones to have used it self-referentially. The term has always had negative connotations since then.

One must not blacklist a "word" simply because of
the feelings it evokes.

[David Arbogast]

Mr. Wilder:

I could care less what metaphor you use to illustrate your point, because in the end your point is valid. However, rather that working endlessly to revise a patent system that will never please everybody, I prefer a light-handed approach to patent reform along with continued interpretion and judgement of claims by the judicial system. After all, that's what it was created for. I am not suggesting that either system is perfect, but rather that they should be used together because there is not complete solution for either.

Kafka had nothing on US Patent law

Kafka would not have dreamed the Catch-22 situation US patent law puts good citizens in could have really come about. It will put user companies, developers, etc. of software in a position of constant fear that what they are developing has been previously patented. This will without doubt gravely harm creative development and, in the long term, the economy. This 'Patent Terrorism' is simply the first symptom of a bureaucratic anarchy Kafka did not even begin to describe.

[gkisor]

Who is the real Patent terrorist?

Seems that big business has gotten to you. Anyone who is a student of the law knows that patents are a property right to protect inventions, not products. The framers of our constitution saw clearly that inventions, not companies' products, needed to be protected from those that would use the ideas without compensation to the inventor. The "real patent terrorists" are those that advocate that it is okay to use a patent of an inventor, solely because he isn't protecting a product. They further intone the inventor does not have the right to protect his property by the exact legal means the constitution allows if he is not associated with a business that makes that product. These misguided pundits actually help businesses in the stealing of the rights of an inventor, stating that it is good for this country to allow them to steal without liability, solely be cause they "make a product". The rights to protect your invention are the same rights that made this country the great bastion of innovation that it has become by encouraging all inventors, large and samll, to innovate. Just because someone is an innovator, but not a manufacturer, doesn't mean their invention rights should be ignored.

If Edison, Bell, the Wright Brothers, or even Ben Franklin could read your arcticle they would hopefully haunt you until you recanted :-).
-George King
Bellevue, WA

[meland4258]

business

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http://www.vistaprint.com/vp/gateway.aspx?S=4848761673

[Thunder Johny]

great business

http://www.analogstereo.com/citroen_c5_owners_manual.htm