Amid the patent wars, a powerful pact of non-aggression
FORTUNE — The Open Invention Network, a community set up by an IBM-led consortium in 2005 to foster a safe patent environment for developers and users of the free, open-source software operating system Linux, now has more than 500 signatories, the group announced today. The group surpassed that symbolic milestone last December, according to its CEO Keith Bergelt, and now signs up a new company roughly every three days.
In February 2008, when Bergelt came to OIN, the group had just 32 participants or, technically, “licensees.” OIN’s rapid expansion since then, Bergelt says in an interview, reflects that “businesses and organizations are becoming increasingly reliant on Linux and open source to grow their technology base and remain competitive,” and that “OIN’s patent non-aggression model is working to discourage litigation and encourage the kind of open innovation and shared creativity that is the hallmark of Linux and, more broadly, open source.”
Linux has quietly achieved an invisible pervasiveness in contemporary society. Though long dominant on servers, Linux has now also captured the largest share of consumer computing, if that category is defined to include, as it should, mobile devices and tablets as well as personal computers. According to a Goldman Sachs (GS) report issued last December, Google’s (GOOG) Android — which is Linux-based — enjoys a 42% share of all newly sold consumer computing products, compared with 24% for Apple (AAPL) and 20% for Microsoft (MSFT).
Linux now undergirds most cloud-based computing — what we do, for instance, on Twitter, Facebook (FB), or Amazon (AMZN); consumer electronics such as digital cameras and TVs; supercomputing, e.g., weather forecasting, genetic modeling, and particle physics experimentation; embedded devices like GPS navigation systems, handheld point-of-sale and tracking systems, and entertainment devices; and, financial trading including any transaction on NASDAQ or the New York, London, Tokyo, Frankfurt, Hong Kong, or Shanghai exchanges. It also powers most telecommunications switching equipment, so that even people who use iPhones are probably using Linux to complete their calls.
OIN’s 500th licensee, the Privly Foundation, provides software that enables political dissidents to post private messages on public social media, like Twitter. It is a small, relatively unknown, open-source project. Over the years, however, other OIN signatories have come to include such behemoths as Google, Cisco (CSCO), Hewlett-Packard (HPQ), Symantec (SYMC), Facebook, Twitter, Fujitsu, LG Electronics (LGL), HTC, and even Nationwide Mutual Insurance.
Linux was released in 1991 by the then-21-year-old Finnish student Linus Torvalds with the assistance of developers around the world. Though it is still written collaboratively by independent programmers — and Torvalds, now 43, still helps oversee additions to it — at least 75% of those who write it today are paid by corporations to do so, according to a 2012 Linux Foundation white paper. The companies that have made the most contributions in recent years are Red Hat (RHT), Intel (INTC), Novell, IBM (IBM), and Texas Instruments, according to the paper.
Though all technology companies must worry about patent suits, such attacks pose special threats for open-source software users. Unlike proprietary code, like Microsoft’s Windows or Apple’s iOS, open-source software permits users to freely examine, copy, alter, and customize source code. A patent claim against open-source software, if found to be valid, would prevent users from exercising any of those freedoms.
OIN was one of the first defensive patent aggregators. Such groups acquire patents for the protection of their members, clients, or licensees, rather than to seek revenue through licensing and litigation. (Two other defensive patent aggregators, the nonprofit Allied Security Trust and the for-profit public corporation RPX (RPXC), were launched in 2007 and 2008, respectively. While Nathan Myhrvold’s Intellectual Ventures investment fund billed itself as partially defensive when it launched in 2000, it is today widely regarded as the opposite: the largest patent aggressor — or, pejoratively, “troll” — in the world, actively seeking revenue from a war chest of between 30,000 and 60,000 worldwide patents and patent applications, according to a 2012 law review article by Professor Robin Feldman, of the University of California at Hastings Law School, and Thomas Ewing.)
OIN has acquired a strategic portfolio of more than 600 worldwide patents and patent applications, according to Bergelt, including more than 400 that are specific to the U.S. It buys these to make sure they do not fall into the hands of potential trolls, and also to make them available to its licensee companies for potential use in counterclaims in the event that they face a patent suit from an outside aggressor. For instance, in May 2010, when Microsoft sued OIN licensee Salesforce.com (CRM) for alleged patent infringement relating, in part, to its use of Linux, OIN assigned (i.e., transferred) two of its patents to Salesforce.com, apparently to be available for use in counterclaims. The case settled shortly thereafter.
In exchange for gaining access to OIN’s portfolio, each licensee also commits not to use its own patent portfolio against any other licensee vis-à-vis Linux-related software. Collectively, OIN licensees hold more than 320,000 worldwide patents. (Though, of course, only some fraction of those have any potential relevance to Linux.)
The money for OIN’s portfolio acquisitions is provided by its six founding “full” members — IBM, Red Hat, Novell, Philips, Sony (SNE), and NEC — and its two “associate” members, Google and Canonical. Google’s status as an associate member has not previously been reported. It became an OIN licensee in 2007, when it was still just an end-user of Linux, but has since become a major writer and purveyor of Linux-based code for its Chrome browsers and Android operating systems.
TomTom, the GPS navigation company, also plays a “heightened” role in OIN, Bergelt acknowledges, though he declines to elaborate further. TomTom joined OIN in March 2009, after Microsoft sued it for alleged patent infringement relating, in part, to its use of Linux. That case also settled quickly.
A search of the U.S. Patent and Trademark Office database by Fortune for this article turned up the fact that OIN transferred some patents to two of its member companies last year — the first time it had done so since the Salesforce.com transfers in 2010. Specifically, it assigned 11 patents to Google last March, and 25 to Red Hat last June.
Google declined to comment on its acquisitions. Asked to examine those patents by Fortune, Erin-Michael Gill, the chief intellectual property officer at MDB Capital, an IP investment bank, said that it was “immediately obvious” that at least three of them (available here, here, and here) were “very, very broad;” “very very fundamental;” “potential crown-jewel type patents” that neither OIN nor Google would want to fall into a troll’s hands. One, for instance, granted in 1996, enables a Web surfer, upon returning to a previously visited Web page, to recognize which hyperlinks he has previously clicked on by their changed color.
Rob Tiller, the vice president and assistant general counsel, IP, for Red Hat said that the patents it acquired from OIN last June were not “aimed against any particular aggressor.” They included, he said, patents relating to web services, virtualization, enterprise collaboration, and internet browsing, and “are now part of our deterrent force available against any aggressors that attack Linux and open source.”
One important early licensee of OIN, Oracle (ORCL), which joined in March 2007, effectively withdrew from the group last March (though its cross-licensed portfolio as of that point remains available to OIN members). Oracle was then, and still is, involved in patent and copyright litigation with Google over Google’s use of Java in Android. Oracle did not respond to a request for comment. In an interview, Bergelt commends Oracle for its early entry into OIN and says he hopes it will return upon resolution of its dispute with Google.
Bergelt is also hopeful, he adds, that Intel and Samsung will soon become OIN licensees, especially in light of their prominent involvement in the Tizen Association. Among other things, the Tizen project is currently providing automakers with Linux-based software to run in-vehicle navigation and infotainment systems.