[arch-general] Patent protection

[David C. Rankin]

On 12/09/2010 05:05 AM, Peter Lewis wrote:
>> It would be interesting to know what other distros are doing, specially
>> > the larger ones which might be a target first.
> My view would be that we need to reject even the idea of stuff like this. It's 
> just FUD, and quite effective FUD at that.
> 
> Pete.
> 

In anything like this you have to ask "what is the business model here..." At
face value, OIN leaves you scratching your head.

Business Model:

  (1) Acquire Patents
  (2) Make them available royalty free in exchange for an agreement not to sue
Linux.

>From the FAQ:

Q. What does Open Invention Network® do with the royalty streams of its patents?
A. It is not anticipated that there will be any royalty streams.

Huh? A company that buys patents and gives them away for free? Let me invest --
sign me up?

So what is the end game here?

(A) CEO Keith Bergelt, is either an altruistic Linux patriot - not; or

(B) perhaps Bergelt sees something in it for him. A brief review of his history
points to a possible answer:

Prior to joining the Open Invention Network®, Mr. Bergelt served as president
and CEO of two Hedge Funds – Paradox Capital and IPI – formed to unlock the
considerable asset value of patents, trademarks and copyrights in middle market
companies. Paradox and IPI were the first Funds of their kind to offer specialty
lending products supported exclusively by intellectual property. Driven by Mr.
Bergelt's creativity and entrepreneurial approach, these funds enabled the
emergence of patents, trademarks and copyrights as a viable source of collateral
in asset-based loans, forever reshaping the emerging IP Finance landscape.

So it would appear or suggest, that OIN wants to collect patents that can then
be used as collateral for securing the acquisition of capital -- for what...? It
starts to smell a bit like collateralized debt obligations or credit default
swaps at this point. (Take existing paper, not worth much in its current form,
repackage it in a new or different way, have a voodoo appraisal done that vastly
overstates the value of the patents, and use it as collateral to secure huge
loans for OIN -- brilliant)

The real danger to the community is in the event of default by OIN on any
obligations secured by the OIN patents and having the patents change hands. In
that event, the new owners have no obligation to continue the *royalty free*
licensing model and can choose to either (1) fire-sale the patents to the
highest bidder - linux competitors perhaps; (2) discontinue the royalty fee
license and extort money from those that have integrated the technology into
their business or products; or (3) turn into patent trolls to recover money in
that manner. Or any combination.

I don't see OIN Membership as providing any benefit to Arch or any other distro
for that matter. The only tangible promise is a hollow 'you won't get sued by
any member that enters into a OIN licensing agreement'. So what. That and 50
cents will get you a cup of coffee -- maybe.

At best, anyone faced with a suit possibly implicating the protections of the
OIN scheme, stands as nothing more than a third-party beneficiary of the license
agreement between OIN and the licensee. At first blush, I can't even come up
with a scenario where that would be any type of defense at all. (proving you
were an *intended* third-party beneficiary is never a sure thing)

Anyway, this is just my quick cut on the issue after thinking through the issue
briefly and looking into the information OIN has up on its site. I see this is
one of those things you treat like a rattlesnake. The only way to stay safe is
to stay out of striking distance...


-- 
David C. Rankin, J.D.,P.E.
Rankin Law Firm, PLLC
510 Ochiltree Street
Nacogdoches, Texas 75961
Telephone: (936) 715-9333
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www.rankinlawfirm.com