Home Business IT Open Source Red Hat paid $US4.2m to settle patent suit: claim

Red Hat paid $US4.2m to settle patent suit: claim

Red Hat paid $US4.2 million to settle a patent infringement suit brought against it by FireStart Software, an intellectual property activist claims.

Florian Mueller, who made a name for himself during the campaign to prevent the adoption of software patents in Europe some years ago, said he had dug up a court filing that showed the payment had been made.

"The significance of this finding lies in how it reflects on Red Hat's credibility," Mueller wrote in his blog.

He said in the political and regulatory contexts, Red Hat insisted that open source licences (especially the GNU General Public Licence) were incompatible with payment of patent royalties. "...this simply depends on the specific terms and conditions of a deal," he added.

Mueller said Red Hat used the GPL as a pretext for refusing to offer its customers implementations of patent-encumbered standards such as the AVC/H.264 video codec.

"Another important credibility issue is that the world's largest open source company actually fails to be open about its patent-related dealings and positions, a fact that others have criticized (sic) before," he said.

"It hides behind self-imposed confidentiality obligations and employs legalese terminology that in the eyes of many laypeople will appear far more favorable (sic) to Red Hat than a straightforward representation of the facts would."

Red Hat has been contacted for comment.

Mueller says the payment made by Red Hat was kept secret but news about it surfaced in another suit. (PDF - 450k)

According to him, FireStar Software filed a suit in the US District Court for the Eastern District of Texas in 2006. It was alleging that a patent related to linked databases (US Patent No. 6,101,502) was being infringed by Hibernate, a JBoss product.

At the time that FireStar first approached JBoss, the process of its acquisition by Red Hat had begun. Mueller says that FireStar may have regarded this as "a financial opportunity".

"The patent-in-suit was later assigned to a Texas company named Datatern," he said. "An investment group named Amphion Innovations US, which owns a stake in FireStar and set up its wholly-owned subsidiary DataTern as a patent licensing company (i.e., a non-practicing (sic) entity), also became a party to the suit.

Mueller says the settlement related to any patents held by companies that might be infringed by Red Hat's products.

"Red Hat published a redacted version of the settlement agreement and a 'reader's guide' to it. the only part that had been redacted was Section 3, "PAYMENT".

"There were different references to that payment in the publicly available parts of the agreement (and the parties agreed to pay their own legal fees), but the amount was not stated anywhere else. Section 7 stipulates a confidentiality obligation concerning the section on payment."

Mueller said that after a while the plaintiffs sued the law firm that had represented them against Red Hat for alleged malpractice.

"In connection with that case (case no. 2:09-cv-00038, Eastern District of Texas), the parties initially didn't mention the amount paid by Red Hat, but then an additional group of companies came in: IP Navigation Group and affiliated entities.

"Those companies belong to Erich Spangenberg, who, according to law.com, runs one of the 'largest, and most litigious, patent-holding companies' and recommends a 'sue first, ask questions later' approach."

Citing from law.com, Mueller said it quoted patent defence company PatentFreedom, according to which "entities connected to Spangenberg have sued more than 500 [by now even more than 600] companies for patent infringement since 2005".

He says Spangenberg "became involved with the FireStar/Red Hat dispute when the right holders were unhappy about the state of affairs and brought him in as additional firepower to pressure Red Hat into a settlement.

"On October 1, 2009, Foley & Lardner (the firm that represented FireStar), amended its 'counterclaims, third-party complaint, and cross-claims', and paragraph 11 of that document made the following revelation: 'Of the $4.2 million settlement that the Plutus Parties [Spangenberg] obtained on behalf of Plaintiffs [Amphion/Datatern], the Plutus Parties took $3.4 million'."

Mueller added that statements made in such a court filing must have evidentiary support, "so we can rely on the accuracy of that information".


Mueller said that in a bid to appease the FOSS community, "in which there is a widespread belief that the GPL doesn't allow inbound patent licensing, Red Hat emphasized in its announcement that its settlement also covers 'community members' (upstream and downstream) as 'third party beneficiaries'. Indeed, Section 9.12 of the settlement agreement contained some provisions.

"In the press release announcing the deal, Red Hat's patent attorney Richard Fontana said: 'Red Hat's settlement satisfies the most stringent patent provisions in open source licenses, is consistent with the letter and spirit of all versions of the GPL and provides patent safety for developers, distributors and users of open source software'.

He said Eben Moglen of the Software Freedom Law Center reviewed the agreement and concluded that it would also be compatible with GPLv3 (although only GPLv2 was relevant to that particular deal). "He liked the fact that its terms 'provide additional protection to other members of the community upstream and downstream from Red Hat' and welcomed 'Red Hat's efforts on the community's behalf'."

Mueller added: "Considering a $4.2 million payment compatible with the GPL is, however, in contradiction with what Red Hat and its lobbying fronts claim in different political and regulatory contexts.

"For example, when the European Commission was updating its European Interoperability Framework (a set of procurement guidelines), Red Hat and its different lobby groups claimed that only royalty-free standards are compatible with the GPL and other important FOSS licenses (sic).

"I debunked that false claim and instead advocated a proper distinction between patent licensing terms and conditions that work for FOSS from those that don't. That is exactly the approach the EU took in the final version of those guidelines.

"I believe Red Hat should have told European policymakers the truth about its FireStar settlement and unknown number of other patent license (sic) deals in place instead of trying to gain a political advantage with incorrect claims that royalties are inherently GPL-incompatible."



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Sam Varghese

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A professional journalist with decades of experience, Sam for nine years used DOS and then Windows, which led him to start experimenting with GNU/Linux in 1998. Since then he has written widely about the use of both free and open source software, and the people behind the code. His personal blog is titled Irregular Expression.