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The Red Hat-FireStar Settlement Agreement is Published - updated
Tuesday, July 15 2008 @ 04:03 PM EDT

As you know, Red Hat and FireStar settled their patent litigation in June. One of the terms required confidentiality for 30 days, but that time period is over, so we now have the agreement [PDF] itself to study, minus only the clause on financial terms. Red Hat VP and Assistant General Counsel Rob Tiller announced the release of the document today:
In the spirit of freedom and openness, we are happy to make the agreement public today here. We hope it will be a useful tool both in addressing existing legal threats and also in suggesting methods for addressing threats as yet unknown.

The agreement is, of course, a legal document. Some of the language is routine legal terminology, and some concerns the parties to the case and is of no general interest. On the other hand, the agreement has some important ideas expressed in terminology that may be unfamiliar to the non-lawyer reader, and so some explanation may be useful. Here are some pointers on where to find the juicy parts and how to figure out what they mean. To state the obvious, this is not intended as legal advice and should not be relied on as such.

I wrote about it back in June, based on Red Hat's press release, but now we have the agreement itself, so we can verify that the settlement covers everybody, upstream and downstream, and not just Red Hat and not just Red Hat customers, while at the same time satisfying the requirements of the GPL. Tiller explains the various clauses. So let's go over some of the pertinent language in detail. Tiller explains it, but I'm going to break it down a bit more, to make sure you understand. Of course, in doing that, there is always a chance that I will make a mistake, and I'm not a lawyer, so if there is any perceived difference between what I write and what Tiller wrote, he's correct. I'm just trying to explain legal terminology in ways that make it more accessible to you. If you still have questions, you can send them to press@redhat.com. Tiller says they'll try to address them in future posts on Red Hat's site.

Most of the agreement is typical language, but Tiller explains the parts that are specific to this agreement, which is groundbreaking. It's living proof that the GPL can function as intended, and without compromise, while still dealing with US patent law.

As I've often explained, when reading a contract you need to start with the Definitions section, because how a term is used in a contract can affect the meaning of the clauses that come later. That is more true in this agreement than in most contracts, because there are terms that are not typical and some new definitions. Some of the misunderstandings I've seen about the agreement are, I think, a result of not having the agreement itself and particularly the Definitions section to look at before.

Definitions

Tiller explains what "Licensed Patents" means in this agreement:

Section 1.10 defines Licensed Patents to include Specified Patents, which are in turn defined in Section 1.22 to include U.S. Patent No. 6,101,502, U.S. Patent No. 5,937,402, U.S. Patent No. 5,826,268, U.S. Patent No. 5,542,078, and U.S. Patent No. 5,522,077, and any other patent owned, controlled, or enforceable by DataTern before the effective date, any patent issuing from or claiming priority to a pending patent application by DataTern, and any foreign counterpart of the listed patents.

There were five patents in the litigation, then, but as you can see on page 17 of the PDF, Exhibit A, two of the patents had expired for failure to pay maintenance fees. I'm guessing the FireStar lawyers turned purple when that came to light. Here's what was left: U.S. patent No. 6,101,502, 5,937,402 and 5,522,077, plus any foreign counterparts. The licensed patents in the agreement, however, include all five of the patents. I doubt that any money was paid for the two that had expired though.

OK. So that is what is being licensed. But who benefits from this license? The other definitions will help us be sure. Note on page 3 of the PDF that clause 1.15 defines "Red Hat" to mean Red Hat, the Delaware corporation, but also "all parents, subsidiaries, Affiliates, related entities, or successors, and any Entity which is now or which shall subsequently be owned or controlled, either directly or indirectly, in whole or in part, by Red Hat, Inc. So, any time you see the words "Red Hat" in the agreement, that is who is meant. "Red Hat Brand" is equally inclusive:

1.16 "Red Hat Brand" means a trademark, service mark, trade name, or brand owned, exclusively licensed, or controlled, now or in the future, by Red Hat.

These broad definitions cover Red Hat, yes. But they also cover JBoss and Fedora and anything in the future like them. It doesn't just mean something that is part of a commercial product offered by Red Hat. And, as Tiller points out, it also covers upstream: "It also includes upstream predecessor versions of any such code pursuant to Section 1.21."

Here's the part that defines "Red Hat Community Member", and they need to define it because it isn't only Red Hat that gets broad rights to the licensed patents. And this is the part where you need to read very, very closely. Notice it is defined as very inclusive also, with a much broader meaning than just a customer of Red Hat:

1.18 "Red Hat Community Member" means any Entity that is a licensee or licensor of, contributes to, develops, authors, provides, distributes, receives, makes, uses, sells, offers for sale, or imports, in whole or in part, directly or indirectly, any Red Hat Licensed Product, including without limitation any upstream contributor to, or downstream user or distributor of, a Red Hat Licensed Product. An upstream contributor includes, for example, an Entity that contributes to a software product, so long as a copy or derivative work of that software product is distributed or used by Red Hat. For example, an Entity would be an upstream contributor if it contributes to a version of Open Office if that version or a derivative work of that version is distributed by Red Hat as part of Red Hat Enterprise Linux. A downstream distributor includes, for example, an Entity that distributes a copy of a Red Hat software product received from Red Hat or another Entity or that distributes a derivative work of such software product. For example, an Entity would be a downstream distributor if the Entity received a derivative work of Hibernate Tools from either Red Hat or another Entity and then distributed a copy of the derivative work.

See how broad that is? Upstream, downstream, and every which way. If you write some code for Open Office, then, and it ends up being distributed by Red Hat in its distribution, you are covered as an "upstream contributor".

A "Red Hat Derivative product" is "any product, process, service, or code that is a direct or indirect Derivative of at least one Red Hat Product but which does not include any Red Hat product. That is important in understanding the definition of "Red Hat Licensed Product":

1.20 "Red Hat Licensed Product" means any Red Hat Product, Red Hat Derivative Product, or Red Hat Combination Product.

And here's what that last part is:

1.17 "Red Hat Combination Product" means any product, process, service, or code that is a combination of (a) at least one Red hat Product or Red Hat Derivative Product and (b) at least one product, process, service, or code portion that is neither a Red Hat Product nor a Red Hat Derivative Product. A "Red Hat Combination Product" does not include any Red Hat Product or Red Hat Derivative Product. A combination includes, without limitation, two products distributed together, two products that interact or that interoperate, and two products that call each other.

Are you starting to notice that the draft language is trying to include everyone? Just from the definitions, we can see that. Tiller explains this part like this:

The license covers Red Hat Licensed Products, which is defined in Section 1.20 to include Red Hat Products, Red Hat Derivative Products, and Red Hat Combination Products. This category is not limited to commercial products distributed by Red Hat. Red Hat Products include code distributed under a “Red Hat Brand,” which, based on the definition in Section 1.16, includes, for example, Fedora and JBoss. It also includes upstream predecessor versions of any such code pursuant to Section 1.21.

This already-broad class of software is then expanded further by the definitions of Red Hat Derivative and Combination Products, which include software derived from code distributed under a “Red Hat Brand” (which is broadly defined), and combinations of such code with other code. Because this includes downstream derivatives and combinations based on projects developed upstream from Red Hat, JBoss, and Fedora, it covers not only software distributed by us, but also software from such projects that is distributed by our competitors such as Novell and Sun Microsystems under their own brands.

It is worth noting that Section 5.4 specifies two classes of products that are not covered by the license. Section 5.4 explains that the license does not apply where there is infringement without use of or reference to any portion or functionality of the “Red Hat Product” (as broadly defined in the agreement). Thus merely combining a non-infringing “Red Hat Product” with unrelated code that does purportedly infringe one of the licensed patents will not by itself immunize the other code from suit. The point here is to disallow “gaming the system” as to code developed and distributed outside the ecosystem that includes Red Hat, Fedora, and JBoss merely by, for example, attaching it to a line of code from within that ecosystem.

Even such code distributed by Novell and Sun Microsystem is covered. Is that not refreshing? Note also that "Red Hat Product" includes "predecessor versions" of any Red Hat Products, including versions Red Hat or its employees had no involvement in developing. When you think about the Novell-Microsoft patent deal, what a contrast! That covered only Novell's paying customers, and deliberately excluded the rest of the community. Red Hat, with a deeper understanding of the GPL and the community's interests, in contrast responds with a very creative, GPL-compatible agreement that reflects how the community has always worked -- competition on merit, not on exclusion or proprietary moves.

Now lets see what everyone covered gets under the agreement. Tiller writes, "The terms of the license are broad: 'a perpetual, fully paid-up, royalty-free, irrevocable worldwide license of the Licensed Patents for any and all purposes . . . .'” Let's jump to sections 5.1 through 5.3 and read it in more detail:

5.1 Licensor grants and promises to grant to Red Hat a perpetual, fully paid-up, royalty-free, irrevocable worldwide license of the Licensed Patents, not intending any limitations. The license granted under Section 5.1 includes, without limitation, a license to make, have made, use, have used, sell, have sold, offer for sale, have offered for sale, provide or have provided, distribute or have distributed, import, or have imported any Red Hat Licensed Product and services related to any Red Hat Licensed Product. For the avoidance of doubt, Section 5.1 does not provide Red Hat a separate right to sublicense the Licensed Patents.

5.2 Licensor grants and promises to grant to Red Hat Community Members a perpetual fully paid-up, royalty-free, irrevocable worldwide license of the Licensed Patents to engage in any and all activities related to Red Hat Licensed Products, including without limitation to make, have made, use, have used, sell, have sold, offer for sale, have offered for sale, provide or have provided, distribute or have distributed, import, or have imported any Red Hat Licensed Product and services related to any Red Hat Licensed Product. For the avoidance of doubt, Section 5.2 does not provide Red Hat Community Members a separate right to sublicense the Licensed Patents.

5.3 Licensor grants and promises to grant to Red Hat and Red Hat Community Members a perpetual, fully paid-up, royalty-free, irrevocable right to grant worldwide sub-licenses of the Licensed Patents to Red Hat Community Members to the same extent the Red Hat Community Members are licensed under Section 5.2 of this Agreement.

See how it matters to read the definitions? The essential GPL issue of sublicensing is covered very, very explicitly.

What does that last paragraph, 5.4, mean, though? Tiller explains it:

It is worth noting that Section 5.4 specifies two classes of products that are not covered by the license. Section 5.4 explains that the license does not apply where there is infringement without use of or reference to any portion or functionality of the “Red Hat Product” (as broadly defined in the agreement). Thus merely combining a non-infringing “Red Hat Product” with unrelated code that does purportedly infringe one of the licensed patents will not by itself immunize the other code from suit. The point here is to disallow “gaming the system” as to code developed and distributed outside the ecosystem that includes Red Hat, Fedora, and JBoss merely by, for example, attaching it to a line of code from within that ecosystem.

Section 9.10 is interesting too:

9.10 Consideration Not Related to Conveyance of Red Hat Licensed Product

Neither the payment indicated in Section 3 of this Agreement nor any other consideration in this Agreement is based on the extent of Red hat's or Red Hat Community Member's activity of conveying any Red Hat Licensed Product or other work.

I suppose that is GPL language. And no party admits any wrongdoing and both "deny any allegation of liability made in the Litigation." And to take it further Red Hat says it makes "no admission that any Licensed Patent is infringed, valid, or enforceable." That is probably to cover any untoward event after the five year term of a patent promise not to sue, also part of the agreement, is up, I am thinking. And the inclusion of the right to import would cover, I would guess, any tricky types who might come up with a complaint to a government agency like the International Trade Commission, instead of suing in court for patent infringement. It's the latest rage in patent situations, if you remember the Barracuda story. Remember Trend Micro filed a complaint with the ITC that accused Barracuda of importing?

The complaint alleges violations of section 337 of the Tariff Act of 1930 in the importation into the United States of certain systems for detecting and removing viruses and worms, components thereof, and products containing same that infringe a patent owned by Trend Micro. The complainant requests that the ITC issue an exclusion order and cease and desist orders....

So this Red Hat-FireStar agreement seems to me to be carefully protecting that right to import. Of course, ask your lawyer, but that's how I understand it.

So, the bottom line is that a Red Hat end user can modify something and distribute their new app under the GPL to anyone and everyone, and then those sublicensees can do the same. That is the heart of the GPL, sublicensing. But that protection is doubly protected, because "Red Hat Community Members", which includes anyone downstream (including downstream from "upstream predecessor versions") will be benefitting from the patent license *directly* anyway by the language. One calls that belt-and-suspenders drafting.

It is definitely not just protection for Red Hat, because there is this broad class of "Red Hat Community Members" getting significant benefits under this agreement. In a way "Red Hat Community Members" is a misnomer, since that class consists of people and companies that might be far removed from Red Hat, or which compete with Red Hat.

There is also a covenant not to sue for five years, and Tiller explains that part too:

Section 6 includes a release and covenant not to sue protecting Red Hat and community members from possible claims for past infringement. Through the definition of “Current and Near Future Intellectual Property,” the release and covenant cover both existing patents of DataTern, Inc. (“DataTern”) and Amphion Innovations PLC (“Amphion”) and any patents acquired by those entities within five years of June 6, 2008. In addition, the release and covenant give protection for activity within the same five years with respect to patents acquired by DataTern and Amphion after that five-year period. Note that, like the license, the release and covenant do not cover combination or derivative products to the extent that infringement occurs without use of or reference to any portion or functionality in the broadly defined “Red Hat Product” concerned.

It's not transferable except by Red Hat if, say, Red Hat got bought or merged with another company, but the protections for others specifically remain. But FireStar can't sell the patents and then the new owner pop up claiming *it* didn't promise not to sue, that only FireStar made that promise. I worry about that a lot with Microsoft patent promises not to sue. Of course, Microsoft always carefully excludes GPL commercial programmers, so in a way I'm worrying about a theoretical, in that there is no Microsoft patent peace for them in the first place.

I took the time to explain all this so you'll understand that some of what you've been reading about this agreement isn't quite accurate. That's understandable in that the agreement was not available before. For example, Sun's General Counsel Michael Dillon wrote about the FireStar deal a few days ago. Some of what he wrote you can compare to the agreement itself and see the areas where we now have a better and more complete understanding, particularly regarding who is covered by it.

It's certainly a good thing that Sun is trying to knock out any patents, though, and trying to help out the community. But note that the USPTO action Dillon writes about is is a first office action in a reexamination. The patent isn't knocked out yet. Sometimes reexams work; sometimes they don't; sometimes what happens is that there are some narrowing amendments, but the patents survives. So it's a worthwhile effort, but there is a long way to go and an uncertain ending, patent law being as nutso as it currently is, which will explain why Red Hat made the decision to enter this agreement. It means everyone is protected immediately and forever and without any doubt.

Finally, you might like to know how things are going in the IP Innovation (Acacia) patent litigation. Here's the latest: after the court set a trial date for April 12, 2010, and came up with a schedule for discovery, the parties jointly filed a motion [PDF] requesting more time for discovery, telling the court that the reason they would like more time is that they are negotiating and might be able to reach a settlement. Note the new deadlines mentioned by the parties must be 2008, not 2007, presumably just a clerical error.

So, the Red Hat-Firestar agreement is now public. I'm very happy to see the language itself, but other lawyers for others who are trying to deal with patent infringement claims can build on this and make use of it. And it's proof that Microsoft does not need to exclude GPL commercial programmers. You can come up with language that allows the GPL to be itself and still function in the old world of crazed patent law. As I wrote in June, this is an historic agreement. If you protect essential terms of the GPL, as Red Hat has, you can still settle a patent litigation lawsuit, pay for a license, etc., just as you normally would. That is what Red Hat did. Thank you, Red Hat. The GPL does *not* exclude itself, then. Any exclusion is, therefore, by other parties for reasons that are not based on any requirement in the GPL.

Update: Here's Waldo. It seems Firestar and Microsoft are partners, as of 2002. So... you think? More on the patent and Firestar's maneuvers here.


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