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DOJ and German Antitrust Body Order Changes to CPTN Patent Purchase - Updated
Wednesday, April 20 2011 @ 02:17 PM EDT

Simon Phipps of OSI reports that the DOJ and the German antitrust body are requiring changes to the CPTN deal, stating that FOSS is vital:
News just broke jointly from the US Department of Justice and the German Federal Cartel Office that they have directed CPTN to change the way they acquire Novell's software patents so that the open source community is protected.

This is landmark news for the software freedom community. The Open Source Initiative (where I am a director) and the Free Software Foundation both submitted opinions to the DoJ. Both agreed that the acquisition of Novell's patent portfolio by a consortium comprising Apple, EMC, Microsoft and Oracle presented a threat to the ability of open source software to promote strong competitive markets. It seems the DoJ and FCO agreed with them.

This is wonderful news.

The Wall Street Journal is reporting that the DOJ has ordered the following changes to the proposed CPTN patent sale:
Among the revisions, Microsoft will sell back to Attachmate all of the Novell patents it would have bought, but it will continue to receive a license for the use of those patents; EMC won't acquire 33 Novell patents and applications that are related to virtualization software; all of the patents acquired will be subject to the GNU General Public License and the Open Invention Network--open-source and Linux licenses, respectively; CPTN won't have the right to limit which of the patents are available on the Linux license; and CPTN and its owners won't try to infuence or encourage Novell or Attachmate to change which of the patents are available under the Linux license.
I'm not sure what that means, to be "subject to" the GPL. The H has the same question:
The DoJ, working closely with Germany's Federal Cartel Office, appears to have agreed with the OSI and FSF's view of the deal, and is requiring major changes. Most importantly for open source developers, the agreement now says that all of the Novell patents will be "acquired subject to the GNU General Public License, Version 2, a widely adopted open-source license, and the Open Invention Network (OIN) License, a significant license for the Linux system". The announcement does not specify how these licences, especially the GPLv2 software licence, will apply to the patents. There would also be limits on CPTN, and it's owners, from limiting which patents are included in the GPLv2 and OIN licensing process or influencing the process.
I assume eventually Novell will have to post more details with the SEC, and then we can find out. But it's clear enough that if anyone thought they were going to get to sue Linux and FOSS with these patents, it isn't going to fly. Wow.

A huge thank you to OSI and FSF and FSFE for bringing this to the attention of both regulatory bodies. I gather that the purpose is to maintain the same level of protection that Linux patents had under Novell's OIN pledge. Wow. Thank you to both regulatory bodies. The FOSS world is deeply grateful.

Steven J. Vaughan-Nichols got a reaction from Andrew Updegrove:

So what does it all mean? Andrew “Andy” Updegrove, founding partner of Gesmer Updegrove, a top technology law firm, said, “This is a rather breath-taking announcement from a number of perspectives. Among others, the granularity of the restrictions imposed demonstrates a level of understanding of open source software in general, and Linux in particular, that has not been demonstrated by regulators in the past. It also demonstrates a very different attitude on the part of both the U.S. and German regulators, on the one hand, and Microsoft, on the other, from what we saw the last time that Microsoft was under the microscope. In the past, Microsoft was more disposed to fight than negotiate, and the U.S. and the European Commission were far apart in their attitudes. This announcement conclusively places open-source software on the U.S. regulatory map.”
Breath-taking is the word of the day, all right. I am so happy. And so relieved.

I can't resist. To my fellow journalists: did what Florian Mueller wrote about this turn out to be accurate?

Here's the DOJ press release:

Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Wednesday, April 20, 2011

CPTN Holdings LLC and Novell Inc. Change Deal in Order to Address Department of Justice's Open Source Concerns

Justice Department and Germany’s Federal Cartel Office Cooperate Closely on Patent Matter, Investigation Continues

WASHINGTON – The Department of Justice announced today that in order to proceed with the first phase of their acquisition of certain patents and patent applications from Novell Inc., CPTN Holdings LLC and its owners have altered their original agreements to address the department’s antitrust concerns. The department said that, as originally proposed, the deal would jeopardize the ability of open source software, such as Linux, to continue to innovate and compete in the development and distribution of server, desktop, and mobile operating systems, middleware, and virtualization products. Although the department will allow the transaction to proceed, it will continue investigating the distribution of the Novell patents to the CPTN owners.

The department said that CPTN, a holding company owned in equal measure by Microsoft Inc., Oracle Corp., Apple Inc. and EMC Corp., and its owners sought to acquire the patents in a two-stage transaction in conjunction with Novell’s planned merger with Attachmate Corporation. In the first phase, CPTN would acquire the patents and applications. In the second phase, the patents would be allocated and distributed to each of the four owners. In light of the department’s competition concerns, CPTN and its owners made revisions to their formation agreements to acquire approximately 882 patents and patent applications from Novell. The department said that these changes were necessary to protect competition and innovation in the open source software community.

“The parties’ actions address the immediate competitive concerns resulting from the transfer of Novell’s patents. To promote innovation and competition, it is critical to balance antitrust enforcement with allowing appropriate patent transfers and exercise of patent rights,” said Sharis A. Pozen, Deputy Assistant Attorney General of the Justice Department’s Antitrust Division. “Although we recognize that the various changes to the agreement recently made by the parties are helpful, the department will continue to investigate the distribution of patents to ensure continued competition.” In order to address competition concerns of the department, CPTN and its owners have revised their agreements to provide that:

  • Microsoft will sell back to Attachmate all of the Novell patents that Microsoft would have otherwise acquired, but will continue to receive a license for the use of those patents, the patents acquired by the other three participants and any patents retained by Novell;

  • EMC will not acquire 33 Novell patents and patent applications that have been identified as related to virtualization software;

  • All of the Novell patents will be acquired subject to the GNU General Public License, Version 2, a widely adopted open-source license, and the Open Invention Network (OIN) License, a significant license for the Linux System;

  • CPTN does not have the right to limit which of the patents, if any, are available under the OIN license; and

  • Neither CPTN nor its owners will make any statement or take any action with the purpose of influencing or encouraging either Novell or Attachmate to modify which of the patents are available under the OIN license.
During the course of their investigations, the Department of Justice and Germany’s Federal Cartel Office (Das Bundeskartellamt) cooperated closely with each other, aided by waivers from the parties. This permitted the agencies to share information and assessments of likely competitive effects and coordinate on potential revisions to the parties’ agreements.

“The Department of Justice and the Federal Cartel Office worked together very closely throughout this investigation,” said Deputy Assistant Attorney General Pozen. “This was an excellent example of international cooperation between our two agencies.”

Novell Inc. is a Delaware corporation with its principal place of business in Waltham, Mass. Its 2010 revenues were approximately $812 million. Attachmate Corp. is a privately held corporation based in Seattle. Its revenues are not public. CPTN Holdings LLC is a recently created consortium created by Microsoft, Oracle, Apple and EMC for the purpose of acquiring the Novell patents. It has no sales or revenues. Microsoft Inc. is a Washington corporation with its principal place of business in Redmond, Wash. Its 2010 revenues were approximately $62.5 billion. Oracle Corp. is a Delaware corporation with its principal place of business in Redwood City, Calif. In fiscal year 2010, it had revenues of nearly $27 billion. Apple Inc., a California corporation with its principal place of business in Cupertino, Calif., had 2010 revenues of more than $65 billion. EMC Corp., a Massachusetts corporation with its principal place of business in Hopkinton, Mass., had 2010 revenues of approximately $17 billion.

And here's Google Translate's version of the German FCO press release:
Press Release of the Federal Cartel Office

Bundeskartellamt clears joint venture Cptn for the purchase of Novell patents

20.04.2011 20.04.2011

Bonn, den 20. Bonn, 20 April 2011: April 2011: The Federal Cartel Office announced today the formation of the joint venture Cptn by the four companies Microsoft Inc., Oracle Inc., Apple Inc. and EMC Corp.

Cptn should acquire by the American software company Novell Inc. 882 software patents and patent applications and distributed according to a pre-established mechanism of the four parent companies.

In addition, the shareholders will receive licenses to all patents. After three months Cptn is abolished.

The patent sale agreement is associated with - from the Federal Cartel Office approved in December 2010 - Sale of the operating business from Novell to Attachmate. The patents sold RELATIONS, inter alia, the operating system "Linux".

Andreas Mundt, President of the Federal Cartel Office, "Even an acquisition of patents can result in individual cases to significant anticompetitive effects. We therefore have the effect of the sale of Novell's patents just on Open Source Software examined. The amendments take the concerns of the companies here in Germany and the U.S. account. The cooperation with the U.S. Department of Justice was outstanding."

The transaction was notified in December 2010 by the U.S. Department of Justice and the Federal Cartel Office. The application was however withdrawn in two authorities in late December 2010, after the preliminary competition concern had surrendered. The concerns were mainly on the markets for operating systems and virtualization software, where Microsoft and EMC / VMware, at least the market strong. In these markets there is basically over smaller competitors, the possibility of so-called FUD strategies ("Fear, Uncertainty, Doubt"), operated by means of patent lawsuits. Then also had numerous complaints made in particular from the open source community.

The registration took place this year then in modified form: Microsoft's future share sale to the patents prior to Attachmate. EMC reduced its share of the patents to those that appeared relevant in the market for virtualization software. These commitments, and other contractual changes to keep open the Novell patents for open source vendors acknowledged the competition concerns identified as critical in the markets.

This allowed the Federal Cartel Office and the U.S. competition authorities of the release of the founding of Cptn and their acquisition of patents from Novell. The Department of Justice has announced to examine the distribution of patents relating to the individual partners even further.

After the parties had given their consent at the beginning of the process for information exchange (so-called waiver) between the authorities were able to Department of Justice and the Federal Cartel Office regularly exchange information about the situation and coordinate their actions in a very constructive manner.

I notice that others besides OSI and FSF also sent complaints. Thank you to all. Here it is in German, for accuracy:
Pressemeldung des Bundeskartellamtes

Bundeskartellamt gibt Gemeinschaftsunternehmen CPTN für den Kauf von Novell-Patenten frei

20.04.2011

Bonn, den 20. April 2011: Das Bundeskartellamt hat heute die Gründung des Gemeinschaftsunternehmens CPTN durch die vier Unternehmen Microsoft Inc., Oracle Inc., Apple Inc. und EMC Corp. innerhalb der Monatsfrist freigegeben.

CPTN soll von dem amerikanischen Softwareunternehmen Novell Inc. 882 Software-Patente und Patentanmeldungen erwerben und nach einem vorab festgelegten Mechanismus unter den vier Muttergesellschaften verteilen. Außerdem erhalten die Gesellschafter Lizenzen an allen Patenten. Nach drei Monaten wird CPTN wieder aufgelöst. Der Patentverkauf ist vertraglich verknüpft mit dem ‑ vom Bundeskartellamt im Dezember 2010 freigegebenen - Verkauf des operativen Geschäfts von Novell an Attachmate. Die verkauften Patente beziehen sich unter anderem auf das Betriebssystem „Linux“.

Andreas Mundt, Präsident des Bundeskartellamtes: “Auch ein Erwerb von Patenten kann im Einzelfall zu erheblichen wettbewerbsschädlichen Effekten führen. Wir haben deshalb die Auswirkungen des Verkaufs der Novell-Patente auch auf Open Source Software genau geprüft. Mit den vorgenommenen Änderungen tragen die Unternehmen den Bedenken hier in Deutschland und in USA Rechnung. Die Zusammenarbeit mit dem US-amerikanischen Department of Justice war hervorragend.”

Das Vorhaben war bereits im Dezember 2010 beim US-amerikanischen Department of Justice und beim Bundeskartellamt angemeldet worden. Die Anmeldung wurde jedoch bei beiden Behörden Ende Dezember 2010 zurückgenommen, nachdem sich vorläufige wettbewerbliche Bedenken ergeben hatten. Die Bedenken bezogen sich vor allem auf die Märkte für Betriebssysteme sowie für Virtualisierungssoftware, auf denen Microsoft bzw. EMC/VMware mindestens marktstark sind. Auf diesen Märkten besteht grundsätzlich gegenüber kleineren Wettbewerbern die Möglichkeit sogenannter FUD-Strategien („Fear, Uncertainty, Doubt“), die mit Hilfe von Patentklagen betrieben werden. Hierauf hatten auch zahlreiche Beschwerden, insbesondere aus der Open Source Community, hingewiesen.

Die Neuanmeldung in diesem Jahr erfolgte daraufhin in veränderter Form: Microsoft verkauft seinen zukünftigen Anteil an den Patenten vorab an Attachmate. EMC reduzierte seinen Anteil an den Patenten um solche, die auf dem Markt für Virtualisierungssoftware relevant erschienen. Diese Verpflichtungen wie auch weitere vertragliche Änderungen zur Offenhaltung der Novell-Patente für Open Source-Anbieter räumten die wettbewerblichen Bedenken auf den als kritisch identifizierten Märkten aus. Dies erlaubte dem Bundeskartellamt und der amerikanischen Wettbewerbsbehörde die Freigabe der Gründung von CPTN und deren Erwerb der Patente von Novell. Das Department of Justice hat angekündigt, die Verteilung der Patente an die einzelnen Gesellschafter noch weiter zu prüfen.

Nachdem die beteiligten Unternehmen zu Beginn des Verfahrens ihre Zustimmung zum Informationsaustausch (sog. Waiver) zwischen den Behörden gegeben hatten, konnten sich Department of Justice und Bundeskartellamt regelmäßig über den Sachstand austauschen und ihr Vorgehen in sehr konstruktiver Weise miteinander abstimmen.

But there is no joy in Fudville. Mighty Microsoft has struck out.

Update: Microsoft's lawyers, I guess, on Twitter have this to say:

MicrosoftIP

We are pleased that the CPTN #patent purchase has been approved by regulators. We look forward to continuing our collaboration with Novell.

Not to mention with the GPL. Heh heh. Kidding. That probably isn't the part that they are looking forward to.

Here's FSFE's press release:

Free Software crucial to competition, regulators in Novell patent deal say

Published: 2011-04-20

Competition authorities in Germany and the United States today highlighted the fundamental role that Free Software plays for competition in the software market. After several months of discussions, the US Department of Justice (DOJ) and the German Federal Competition Office (FCO) have allowed a consortium of Microsoft, Oracle, Apple and EMC to acquire 882 patents from Novell only subject to conditions clearly intended to prevent their use against Free Software players.

"This is an historic step", says Karsten Gerloff, President of the Free Software Foundation Europe, which was involved in the FCO investigation since the beginning. "The regulators acknowledge that Free Software is crucial to competition; that patent aggression can well be anticompetitive behaviour; and that fear, uncertainty and doubt serve to push smaller competitors out of the market."

Parallels to Microsoft case - no patent privilege

"FSFE has been highlighting the danger of software patents for a decade," says FSFE's legal counsel Carlo Piana. In the present transaction, patents play a similar role as they did in the European Commission's antitrust proceedings against Microsoft. Microsoft was forced to disclose its secret protocols, but refused to make them available under conditions that would allow their use in GPL-licensed Free Software. FSFE is glad to see that conversely in this situation antitrust authorities on both sides of the Atlantic are recognising the power of copyleft Free Software licenses to preserve competition.

The decisions by the FCO and the DOJ are also an acknowledgement that regulatory intervention can be necessary to overcome vendor lock-in and create a level playing field for all market participants. "Patents are not an excuse to avoid antitrust scrutiny. Today's announcements make that clear as daylight" says Piana. In a hearing at the European Court of Justice next month, FSFE will state its objections to Microsoft's strategy of using patents to limit competition, as Microsoft is appealing the fine of 899 million Euro imposed by the Commission.

FSFE will carefully review the actual decisions as they become available. "Today's announcements point in a very interesting direction. It is a success for the intense work done by FSFE and others, such as the Free Software Foundation and the Open Source Initiative. But the conditions we've seen are no panacea. The devil will be in the details," says Gerloff. Intense monitoring by the competition authorities will be required to ensure that the conditions for the transaction will have the intended effect.

See also FSFE response to questions by German FCO from April 6, 2011

And here is that response:

Answers to Bundeskartellamt's survey

We are grateful for the Bundeskartellamt's work regarding the proposed creation of CPTN Holdings LLC as a joint venture by Microsoft, Apple, EMC and Oracle. We highly appreciate that the Bundeskartellamt is actively gathering the views of market participants, and are taking the opportunity to provide the following input according to the best of our knowledge of the situation.

Due to the short time afforded for an answer, we are only able to provide a preliminary assessment. In our effort to support the competition authorities in their mission, we are further hampered by a lack of publicly available information on various aspects of the planned transaction, such as the patents being sold, or the details of the proposed licensing arrangement between Attachmate and Microsoft.

1. Effects on FSFE's activities

In which way could in your view the CPTN-Transaction have effects on your activities?

Free Software Foundation Europe is a non-profit, charitable organisation dedicated to the promotion and spread of Free Software, which is a basic necessity for a free information society.

Free Software has a key role in today's society, providing the basis for the Internet and the World Wide Web. As detailed in our original statement of concerns to the Bundeskartellamt on December 22, 2010, Free Software is pervasive in both the public and the private sector, and acting as the innovative underpinnings for much of the IT industry.

From this perspective, we are highly concerned that the proposed transaction would create a climate in which Free Software would likely fail to thrive and reach its full potential. We fear that the transaction would

  • further increase the already substantial business risk from patent litigation for independent software developers as well as small and medium enterprises (SMEs);
  • cement the dominant positions of the CPTN partner companies in their respective fields;
  • lead to a further concentration of market power in the hands of companies which already hold a dominant position in their respective fields;
  • and allow the CPTN partner companies to leverage their dominance in a number of fields into new areas, such as mobile technology.

While FSFE itself does not produce or distribute significant amounts of software, our mission to promote and spread Free Software would suffer a serious blow if the already rampant patent litigation activity against Free Software would be further stepped up. Beyond FSFE's own mission, we are concerned about the effects of the transaction on the Free Software ecosystem as a whole.

2. Microsoft

How do you evaluate the modifications to the transaction according to which Microsoft will not acquire any patents but just patent licenses for the Novell patents?

Though the questionnaire does not specify this, it is our understanding that the patent license from Attachmate to Microsoft will be a non-exclusive license. Anything else would be equivalent in effect to having the patents held by Microsoft directly.

The modification of the transaction regarding Microsoft perhaps reflects the thoroughness with which the competition authorities have assessed the transaction, and their discussions with the CPTN participants. We welcome the scrutiny exercised by the competition authorities with regard to this transaction. From our point of view, the value of this modification is hard to assess without information on the details of the planned arrangements between Attachmate and Microsoft. We regretfully note that the modification does very little to allay our concerns about the potential uses of these patents to limit competition in a number of product areas and geographic markets.

Even a non-exclusive license for Microsoft to the patents in question would be likely to strengthen Microsoft's dominant position in desktop operating systems and desktop productivity software.

Furthermore, there is no information available on the degree to which Microsoft's commitment to pass the patents on to Attachmate is binding. More to the point, there is no assurance that Attachmate will not simply choose to sell the patents on to any interested party after the dissolution of CPTN. Attachmate is privately held, and the company's investors have no reason to refrain from selling the assets on at any time if they so desire. The company has no known track record in the field of Free Software, which makes its future behaviour even harder to predict.

The proposed modification also fails to address the concerns, voiced in our original submission from December 22, 2010, that the sold patents will be used to engage in disruptive litigation against users and producers of Free Software, or the threat of such litigation.

An uncomfortable precedent is provided by the various lawsuits pursued by SCO1 against companies using and distributing the GNU/Linux operating system. While SCO's claims to hold copyright to part of the GNU/Linux operating system was eventually ruled baseless, the lawsuits served to create a climate of fear, uncertainty and doubt, slowing the adoption of Free Software as a consequence. Microsoft's history, as detailed in our original submission from December 22, 2010, of using undisclosed patent claims to pressure device makers into licensing agreements over their use of Free Software in their products, is a particular cause for concern. Depending on the nature of the patent license given to Microsoft by Attachmate, Microsoft could engage in such litigation itself. There could also be an arrangement between Attachmate and Microsoft to this effect.

Our concerns would be allayed if Attachmate, along with Microsoft and the other CPTN investors, were to issue a legally binding statement not to assert Novell's patents against Free Software, making its patents available for unlimited use in Free Software, including under GPL and other copyleft licenses. This would merely formalise the status quo, under which Novell chose not to assert its patents against Free Software implementations.

Under the proposed arrangement of the transaction, the sold patents and patent applications would remain subject to all licenses, covenants not to sue, and similar restrictions. In keeping with this approach, we merely propose to add one more restriction in order to preserve the status quo, namely that Attachmate should enter into a binding commitment to make the patents available under conditions that allow their implementation in Free Software, including under the GNU GPL.

3. EMC

On the basis that EMC will not acquire the above-mentioned 31 patents relevant for virtualization – would you still expect any negative impact of the transaction in this field?

This question is difficult to answer without knowing the patents concerned, or their relative value to companies which are active in the field of virtualisation.

We would in particular be interested in learning how those 31 patents were selected; by whom they were selected; and who will receive those patents in EMC's stead.

Similar concerns apply here as those raised under Question 2 with regard to Microsoft. With a substantially strengthened patent portfolio, EMC would be in a better position to threaten Free Software competitors, or even take legal action against them. Hence we recommend to use the same remedy here as proposed under Question 2, namely ask EMC to commit, in a legally binding fashion, to not using the acquired patents against Free Software.

4. Concerns by product and geographic market

If according to you the transaction raises concerns, please explain in detail, which of the CPTN-Investors would acquire or strengthen its dominant position on which product and geographic market?

This is hard to assess in detail, as vital information about the transaction is not publicly available. This concerns in particular the list of patents to be acquired by CPTN. There is also a marked lack of clarity on how the patents will be distributed among the CPTN participants, and on the nature of the "serpentine draft process" referred to in the questionnaire.

Even without more detailed information, it is clear that the acquisition of Novell's patents will allow the CPTN participants to confirm and perhaps increase their dominant position in different markets. While it is not possible to make a definitive judgement without knowing the patents to be transferred, we can assume that each CPTN participant will select those patents that are of the greatest interest to it. These will likely be those patents that either strengthen the participant's dominance in a given product area or geographic market, or allow the participant to leverage existing dominant positions in one area or market to another.

Microsoft holds a dominant position in desktop operating systems and office productivity software, in nearly all markets around the world. Any patents transferred from Novell into CPTN in this space would serve to bolster Microsoft's near-monopoly position, and allow the company to further leverage its dominant position into other areas, such as the mobile space.

Oracle acquired a strong position in middleware with the purchase of Sun, in particular with Java. Oracle is currently actively enforcing Java-related patents in court against the Android mobile operating system, which is distributed under Free Software licenses.

Apple is also currently actively enforcing its patents against the Android mobile operating system, while defending a leading market position for its own iOS mobile operating system.

The mutual cross-licensing which is an inherent part of the modified CPTN transaction makes clear that the CPTN investors are keen to reduce competition among themselves, while excluding others from using the technologies in the Novell patent portfolio.

5. Further remarks

Are there any further remarks or aspects for the competitive assessment of the CPTN-transaction which you would like to bring to our attention?

As we have detailed above, a lot of the factors that will determine the transaction's impact on competition in the various markets affected remain unknown. We therefore consider it important that the details are properly examined and their impact assessed before allowing the transaction to proceed.

While we appreciate the close attention with which the Bundeskartellamt is analysing the transaction and its consequences, we regret to note that modifications to the transaction fail to address most of the concerns expressed in our original filing from December 22, 2010:

  • We requested that the list of patents to be sold should be made publicly available. The list has not been published, largely preventing us from commenting in detail on specific competition issues which may arise as a consequence of the transaction.
  • We asked for a specific provision which would (legally) oblige new patent holders to allow their use in programs distributed under the GNU General Public License and other copyleft licenses. No such provisions have so far been introduced, nor are equivalent measures in place to prevent substantial damage to competition in the software market from arising as a consequence of the transaction.
  • We voiced our concerns regarding the behaviour of Microsoft during and after the transaction. The modification of the proposed transaction, under which Microsoft will sell its patents on to Attachmate and only retain (exclusive? non-exclusive?) licenses, fails to ensure even a preservation of the status quo exemplified by Novell's defensive stance on patents. Instead, the transaction will still result in a boost to Microsoft's dominant position in desktop operating systems and office productivity software in most geographic markets, and further enable the company to leverage its dominance in those areas into the mobile space.

However, we do appreciate the added clarity provided regarding the structure and governance of CPTN.

We believe that the transaction and its financial aspects merit further scrutiny. In particular, the financial relationship between Attachmate and Microsoft should be investigated. The price which CPTN is paying seems very high for the patents on offer. Novell's original SEC proxy statement show that previous bidders were offering substantially less for the company's patent portfolio than the USD 450 million which CPTN agreed to pay.2 The CPTN investors will clearly be hoping to recoup this outlay. Given that they are offering much more money for the patents than previous bidders, it is natural to ask whether they are planning to recoup the acquisition price in ways that are not available to other bidders lacking the specific market positions of the CPTN investors. This consideration gives us cause to be concerned about the lack of transparency in the setup and financing of the CPTN joint venture.

We are also convinced that conditions need to be imposed to safeguard competition in the various affected software markets, by making the patents available for implementation in Free Software, including under the GNU GPL and similar licenses.

In order to be effective, such conditions would need to stipulate that the patents should be made available for implementation in Free Software without requiring implementers or distributors to pay royalties. Per-copy royalties are fundamentally incompatible with the GNU GPL, which is the most widely used Free Software license, and covers key programs such as the Linux kernel and much of the GNU operating system.

One of the key characteristics of the GPL – and a central reason for its effectiveness – is that it prohibits the licensor from imposing on the licensee conditions above and beyond those of the license itself. A requirement to pay royalties to a patent holder would be such an additional condition. Requiring distributors of software to impose such conditions on recipients would require distributors to violate the license. This concerns in particular the Linux kernel, which is the core component of both the GNU/Linux operating system and the Android mobile operating system. Both those systems are key competitors in their respective fields, the desktop/server area dominated by Microsoft, and the mobile space, where Apple's iOS leads on market share.

In closing, we should like to thank the Bundeskartellamt for its detailed attention to the transaction, and applaud its effort to take into account the views of market participants. We remain available to support the Bundeskartellamt's work in this matter.

With kind regards
Karsten Gerloff
President, Free Software Foundation Europe

Copyright © 2001-2011 Free Software Foundation Europe.
Verbatim copying and distribution of this entire article is permitted in any medium, provided this notice is preserved.


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