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NetApp's Point of View on the Sun Litigation - An Update
Sunday, October 26 2008 @ 09:07 PM EDT

Dave Hitz, CEO at NetApp, has posted his view on the latest happenings in the NetApp v. Sun patent litigation. Sun's General Counsel, Mike Dillon, recently described the outcome of the Markman hearing, which Sun was pleased with, and he also announced that the USPTO has agreed to reexaminations of several of NetApp's patents, including agreeing to a reexamination of the '292 patent [Order]. Hitz says NetApp has more patents even if these are invalidated, and he asks some questions which I'd like to answer. He questions the motives behind Sun's request to the court for a stay in the proceedings while the validity of the patents are decided. He seems to view that as Sun dragging its feet, and he asks if Sun's request indicates a lack of confidence in its position. I'll bet your answers will be a lot like mine, particularly if you've had your SCO inoculations.

Here are his questions:
If you were Sun, and if you were confident in your case, wouldn’t you want to clear the name of ZFS as quickly as possible, to reassure your customers and partners? By contrast, if you were NetApp, and you had no confidence in your patents, wouldn’t you try to slow things down to maintain the cloud of doubt as long as possible? I believe we have a strong case, but whether we are right or wrong, isn’t it best for everyone involved to get the answer as quickly as possible?
Normally, you might think so. But don't you remember the Blackberry patent mess, where the court forced a settlement by refusing to wait for the USPTO to decide with finality if the patents were even valid? RIM's defense was that the patents were not valid, and it had applied for reexamination to the USPTO. A jury meanwhile had ruled in its wisdom in 2002 that RIM had infringed the NTP patents as alleged, but then later, lo and behold, in 2005 and 2006, while the litigation was in end game, the USPTO began announcing that at least some of the patents were not valid, but too late to matter in the litigation. The judge refused to wait, because of the likely appeal, and RIM was confronted with a horrible choice, be shut down immediately by the court while it waited for a final decision on the patents or pay money it felt was not appropriate for patents it believed were invalid:
The post-patent review process can also be very lengthy. The review of the NTP patents, which began in 2003, was still going on as the potential BlackBerry shutdown loomed in 2006. Even as the USPTO issued orders in late 2005 and early 2006 declaring the patents invalid, appeals of those orders would have served to keep the patents intact for years.

This became one of the central controversies arising from the BlackBerry settlement: From RIM’s perspective, the firm paid more than $600 million to use a technology that the government said was not validly patented. From NTP’s perspective, however, the patents remained valid unless (and until) a final court determination, and RIM was rightfully paying for its use of NTP’s technology.

I'm thinking if I were Sun and I was confident that the eventual decision from the USPTO was going to be a rejection of the patents NetApp claimed are being infringed, I'd prefer to wait. Is that not logical, and in fact Dave says that is what's behind the request, but he gives it a twist in meaning:

To me, the best indicator of strength is to look at which party wants to get on with the case (the one with a strong position), and which party consistently drags its feet and tries to delay (the one with the weak position).

Sun is requesting a “stay,” which is a request to put our claims on hold and delay the trial, because the Patent Office has issued a preliminary rejection of claims in 3 of our patents (out of 16). Such a ruling is not unusual for patents being tried for the first time, and there are two ways to resolve the issue. Waiting for the Patent Office, which is what Sun wants to do, is the slow way. The patent office currently has a backlog of 730,000 patents, and they can’t hire fast enough to close the gap. Waiting could take years. The legal system isn’t always fast, but it can be. When NetApp agreed to relocate the case to California, we did it on the condition that we’d get to trial relatively quickly. Dillon mentioned issues with three patents, but NetApp currently has 16 WAFL patents that we believe apply to ZFS, with more on the way. We believe that we have a strong case, and we want to get it resolved.

I think it's four now, actually, unless I've miscounted. But here are some questions for NetApp:
  • Are you not suggesting something similar to the RIM outcome?

  • If the court does not wait to find out if your patents are valid, might Sun be forced to pay you for patents that later turn out to be invalid?

  • Would that be fair?

  • And deeper, if the USPTO issues lots of stupid patents, and we know it does, believing that any difficulties can be ironed out later by litigation, if that later litigation can't wait for the necessary analysis, doesn't the patent system become a game-able hustle for plaintiffs with questionable patents?

  • To speed things up, would you be willing to stipulate to a final order, waiving any and all appeals, that the patents the USPTO has announced are probably invalid are in fact invalid and rely going forward only on the patents that are not currently in dispute?

  • If not, and if the positions were reversed and you were in Sun's shoes, would you be in a hurry? Reeally?

  • Why would anyone want to take patents to trial before it has been definitely determined whether or not they are valid?
Those of us who got our SCO booster shots also know that claims by a party in litigation that the other side is dragging its feet might or might not be true. I don't even need any more SCO shots, by the way. I'm immune. For life.

Of course, the most fundamental question is whether software patents actually work out at all. Do they encourage innovation or block it? Red Hat is asking those questions:

But the success of FOSS shows that, at least in the software area, the patent system is seriously flawed. FOSS innovations have changed the world of technology dramatically, but is implausible to suppose that they have been inspired by hope of receiving a patent. No FOSS developer wishes to exclude others from their invention by obtaining a patent. Instead, FOSS developers share their code freely. Moreover, the public gains nothing from a FOSS patent, because, by definition, the source code is freely available without reference to a patent disclosure. In terms of motivating FOSS inventors or spreading FOSS knowledge, the patent system contributes precisely nothing.

For the FOSS community, the problem is not so much that patents are failing to serve their intended purpose of promoting innovation. The history of FOSS shows that innovation happens in spite of poorly conceived legal rules. The real concern is that patents may actually hinder software innovation. There are now more than 200,000 software patents, and there is no practical way to be sure that a new program does not infringe one or more of them. A patent lawsuit can cost several million dollars in attorneys’ fees. The risk of patent litigation is one that the FOSS community has learned to live with. But it hardly seems likely that the risk is doing anything other than inhibiting software innovation.

The issue here is more than academic. The patent system we have today was based on a theory of innovation that, at least in the FOSS area, is simply wrong. If we want to encourage innovation, we need to test the theory with empirical research. We should bring the tools of economics and other social sciences to bear to clarify what forces encourage innovation and what forces hinder it. Where the patent system is not performing its intended function, what changes are needed? Are there effective incremental reforms for the software patent problem, or do we just need a new system?

I vote for a new system, frankly. This one, as the NetApp-Sun litigation is just the most recent proof, is seriously broken.

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