Novell RIP: Implications of Microsoft Getting Creative with IP Ownership

Rob Enderle

This week, the passing of Novell was announced as Attachmate bought the company and most of the assets passed to CPTN Holdings, a consortium of companies created by Microsoft to hold patents. Attachmate, which largely lives as a mainframe interoperability with connectivity services and products, is likely planning to expand more aggressively into non-mainframe areas with the acquisition. However, it is CPTN Holdings that may represent the more interesting part of the deal.


CPTN may be both a defensive and offensive tool for the companies that have invested in it. It's a defensive tool in that the patents can be used by the investors if the investors are sued for related patent infringements. It can also be used as an offensive tool against companies infringing on CPTN patents that are competing with the investors. If that were to happen, CPTN could be the entity taking the action to shield the investing company from anti-competitive challenges.


Let's explore this a little bit.


The IP Mess of 2010


This year has seen a massive uptick in litigation between companies, with Google involved in most of the action. We have Apple and Microsoft going after Android licensees; we have Oracle attacking Google with Java; we have counter suits popping up as well. It's beginning to feel like a wonderful decade if you are an IP litigator. But if you are trying to bring a potentially infringing product to the market (particularly one that has roots tied to Linux), it's not looking so attractive.


This litigation is becoming an increasingly huge distraction, particularly because everyone seems to want to depose or put CEOs on the witness stand in order to either embarrass them-like Oracle wants to do with HP's new CEO-or force the company to make a settlement, which is what SCO had intended to do with IBM.


CEOs aren't huge fans of being deposed or being on a witness stand thanks to seeing Bill Gates' taped testimony in Microsoft's DOJ trial. They would rather have someone else deal with these problems.


Creating an Arm's Length Litigation Entity


The sustaining lesson from the SCO disaster is that firms that try to be active in litigation and in trying to bring products to market will fail with at least one of the two efforts or both. This suggests a different approach: one that puts the intellectual property that will be used both offensively and defensively into a pool that can be managed by a company that is structured and staffed by litigation experts, much like a patent troll is staffed. This provides a corporate vale between the companies that hold the patents and those litigating to protect them or the firms' interests, and to place people who are properly trained in key decision-making roles. In a way this could be both the best offensive play and the best defensive play against patent troll companies because it's a better match for them in terms of skill-sets and the company can effectively compete with patent troll companies for legal resources.


If the UNIX patents are used against companies like Redhat and Google, many of the problems SCO experienced would be avoided and it would potentially protect Microsoft and its partners from retaliation. The holding firm is missioned to protect the properties it manages and it wouldn't be acting under the direct control of any of the investors, but its goals and the goals of those investors would be aligned.


This could turn out to be rather brilliant in hindsight and it suggests that Microsoft is upping their game and getting very creative in an area that hasn't seen that much creativity of late.


Wrapping Up: Redhat and Google First Targets


But what does this mean for you? Well, not much, unless you are licensing Redhat Linux, Android or Chrome OS. And if you are and you aren't an IT vendor, this probably won't have much impact on you in 2011.


However, if this new patent holding consortium does go on the offensive, which is likely, it will probably target either Google or Redhat first. Because Redhat doesn't have much in the way of resources, it may be an easier target-but a less lucrative one-and has likely been preparing for this litigation for some time. This will be CPTN's call because Microsoft, to get the protection of being at arm's length, must leave this choice to the holding company.


Google's CEO, however, has a historic inability to think before he speaks or writes. Google hasn't really done that much work to prepare for litigation and has deeper pockets to pay settlements or judgments. In addition, Google is large and increasingly disliked as a company and would be a far less likely defendant to provide PR advantages as well. However, Google's licensees, to date, have been far more attractive targets and most of the low hanging fruit is already engaged in litigation making the choices more interesting.


Long-term consortiums like CPTN holdings may be how big companies pool resources in order to buy IP and to provide mutual protection and a return on their IP investments. This might actually lead to less litigation over the long-term. We'll see, but one thing is certain: Microsoft is thinking creatively here and that means change is certainly in the wind.

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