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The litigation business – The Free Software Column

SCO’s action against IBM and others failed, but reflects a fashion in the technology industries – not restricted to SCO – for replacing innovation and business with teams of lawyers and threats of litigation, says Richard Hillesley

Recently Groklaw revealed the unsurprising news that the sco Group is seeking to renew its hopeless and unrelenting legal fray with IBM.

SCO’s original claim was that IBM and others had copied “substantial System V code” into the Linux kernel. SCO had bought some of the rights to System V UNIX from Novell prior to its purchase by Caldera Systems, a Linux company, and its re-formation as The SCO Group. The deal had been intended to open up SCO’s extensive business channels to Caldera OpenLinux. But instead, the newly formed SCO Group decided to take the plunge into the world of litigation. SCO sued not only IBM, but two firms, Autozone and DaimlerChrysler, that used Linux internally, and sent notice to all Fortune 500 and Global 2000 companies that “Linux infringes on our UNIX intellectual property and other rights.” As a result, many companies declined to use Linux, which resulted in IBM and Red Hat countersuing SCO.

The SCO Group’s actions failed, but reflect a fashion in the technology industries for threats of litigation around patents, copyrights and trademarks. Sadly, the structure of laws surrounding ‘intellectual property’ and the short-termism of business culture during the last 30 years has made litigation an attractive way of doing business. Big money can be made for a relatively small outlay. There are many firms for whom possession of ‘intellectual property’ has become the primary objective of trading. Classic examples of companies pursuing profits based on the ‘ownership’ of ideas include Forgent Networks Inc and NTP Inc.

In 2004, Forgent Networks Inc threatened legal action against 44 businesses that used JPEG digital image compression – a technology that had been in use by thousands of companies since the 1980s. The original patent dated from 1987 and was purchased by Forgent in 1997.

In 2000, NTP Inc, a Virginia-based company with few assets other than 50 US patents, notified Research In Motion, the manufacturer of the BlackBerry, that its wireless email infringed a mobile email patent owned by NTP. RIM faced the choice of shutting down its network or handing over millions of dollars. RIM chose to pay a toll to NTP of $612.5 million.

Copyrights and patents were supposed to protect the rights of the creator. Copyright was conferred for a limited time to the original creator of a work of scholarship or art. Patent rights belonged to the originator of an idea or concept and were only granted – again, for a limited time – after strenuous tests of originality and appropriateness had been met. They would only be conferred on inventions that were entirely original, were not obvious, and had the potential to radically transform the way things were done.

Over the last 30 years the bar has dropped, and patents are issued for trivial and obvious inventions. Patents can be disputed, but the cost of doing so is prohibitive. Ownership has been conferred not on individuals, creators or inventors, but on the corporations that employ them, and ownership is traded between firms. As a consequence, companies have come into existence that have no purpose other than to claim new patents, or to purchase moribund patents and chase them through the courts for their own profit. They have nothing to lose and everything to gain. The prime example of such a company is Intellectual Ventures (IV), founded by Nathan Myhrvold, who was once Microsoft’s chief technology officer, with the sole objective of collecting patents and licensing them to others.

In many cases, the cost of contesting a patent, searching for prior art and the recruitment of lawyers, is prohibitive and a distraction, so a settlement is made without recourse to the law and the validity of the patent is never contested.

Owning your own patents as a bargaining chip is no defence against a troll. Far from encouraging openness and the spread of ideas, the cumulative effect of the patent industry is to stifle innovation – and to limit technological exploration to those who can afford a roomful of lawyers.

If the SCO Group had continued to pursue its primary business, of producing Linux- and UNIX-based software, it may have continued to thrive. As it transpired, SCO didn’t own the requisite rights to System V UNIX, and failed to demonstrate that there was any copied code in the Linux kernel. Litigation didn’t pay, but SCO did impede the progress of Linux.

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