Patent Liability Insurance

[Compulinkltd]

One of the risks we see in creating an open-source project is the
possibility of being sued for inadvertently reinventing someone else's
patented idea.  Basic due diligence may be enough to avoid a copyright
infringement, but we aren't sure if that is the case for patents.  
Patent searches could prove too expensive for many open-source
projects.  The cost of defending a patent infringement suit could put
many open-source projects out of existence.  Are there inexpensive ways
open-source projects can mitigate the risk of inadvertently infringing a
third-party patent?

I understand that is possible to purchase patent liability insurance.  
How much does patent liability insurance typically cost?  How do most
open-source projects raise the revenue to pay for this insurance?  Do
any of the many foundations that assist open-source projects (Apache,
Mozilla, Eclipse, FSF, etc.) offer this insurance for the projects they
host?

Most open-source licenses I have seen disclaim any warranty of patent
non-infringement and therefore shift the legal risk onto the users.  Are
the users of open source software therefore expected to purchase patent
liability insurance?

Bruce Alspaugh

[Matthew Flaschen]

Bruce Alspaugh wrote:
> One of the risks we see in creating an open-source project is the
> possibility of being sued for inadvertently reinventing someone else's
> patented idea.

This risk is not specific to open source.

  Basic due diligence may be enough to avoid a copyright
> infringement, but we aren't sure if that is the case for patents.

IANAL, but no because independent innovation is not a defense for patent
infringement (as it is for copyright infringement).

> Are there inexpensive ways
> open-source projects can mitigate the risk of inadvertently infringing a
> third-party patent?

So far, the community has mostly relied on invalidating patents (e.g.
http://www.pubpat.org/) and accumulating portfolios to threaten
proprietary software companies with (e.g.
http://www.openinventionnetwork.com/).

> How do most open-source projects raise the revenue to pay for this insurance?  Do
> any of the many foundations that assist open-source projects (Apache,
> Mozilla, Eclipse, FSF, etc.) offer this insurance for the projects they
> host?

I know of no open source project that pays for such insurance.

> Most open-source licenses I have seen disclaim any warranty of patent
> non-infringement and therefore shift the legal risk onto the users.

It's not really shifting.  The distributor is simply saying both user
and distributor would be liable for any infringement.

> Are the users of open source software therefore expected to purchase patent
> liability insurance?

No.  The risk is actually exaggerated, in my opinion.  Despite the FUD,
suing open source customers would be a PR nightmare.

Matt Flaschen

[Marc Whipple]

Note: While I am an attorney and licensed to practice before the USPTO,
this is not legal advice.

>One of the risks we see in creating an open-source project is the
>possibility of being sued for inadvertently reinventing someone else's
>patented idea.  Basic due diligence may be enough to avoid a copyright
>infringement, but we aren't sure if that is the case for patents.

That depends on what risk you are looking to mitigate. If you are
worried about the more serious kinds of sanctions that willful
infringement can subject an infringer to, basic due diligence should
suffice. If you perform due diligence and have no reason to believe that
you are infringing a patented invention, you avoid the really killer
sanctions for the most part.

If you are worried about legal sanctions for basic infringement
(ordinary damages, injunctions, etc) then no amount of diligence will
save you. There is no real defense to patent infringement other than not
to do it. If the claim reads on your product, you're done. Due diligence
could help in that it might prevent you from practicing an infringing
device or method, but not in defending such practice.

>Patent searches could prove too expensive for many open-source
>projects.  

Patent searching has gotten remarkably cheap in the age of the Internet.
In fact, a reasonably competent person can perform some elements of the
initial search themselves, for free, on the USPTO's website. I would
strongly suggest that those who aren't good at reading legalese - by
which I do not mean non-lawyers, I know non-lawyers are good at it and
lawyers who aren't - ask an experienced patent attorney to examine the
results of the search, or, if in the least unsure of how to properly
design such a search, to consult a patent search firm or patent
attorney.

>The cost of defending a patent infringement suit could put
>many open-source projects out of existence.  Are there inexpensive ways

>open-source projects can mitigate the risk of inadvertently infringing
a
>third-party patent?

That depends on your definition of inexpensive. For garage inventors (or
home-office programmers, if you prefer,) the answer is, sadly, "Probably
not." There are just too many patents.

>I understand that is possible to purchase patent liability insurance.  
>How much does patent liability insurance typically cost?

Like any insurance it depends on the coverage. I looked into a general
policy for the invention studio where I worked many years ago. The
premium for a policy with coverage broad enough and limits large enough
to do any good would have been a significant percentage of our gross
revenues in a good year. It's not cheap.

>How do most
>open-source projects raise the revenue to pay for this insurance?  Do
>any of the many foundations that assist open-source projects (Apache,
>Mozilla, Eclipse, FSF, etc.) offer this insurance for the projects they

>host?

I don't know that. I would be very surprised.

>Most open-source licenses I have seen disclaim any warranty of patent
>non-infringement and therefore shift the legal risk onto the users.
Are
>the users of open source software therefore expected to purchase patent

>liability insurance?

"Expected" may be too strong a word. I suspect that most contributors to
Open Source don't think about whether users should or shouldn't get it
in the first place. However, I will gladly defer to other more
experienced voices.

M

[davelab6]

On 14/05/07, Marc Whipple <MWhipple@...> wrote:
>
> >The cost of defending a patent infringement suit could put
> >many open-source projects out of existence.  Are there inexpensive ways
> >open-source projects can mitigate the risk of inadvertently infringing
> > a third-party patent?
>
> That depends on your definition of inexpensive. For garage inventors (or
> home-office programmers, if you prefer,) the answer is, sadly, "Probably
> not."

You may find http://conservancy.softwarefreedom.org of use :-)

--
Regards,
Dave

[Matthew Flaschen]

Dave Crossland wrote:
> You may find http://conservancy.softwarefreedom.org of use :-)

This would protect individual developers (which can also be accomplished
by a separate non-profit or corporation) but then a lawsuit would just
destroy the conservancy instead.  That can't be regarded as a true
solution, in my opinion.

Matt Flaschen

[Compulinkltd]

On 5/14/07, Matthew Flaschen <matthew.flaschen@...> wrote:

Dave Crossland wrote:
> You may find http://conservancy.softwarefreedom.org of use :-)

This would protect individual developers (which can also be accomplished
by a separate non-profit or corporation) but then a lawsuit would just
destroy the conservancy instead.  That can't be regarded as a true
solution, in my opinion.

Matt Flaschen

 

It might not solve the problem entirely, but Dave does have a point.  I'm looking at the bios of the Board of Directors for the Conservancy and the Software Freedom Law Center that sponsors it.  Presumably, if the conservancy were sued for an inadvertent patent violation by one of the member projects, they would have to take on some very powerful and respected intellectual property lawyers.  Few open-source projects could afford to have them on retainer.  It effectively raises the stakes for any company that might try to sue.

 

Bruce
 

[Radcliffe, Mark]

Same caveat as below: I am an attorney (although not licensed to
practice before the PTO)and these general statements are not legal
advice.

Virtually all open source projects and open source companies with whom I
deal do not perform patent searches for the following reasons:

1) They are expensive and patents are difficult to interpret in the
software market

2) Patent applications are confidential until either publication or
issuance of the patent; consequently a search today may be irrelevant if
the patent application is issued as a patent the next day

3) If you find a relevant patent you are then potentially liable for
willful infringement and, thus, treble damages

I don't agree that you have no real defenses to patent infringement: the
patent may not meet the statutory requirements of novelty, non
obviousness and utility, it may have been filed after the one year
statutory bar and it may not cover your particular product. The problem
is that proving these defenses is very expensive. I am not aware of any
company or project with patent insurance because it is expensive and
coverage is limited.

The disclaimer of infringement is included because the default
provisions under Article II of the UCC imposes an "implied warranty of
non-infringement" so if you do not include such a disclaimer you are
warranting that the software does not infringe third party rights
(including patent rights). This disclaimer is also included in virtually
all commercial licenses (although commercial licenses generally have a
more limited intellectual property indemnity).

-----Original Message-----
From: Marc Whipple [mailto:MWhipple@...]
Sent: Monday, May 14, 2007 2:57 PM
To: Bruce Alspaugh; License Discuss
Subject: RE: Patent Liability Insurance

Note: While I am an attorney and licensed to practice before the USPTO,
this is not legal advice.

>One of the risks we see in creating an open-source project is the
>possibility of being sued for inadvertently reinventing someone else's
>patented idea.  Basic due diligence may be enough to avoid a copyright
>infringement, but we aren't sure if that is the case for patents.

That depends on what risk you are looking to mitigate. If you are
worried about the more serious kinds of sanctions that willful
infringement can subject an infringer to, basic due diligence should
suffice. If you perform due diligence and have no reason to believe that
you are infringing a patented invention, you avoid the really killer
sanctions for the most part.

If you are worried about legal sanctions for basic infringement
(ordinary damages, injunctions, etc) then no amount of diligence will
save you. There is no real defense to patent infringement other than not
to do it. If the claim reads on your product, you're done. Due diligence
could help in that it might prevent you from practicing an infringing
device or method, but not in defending such practice.

>Patent searches could prove too expensive for many open-source
>projects.  

Patent searching has gotten remarkably cheap in the age of the Internet.
In fact, a reasonably competent person can perform some elements of the
initial search themselves, for free, on the USPTO's website. I would
strongly suggest that those who aren't good at reading legalese - by
which I do not mean non-lawyers, I know non-lawyers are good at it and
lawyers who aren't - ask an experienced patent attorney to examine the
results of the search, or, if in the least unsure of how to properly
design such a search, to consult a patent search firm or patent
attorney.

>The cost of defending a patent infringement suit could put
>many open-source projects out of existence.  Are there inexpensive ways

>open-source projects can mitigate the risk of inadvertently infringing
a
>third-party patent?

That depends on your definition of inexpensive. For garage inventors (or
home-office programmers, if you prefer,) the answer is, sadly, "Probably
not." There are just too many patents.

>I understand that is possible to purchase patent liability insurance.  
>How much does patent liability insurance typically cost?

Like any insurance it depends on the coverage. I looked into a general
policy for the invention studio where I worked many years ago. The
premium for a policy with coverage broad enough and limits large enough
to do any good would have been a significant percentage of our gross
revenues in a good year. It's not cheap.

>How do most
>open-source projects raise the revenue to pay for this insurance?  Do
>any of the many foundations that assist open-source projects (Apache,
>Mozilla, Eclipse, FSF, etc.) offer this insurance for the projects they

>host?

I don't know that. I would be very surprised.

>Most open-source licenses I have seen disclaim any warranty of patent
>non-infringement and therefore shift the legal risk onto the users.
Are
>the users of open source software therefore expected to purchase patent

>liability insurance?

"Expected" may be too strong a word. I suspect that most contributors to
Open Source don't think about whether users should or shouldn't get it
in the first place. However, I will gladly defer to other more
experienced voices.

M

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[John Cowan]

Radcliffe, Mark scripsit:
>
> Same caveat as below: I am an attorney (although not licensed to
> practice before the PTO)and these general statements are not legal
> advice.

Generally abbreviated here to "IAAL, TINLA" or sometimes "IAALBNYL"
(I am a lawyer but not your lawyer).

--
Do I contradict myself?                         John Cowan
Very well then, I contradict myself.            cowan@...
I am large, I contain multitudes.               http://www.ccil.org/~cowan
        --Walt Whitman, Leaves of Grass

[Andrew C. Oliver-2]

Point of order.  It is not a risk that is more inherent in open source
than any other software development.  This is an industry-wide problem
it is just more public regarding open source.  Ask Vonage or anyone else
who has been on the business end of one of these patents whether it
matters if its open source or not.  I suggest you should be more worried
about a general insurance policy and more of an activist against the
existing silly patent system that is simply unworkable in software.

Patents are being granted on things where there is an obvious prior art.
  The Supreme court has even commented that they have been granted in
excess for the past several years.  I suggest this problem is much much
more broad than open source.

-Andy

Bruce Alspaugh wrote:

> One of the risks we see in creating an open-source project is the
> possibility of being sued for inadvertently reinventing someone else's
> patented idea.  Basic due diligence may be enough to avoid a copyright
> infringement, but we aren't sure if that is the case for patents.  
> Patent searches could prove too expensive for many open-source
> projects.  The cost of defending a patent infringement suit could put
> many open-source projects out of existence.  Are there inexpensive ways
> open-source projects can mitigate the risk of inadvertently infringing a
> third-party patent?
> I understand that is possible to purchase patent liability insurance.  
> How much does patent liability insurance typically cost?  How do most
> open-source projects raise the revenue to pay for this insurance?  Do
> any of the many foundations that assist open-source projects (Apache,
> Mozilla, Eclipse, FSF, etc.) offer this insurance for the projects they
> host?
>
> Most open-source licenses I have seen disclaim any warranty of patent
> non-infringement and therefore shift the legal risk onto the users.  Are
> the users of open source software therefore expected to purchase patent
> liability insurance?
>
> Bruce Alspaugh
>

--
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http://buni.org
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[Brian Behlendorf]

On Mon, 14 May 2007, Andrew C. Oliver wrote:
> Patents are being granted on things where there is an obvious prior art.  The
> Supreme court has even commented that they have been granted in excess for
> the past several years.  I suggest this problem is much much more broad than
> open source.

I always figured that at some point the cost of patents to the industry as
a whole (excepting trolls with no other revenue stream) would become so
burdensome that even traditionally patent-loving firms would petition for
wholesale effective reform.  It'll be interesting to watch how this case
plays out:

http://www.pcmag.com/article2/0,1895,2128829,00.asp

  Brian

[Lawrence Rosen]

Brian Behlendorf wrote:
> I always figured that at some point the cost of patents to the industry as
> a whole (excepting trolls with no other revenue stream) would become so
> burdensome that even traditionally patent-loving firms would petition for
> wholesale effective reform.  It'll be interesting to watch how this case
> plays out:
>
> http://www.pcmag.com/article2/0,1895,2128829,00.asp

If we worried about every silly lawsuit by people who can afford little more
than the filing fee in federal court, we'd go crazy. Don't bet that a patent
lawsuit can be based on *not* using the technology.

OTOH, damages based on *not* using reasonably available technology to fix a
bug might (?) be appropriate in some circumstances. I don't see that the
"DMCA or the rights of American Intellectual Property owners" justify that
remedy, though.

Thanks for sharing this bit of legal trivia. It made me laugh at the
outrageousness of this case. If you personally are served with this
complaint, Brian, call one of us lawyers here to defend you pro bono just
for the publicity value. :-)

/Larry

[Andrew C. Oliver-2]

Personally I think the have-nots on the business end should help fund a
few of these lawsuits provided they agree never to file their patent
against open source.  Its a bit Machiavelli meets Sun Tzu but if enough
people gave to the cause they might be able to shake Microsoft down for
a few Bil.  Sure they'd just come out with a new flavor of Vista to pay
for it but maybe take out a few companies like SCO.  Screw up the system
enough and maybe Brian gets his way..


Lawrence Rosen wrote:

> Brian Behlendorf wrote:
>> I always figured that at some point the cost of patents to the industry as
>> a whole (excepting trolls with no other revenue stream) would become so
>> burdensome that even traditionally patent-loving firms would petition for
>> wholesale effective reform.  It'll be interesting to watch how this case
>> plays out:
>>
>> http://www.pcmag.com/article2/0,1895,2128829,00.asp
>
> If we worried about every silly lawsuit by people who can afford little more
> than the filing fee in federal court, we'd go crazy. Don't bet that a patent
> lawsuit can be based on *not* using the technology.
>
> OTOH, damages based on *not* using reasonably available technology to fix a
> bug might (?) be appropriate in some circumstances. I don't see that the
> "DMCA or the rights of American Intellectual Property owners" justify that
> remedy, though.
>
> Thanks for sharing this bit of legal trivia. It made me laugh at the
> outrageousness of this case. If you personally are served with this
> complaint, Brian, call one of us lawyers here to defend you pro bono just
> for the publicity value. :-)
>
> /Larry
>

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[Matt Asay]

Anyone know how OIN could play in this game of Microsoft's?  Meaning, would
open source companies/projects benefit from joining OIN (if that's even
possible - looks like a Big Boys club).  Seems like a good way to get cover
against spurious patent claims...?

> From: "Andrew C. Oliver" <acoliver@...>
> Date: Tue, 15 May 2007 08:07:50 -0400
> To: 'License Discuss' <license-discuss@...>
> Subject: Re: Patent Liability Insurance
>
> Personally I think the have-nots on the business end should help fund a
> few of these lawsuits provided they agree never to file their patent
> against open source.  Its a bit Machiavelli meets Sun Tzu but if enough
> people gave to the cause they might be able to shake Microsoft down for
> a few Bil.  Sure they'd just come out with a new flavor of Vista to pay
> for it but maybe take out a few companies like SCO.  Screw up the system
> enough and maybe Brian gets his way..
>
>
> Lawrence Rosen wrote:
>> Brian Behlendorf wrote:
>>> I always figured that at some point the cost of patents to the industry as
>>> a whole (excepting trolls with no other revenue stream) would become so
>>> burdensome that even traditionally patent-loving firms would petition for
>>> wholesale effective reform.  It'll be interesting to watch how this case
>>> plays out:
>>>
>>> http://www.pcmag.com/article2/0,1895,2128829,00.asp
>>
>> If we worried about every silly lawsuit by people who can afford little more
>> than the filing fee in federal court, we'd go crazy. Don't bet that a patent
>> lawsuit can be based on *not* using the technology.
>>
>> OTOH, damages based on *not* using reasonably available technology to fix a
>> bug might (?) be appropriate in some circumstances. I don't see that the
>> "DMCA or the rights of American Intellectual Property owners" justify that
>> remedy, though.
>>
>> Thanks for sharing this bit of legal trivia. It made me laugh at the
>> outrageousness of this case. If you personally are served with this
>> complaint, Brian, call one of us lawyers here to defend you pro bono just
>> for the publicity value. :-)
>>
>> /Larry
>>
>
>
> --
> Buni Meldware Communication Suite
> http://buni.org
> Multi-platform and extensible Email,
> Calendaring (including freebusy),
> Rich Webmail, Web-calendaring, ease
> of installation/administration.

[John Cowan]

Lawrence Rosen wrote:

> OTOH, damages based on *not* using reasonably available technology to
> fix a bug might (?) be appropriate in some circumstances. I don't see
> that the "DMCA or the rights of American Intellectual Property owners"
> justify that remedy, though.

This business sounds like a sort of funhouse-mirror version of the
well-known case (whose name has slipped my mind) establishing that it
was negligent in a boat's owner not to carry radio for the purpose of
getting weather warnings, although it was not common practice at the
time.  In that case the boat was tied up at a dock too small for it,
and basically smashed the dock during the storm; the dock's owner sued
and won.

If, instead, some particular manufacturer of radios had sued the boat
owners for failure to use its product, then we'd be on all fours.

--
John Cowan  cowan@...  http://ccil.org/~cowan
If he has seen farther than others,
        it is because he is standing on a stack of dwarves.
                --Mike Champion, describing Tim Berners-Lee (adapted)

[Matthew Flaschen]

Matt Asay wrote:
> Anyone know how OIN could play in this game of Microsoft's?  Meaning, would
> open source companies/projects benefit from joining OIN (if that's even
> possible - looks like a Big Boys club).

Basically, OIN licenses their patent portfolio to any company that
agrees not to allege the "Linux System" infringes their patents.  Of
course, "Linux System" sounds ambiguous and means far more than the
kernel.  There's a long list at
http://www.openinventionnetwork.com/pat_linuxdefpop.html of covered
packages; those packages didn't do anything to get on (they have no
obligations to OIN).  Now, the big boys you referred to are the ones who
gave them the patents in that portfolio (since they have some to spare).
 But OIN apparently accepts patent donations from anyone.

>  Seems like a good way to get cover
> against spurious patent claims...?

It's a start.  I think OIN has a few patents they can use against Microsoft.

Matt Flaschen

[Andrew C. Oliver-2]

Sun Tzu says get other people to fight your wars first.  Another
approach (which I intonated) would be more of a venture capital
approach.  Those with the cash and the interest could invest it in
promising litigation companies targeted in the right direction.  I mean
a 200B lawsuit against those large vendors who strategize in patent
lawsuits against open source is worth funding strategically for those
who want to point out the stupidity of the system which hurts their
interests or for those who have a specific competitive interest based on
open source.

Maybe that is OIN, maybe it is Red Hat Ventures...

-Andy

Matthew Flaschen wrote:

> Matt Asay wrote:
>> Anyone know how OIN could play in this game of Microsoft's?  Meaning, would
>> open source companies/projects benefit from joining OIN (if that's even
>> possible - looks like a Big Boys club).
>
> Basically, OIN licenses their patent portfolio to any company that
> agrees not to allege the "Linux System" infringes their patents.  Of
> course, "Linux System" sounds ambiguous and means far more than the
> kernel.  There's a long list at
> http://www.openinventionnetwork.com/pat_linuxdefpop.html of covered
> packages; those packages didn't do anything to get on (they have no
> obligations to OIN).  Now, the big boys you referred to are the ones who
> gave them the patents in that portfolio (since they have some to spare).
>  But OIN apparently accepts patent donations from anyone.
>
>>  Seems like a good way to get cover
>> against spurious patent claims...?
>
> It's a start.  I think OIN has a few patents they can use against Microsoft.
>
> Matt Flaschen

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[Matthew Flaschen]

Andrew C. Oliver wrote:

> Another approach (which I intonated) would be more of a venture capital
> approach.  Those with the cash and the interest could invest it in
> promising litigation companies targeted in the right direction.

I don't believe software patents are legitimate, so I don't want
/anyone/ to make money of them.  They should be retained as a deterrent
only (until software patents are made illegal)

> Maybe that is OIN, maybe it is Red Hat Ventures...

I like OIN because they aren't trying to make money off patents, but are
developing a strong portfolio to use in self-defense to protect FOSS.

Matt Flaschen

[Andrew C. Oliver-2]

The MAD system in patents reinforces the patent system.  I'm talking
about something to help throw the monkey wrench in it by using it
against itself.

Matthew Flaschen wrote:

> Andrew C. Oliver wrote:
>
>> Another approach (which I intonated) would be more of a venture capital
>> approach.  Those with the cash and the interest could invest it in
>> promising litigation companies targeted in the right direction.
>
> I don't believe software patents are legitimate, so I don't want
> /anyone/ to make money of them.  They should be retained as a deterrent
> only (until software patents are made illegal)
>
>> Maybe that is OIN, maybe it is Red Hat Ventures...
>
> I like OIN because they aren't trying to make money off patents, but are
> developing a strong portfolio to use in self-defense to protect FOSS.
>
> Matt Flaschen

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[Matthew Flaschen]

Andrew C. Oliver wrote:
> The MAD system in patents reinforces the patent system.

It reinforces the system of issuing software patents (which is
unfortunate), but it reduces their use in lawsuits (and by extension
licensing), which is the real point.

> I'm talking about something to help throw the monkey wrench in it by using it
> against itself.

If OIN or Red Hat Ventures started the patent war, Microsoft and other
proprietary vendors would retaliate, which is /not/ what we want.

Matt Flaschen

[Andrew C. Oliver-2]

>
> If OIN or Red Hat Ventures started the patent war, Microsoft and other
> proprietary vendors would retaliate, which is /not/ what we want.
>

The avalanche has already started; it is too late for the pebbles to vote.

http://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100033867/

-Andy

> Matt Flaschen


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