Perens: Education greatest weapon in IP warfare, part 2

The SCO lawsuits are just the tip of the iceberg, said open source evangelist Bruce Perens, who Wednesday delivered his third biannual Open Source State of the Union at LinuxWorld. Perens, a board member with Open Source Risk Management, an open source risk management services and products firm, warned IT shops to get smart about software contracts. In part two of this interview, he predicts that the forces of monopoly will put their legal war chests behind more and more software intellectual property battles. Click here for part 1.

I think the only thing that the next six months to a year holds is more litigation.
Bruce Perens
Open source advocate
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I think the only thing that the next six months to a year holds is more litigation.
Bruce Perens
Open source advocate
How can businesses protect themselves from IT-related intellectual property lawsuits?
There needs to be much more intellectual property education in software shops.

For example, it's often the case that many people in that company will click through a software contract and click 'yes' when they are downloading a piece of software. But if you ask your company's legal department, you will probably find out that only a few people in your company are actually authorized to push the 'yes' buttons. Think of it, employees who are not legally allowed to except a contract on behalf of a company do it all the time when they download, install and register software on their desktops. Could you offer another example of ignorance not being bliss?
In software development shops, I find that loss of documentation is rampant. Companies have forgotten where they have gotten their software or what parts of their software they own.

That's what happened to SCO, which claimed that Linux was infringing its BPF software. I had to tell them that BPF stands for Berkeley Packet Filter, which came from the Berkeley labs and was funded by the U.S. government. So, SCO had lost the documentation that they had gotten the software from the outside.

SCO is certainly not the only company that that's happened to. I noticed cases at Hewlett-Packard, where it was not at all clear where HP had gotten a piece of software, and the software had existed for 10 or 15 years. All of the people who had worked on it were gone, and the legal information about the software was not kept with the software. So, it wasn't immediately accessible to the engineers.

So, with more education, there are obvious things that we can do to improve our systems. How can corporations using open source software determine what their risk of being sued or of having problems would be?
First of all, this is not just something concerning open source software. In fact, it is actually a worse problem for proprietary software than for open source. The reason is that most proprietary vendors are not large. While a good many of them claim to offer indemnity and may be backed up by an insurance policy, the customer has no way of telling whether their software vendor can actually sustain a claim on their indemnity or not. If there is an infringement in proprietary software, the stakes are much higher because more money has changed hands. Can you give an example of how such an infringement would take place?
In the United States, patent law is written like a patent title that says an infringement claim can be brought for various claims. So, one form of infringement is simple using the product. The way the patent title is written, there is nothing that says the patent holder can't sue the end user. It doesn't say that the patent holder can only sue someone who develops something that infringes on the patented software. So how does this play out in real life?
You see something like SCO going after AutoZone. AutoZone obviously did not develop the software. The AutoZone lawsuit actually is interesting in that regard. AutoZone is caught up in what is potentially a copyright infringement suit; it is not a patent suit.

In that particular case, SCO is attempting to use the discovery process to find out what the internal software of that company is doing. They may not be allowed to do this, but if they are able to go on this fishing expedition, that [will not] bode well to other companies that only use software internally. The fact that you have never distributed the software is not an excuse under the law regarding infringement. Where do you see the patent issue going in terms of business software? What does the next six months to a year hold in you opinion?
I think the only thing that the next six months to a year holds is more litigation. We are hearing an increasing number of voices -- and certainly not all from the open source world -- calling for software to reform in general patent reform in the United States. Quite a few people in technology are getting on that. But it is going to take years, and I think it is going to get much worse before it gets better. @4875 What's the impact of so much IP litigation on software innovation by smaller companies?
Small software companies, on the other hand, are at a very great disadvantage to larger companies. This is going to be more visible in the future regarding the Internet and in general standards. Large companies are working, sometimes covertly, to embed their software patents into industry standards with the intent that they will try and install users at that particular Internet service. In other words, they will be able to set up a call gate on the Internet. Now, this doesn't bother Microsoft because Microsoft can -- in general -- get the patent holder to cross license and then Microsoft can execute on this technology without paying a cent.

Now consider a smaller company that makes some Java-based middleware. A company of that size cannot generally force another company to cross-patent with it. Smaller companies may not have a patent portfolio, so -- conceivably -- in the future, they may have significant royalties to pay to companies making patented software that exercise Internet standards. I guess there are no public defenders for patent suit defenders …
Right. So, what are my choices as an individual or small business? I could go to court, but the American Intellectual Property Law Association says that there is a $2.5 million cost for litigating a software patent. So, if I am being asked for $50,000, $100,000 or $500,000 to license a patent, it is much more to my advantage to just go ahead and license it whether or not its claims are illegitimate.

As a small entity, I cannot afford to prove that a bad patent is a bad patent in court. The small players are going to be shaken down by other companies, very often larger companies, to pay royalties.

Besides not being able to go to court, these companies don't have any organization that is effectively representing them. They haven't been speaking to their legislatures. Over in Europe, software patenting is being quite literally rammed down their throats. The European parliament decided to strongly restrict software patenting, and the competitiveness ministry actually overrode the elected representatives.

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Click here for part 1.

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