Patent Suit Filed Against Novell and Red Hat

Oct 16, 2007

Just a couple of days after the latest verbal attacks by Microsoft CEO Ballmer, Linux distributor Red Hat really does find itself at the receiving end of a patent lawsuit, however, this attack also targets Microsoft partner Novell.

IP Innovation LLC filed a lawsuit October 9 with a court in Texas – just a week after Ballmer’s threat to charge Linux users, and especially Red Hat users, license fees see the separate news item here. In an interview with Linux Magazine Germany Red Hat Europe boss, Knoblich, referred to Microsoft’s claims as unsubstantiated.

The patent infringement claim by IP Innovation states that: "Red Hat’s and Novell’s infringement, contributory infringement and inducement to infringe has injured Plaintiffs and Plaintiffs are entitled to recover damages adequate to compensate them for such infringement, but in no event less than a reasonable royalty". IP Innovations also refers to the defendants as "knowingly and actively inducing others to infringe". The complaint aims to achieve relief in the form of a judgment, damages and an injunction.

The complaint and other documents are available from the Groklaw website. The website refers to Microsoft connections: the plaintiff, IP Innovations, is a subsidiary of Acacia Research. And former Microsoft manager Brad Brunell, previously General Manager of Intellectual Property Licensing with Microsoft, joined Acacia Research Group’s management team October 1. The vice president of the company is also a former member of Microsoft staff: Jonathan Taub was director of strategic alliances with Microsoft’s mobile and embedded device division.

Acacia refers to itself as the "Leader in Patent Licensing"; according to the corporate website, Acacia possesses 81 patent portfolios and has enforced many patents. Its latest quarterly report dated 2007 Acacia lists 33 pending complaints involving itself or one of its subsidiaries. Defendants include Toshiba, Intel, Symantec, Ebay and Microsoft. Acacia subsidiary Data Encryption filed a complaint against Microsoft and Dell claiming infringements against data encryption patents, and subsidiary Computer Acceleration Corporation filed a complaint against Microsoft on account of RAM technology (Computing Device Performance Technology).

In recent months, Acacia acquired patent portfolios from the fields of memory management, image transmission, network monitoring and RAM design. The enterprise is Nasdaq listed and returned profits on licensing fees of US$ 5.865 m last quarter, a considerable . In comparison to the same quarter last year, with income totalling US$ 14.4 m. Almost half of earnings from licenses in the quarter ending 30 June 2007 are attributable to just three of the 81 licenses. The enterprise does not generate any income from products, services or development, which explains why spending is mainly restricted to patents. In just six months, the enterprise spent US$ 2.5 on “legal costs”, US$ 17.5 m were spent on license payments and "unforeseen legal fees".

Whereas pending claims are probably just business as usual for Microsoft, the latest complaint against Linux enterprises is likely to attract much attention. In spring 2007, legal experts from the Software Freedom Law Center (SFLC) calculated that Microsoft’s numerous pending patent suits amount to a kind of “patent tax” that Windows users pay. The lawsuit may mean a rule of precedence for Linux companies that was not clarified by the recent decision in the SCO-Novell case.

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