Intellectual property in Open Source Software and Open Standards: Two strategies against open innovation

-- NikolaosVolanis - 22 Dec 2009

"Fear, Uncertainty and Doubt"

The threat of software patent litigation has generally created an atmosphere of legal uncertainty that is detrimental to the OSS community as a whole, particularly due to the “sharing” mentality of OSS and potential liability for all users and developers: Indeed, if one OSS developer is a patent infringer, then so are all other users and developers of the same software. This collective exposure to patent hold up represents a stronger incentive for patent trolls to attack OSS users, since this may generate economies of scale in litigation. The SCO v. IBM case is a lucid example of targeting OSS users, even though it is not primarily a patent infringement case. On March 6, 2003, the SCO group filed a $1 billion lawsuit against IBM claiming that IBM has, without authorization, contributed SCO’s IP to the open source codebase, Unix-like Linux operating system. In May 2003, SCO sent a letter to members of large US firms warning them of the possibility of liability if they use Linux. Another series of letters was sent in December 2003 alleging copyright infringement related to 65 files in the Linux code tree. Following a series of lawsuits and counter-lawsuits, the cases are still pending before various courts. IBM has explicitly noted (Section E, paras 22-24) that SCO has engaged in a technique, so as to create a false perception that SCO holds the IPR rights to UNIX which permit it to control not only all UNIX technology, but also Linux. This impression has been further reinforced by various statements of SCO’s chief executive officer, regarding potential liability for Linux users.

This legal uncertainty due to software patents is usually termed "FUD" – acronym for “Fear Uncertainty and Doubt”. It was first used in the computer hardware industry in 1975, as an attempt to describe IBM’s marketing and public relations policy, as a strategy aiming to influence the public by disseminating unfavourable opinions about a competitor’s product, to overstate the estimation of switching costs if current customers decide to migrate to a rival company’s products or to maintain a leverage over a current business partner who could potentially become a rival. Additionally, when said strategy is combined with the threat of enforcing intellectual property rights (IPRs) that belong to the company, then the specific IPRs are not only used to expose individual companies to legal threats, but also to create a climate of legal uncertainty which is detrimental to the OSS community and the industry as a whole.

Since the 1990s, the term has been used to characterise a facet of Microsoft’s response to the open source movement, which has been implicitly acknowledged in the company’s internal “Halloween Documents”. The Halloween documents comprise a series of confidential Microsoft memoranda (drafted by Microsoft employees Vinod Valloppillil and Josh Cohen) on potential strategies relating to free software, open-source software, and to Linux in particular; and a series of responses to these memoranda. Both the leaked documents and the responses were published by Eric S. Raymond, an open source advocate co-founder of the Open Source Initiative. Marked "Microsoft confidential", these documents identify open-source software, and in particular the Linux operating system, as a threat to Microsoft's dominance of the software industry, and suggest ways in which Microsoft could disrupt the progress of open source software. According to the Halloween Documents, OSS is identified as a “long-term credible” product and thus “FUD tactics cannot be used to combat it”. Still, over the following years, Microsoft has made various announcements regarding the potential dangers of developing or using OSS software, particularly with regard to the General Public License’s (GPL) “viral nature” which “_[...] poses a threat to the intellectual property of any organisation that derives its product from GPL source_”, and to the potential liability for users of Linux, since the latter software allegedly infringes 235 of Microsoft’s patents. This acknowledgement has been recently followed by relevant legal action taken by Microsoft against a company using Linux as the software platform for their products. The latter case was eventually settled out of court.

"Embrace, Extent and Extinguish"

A different strategy, founded on the same basis of IPRs, has been followed in the course of open standards (HTML 4.0 standards in particular), in the seminal competition case between Microsoft and the U.S. Department of Justice. As referenced in the proposed findings of the Department of Justice , “[...]_ Microsoft’s response to the browser threat was to “embrace, extend, extinguish”; in other words, Microsoft planned to ‘embrace’ existing Internet standards, ‘extend’ them in incompatible ways, and thereby ‘extinguish’ competitors_.” (Section V.A.3.b. para. 91.3.2). In this context, the first step involves the development of software which is substantially compatible with competing products and which implements the public standard, the second step refers to the adding or promoting features which are not supported by competing products or part of the standards, and thus creating interoperability problems for customers who attempt to use the standard without said additions or features, whereas the third and final step involves the marginalisation of the competitors, by the time these additions or features become a de facto standard because of the company’s dominant position in the market.

A similar example is also the contest between Sun Microsystems and Microsoft, whereby, Sun accused Microsoft of attempting to use the same technique to “extinguish” its Java cross-platform language. Sun allowed users to freely download the tools needed to read and write programmes in the Java language, which has become popular because of its cross-platform interoperability. In this context, Sun licensed Java technology to Microsoft for its inclusion in the Windows platform. However, Microsoft applied a stratagem of “embrace and extend”, by implementing additional features in Java which were not part of Sun’s standard. In this context, if developers wrote software that took advantage of the extra features, this software would only run in Java running on the Windows platform, thus “extinguishing” Java’s cross-platform compatibility that Sun was aiming for. For this reason, Sun sued Microsoft based on patent infringement and antitrust violations. In 2003, the 4th U.S. Circuit Court of Appeals reversed the decision of a lower court, by deciding that Microsoft did not have to distribute a version of Java endorsed by Sun, but on the same time affirmed that Microsoft violated Sun’s copyright by distributing its own version of the language for the Windows platform. In this context, Microsoft was not burdened with a “must-carry” obligation, but simultaneously was prohibited from distributing any version of Java other than that licensed to Microsoft in a 2001 Agreement with Sun. Finally, the companies reached a settlement over Sun’s antitrust claims in 2004.