The Elephant in the Room: Patent Value and Open Source Software. Michele Herman Davis Wright Tremaine LLP. and

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1 The Elephant in the Room: Patent Value and Open Source Software Michele Herman Davis Wright Tremaine LLP and Joanne Montague Davis Wright Tremaine LLP

2 I. Background Rarely do we think about what tractors and medical devices have in common. Yet both tractors and medical devices in operation today incorporate open source software ( OSS ). OSS is software that is licensed under an OSS license. There are hundreds of OSS licenses and unique OSS licenses can be crafted by any software developer. In general, the terms of an OSS license state that a recipient of the OSS is free to copy, modify, and redistribute the OSS in source or executable form, with or without modifications. The most notable observation about OSS, however, is that today it can be found in nearly every product that includes software and in applications that run on virtually any device, and within the infrastructure that runs nearly any type of business. Some OSS licenses are very permissive in that the only requirements for compliance include reproduction of the copyright notice and OSS license in each copy of the OSS that is distributed. 1 Other OSS licenses are quite restrictive despite being royalty-free. 2 These restrictive licenses, also known as copyleft or reciprocal licenses, require the source code to be made available to downstream recipients including a distributor s own modifications and additions along with the copyright notice and the OSS license. Some restrictive OSS licenses may attach very broadly, however, to additions and modifications so that the restrictive OSS license covers substantial proprietary software that may be combined with the OSS and distributed together. It should be clear that those developing the OSS cannot obtain a direct return on their investment then by charging royalties or other fees associated with the OSS and that those using OSS with their own proprietary software may place their own software at risk of also being subject to the OSS licensing terms. It seems illogical then that the development and use of OSS would be so pervasive. There are many valid reasons for the widespread acceptance of OSS. Several business models leverage OSS. Information and Communications Technology ( ICT ) service-based businesses that provide ICT support, integration, customization, and/or maintenance rely on their customers purchasing a solution of hardware, software, and such services. If the software is free, customers may be willing to pay for the services so long as the total cost of the solution meets the customers expectations and needs. Some device makers that traditionally invest their R&D dollars into hardware development have fewer internal resources to expend on software development. Such device manufacturers may find that they can limit their R&D investment in software development by investing in OSS community development projects because the costs of such projects are shared by others with the same motivation and the software is not needed to differentiate their products. Increasingly, users of OSS have become cognizant of the various legal risks associated with using OSS. For example, failure to comply with the OSS license terms can result in 1 The BSD License and the MIT License are two such examples of very permissive OSS licenses. OPEN SOURCE INITIATIVE, THE BSD LICENSE, available at [hereinafter BSD LICENSE]; OPEN SOURCE INITIATIVE, THE MIT LICENSE, available at [hereinafter MIT LICENSE]. 2 The GPLv2 License is one such example. FREE SOFTWARE FOUNDATION, INC., GNU GENERAL PUBLIC LICENSE, VERSION 2 (1991), available at [hereinafter GPLV2]. Page 1

3 infringement claims. 3 Users that combine OSS with their own proprietary software are becoming more aware of risks that their proprietary software could become subject to the terms of restrictive OSS licenses requiring such users to release their source code for free should they distribute the software to their own customers or partners. 4 Yet relatively few users have been concerned about the impact of OSS distribution on their patent portfolios. Indeed, until recently, many users erroneously believed that since OSS was freely distributed it was also free from patent infringement claims. Further, some OSS developers believe that patent licensing in general is inconsistent or even prohibited under OSS licensing models. In recent months, these myths have been largely extinguished with a multitude of patent lawsuits filed against the Android platform or devices running the Android platform. 5 In addition, several common OSS licenses include defensive revocation provisions that can impact the value of a party s patent portfolio if the party is using OSS licensed under a license with such provisions. If a recipient of the OSS threatens or sues an OSS licensor or a party using the licensed OSS, the OSS license may permit or result in license termination. The type and scope of claims and the action taken that may trigger such defensive revocation provisions vary from one OSS license to the next. But to the extent that the OSS is crucial to a user s product or operations, the defensive revocation provision may be tantamount to a patent grant back as such user may not from a business perspective be able to assert certain patent claims against an OSS licensor or OSS distribution. Finally, software including OSS must often conform to ICT standards to enable interoperation, communication, and information exchange with other products and services. Such standards are often developed under patent policies that permit participants in the standards setting process to license their essential patent claims to implementers of the standard under reasonable and nondiscriminatory ( RAND ) terms and conditions either with RAND compensation or without compensation, the latter being referred to as a RAND-RF commitment (RAND license terms on 3 Jacobsen v. Katzer, 535 F.3d 1373 (Fed. Cir. 2008); Press Release, Best Buy, Samsung, Westinghouse, and Eleven Other Brands Named in SFLC Lawsuit (Dec. 14, 2009), Press Release, Free Software Foundation, Free Software Foundation Files Suit Against Cisco for GPL Violations (Dec. 11, 2008), Press Release, Software Freedom Law Center, SFLC Files GPL Violation Lawsuit Against Extreme Networks, Inc. (July 21, 2008), Press Release, Software Freedom Law Center, SFLC Files Another Round of GPL Violation Lawsuits on Behalf of BusyBox Developers (June 10, 2008), 4 See, e.g., David Goldberg, Quick Counsel: Open Source Software, ASSOC. OF CORP. COUNSEL, Nov. 30, 2010, available at Paul C. Remus & Kristin A. Mendoza, The Risks of Using Open Source Software: Using It in Proprietary Software or Products Can Have Serious Implications for Evaluating the Value of a Business, ALLBUSINESS, Feb. 27, 2009, available at 5 See Amended Complaint, In re Certain Handheld Electronic Computing Devices, Related Software and Components Thereof, No. 337-TA-769 (ITC Apr. 8, 2011); Amended Complaint, In re Certain Mobile Devices, Associated Software, and Components Thereof, No. 337-TA-744 (ITC Oct. 12, 2010); Complaint, In re Certain Personal Data and Mobile Communications Devices and Related Software, No. 337-TA-710 (ITC Mar. 2, 2010); Complaint, Microsoft Corp. v. Barnes & Noble, Inc., No. 2:11-cv (W.D. Wash. Mar. 21, 2011); Amended Complaint, Oracle Am., Inc. v. Google, Inc., No. 3:10-cv (N.D. Cal. Oct. 27, 2010); Complaint, Gemalto S.A. v. HTC Corp., No. 6:10-cv-561 (E.D. Tex. Oct. 22, 2010); Complaint, Microsoft Corp. v. Motorola, Inc., No. 2:10-cv (W.D. Wash. Oct. 1, 2010); Complaint, NTP, Inc. v. High Tech Computer Corp., No: 3:10-cv (E.D. Va. July 8, 2010); Complaint, NTP, Inc. v. LG Elecs. Mobilecomm U.S.A., Inc., No: 3:10-cv (E.D. Va. July 8, 2010); Complaint, NTP, Inc. v. Google Inc., No: 3:10-cv (E.D. Va. July 8, 2010); Complaint, NTP, Inc. v. Motorola, Inc., No: 3:10-cv (E.D. Va. July 8, 2010); Complaint, Apple Inc. v. HTC Corp., No. 1:10-cv-00544, (D. Del. June 21, 2010); Complaint, Apple Inc. v. HTC Corp., No. 1:10-cv (D. Del. Mar. 2, 2010); Complaint, Apple Inc. v. HTC Corp., No. 1:10-cv (D. Del. Mar. 2, 2010). Page 2

4 a royalty-free basis). Because some OSS developers believe that RAND and RAND-RF licenses are inconsistent with or even prohibited by OSS licensing models, they have argued that patent policies used by standards setting organizations ( SSOs ) must be changed to accommodate OSS licensing practices. Such changes if made would not only be unnecessary as they are based on a misunderstanding of the issues but would adversely affect innovation, competition, and user choice, as well as devalue patent portfolios of those participating in the relevant SSOs. There is currently little case law on point to help assess the various risks to a party s patent portfolio associated with using OSS and few OSS users have analyzed these risks in detail. Given the lack of official guidance or even generally held industry views, this paper will explore some possible issues observed by the author and their potential impact on patent portfolios of OSS users when incorporating OSS into products that they distribute to their customers or partners. Part II provides a brief overview of sample OSS licenses and some issues regarding how to properly interpret the scope of the OSS license. Part II also evaluates the impact of a recent Federal Circuit case, TransCore LP v. Electronic Transactions Consultants Corp., 6 on the scope of any patent licenses that may be granted under an OSS license. Part III discusses the impact of OSS-related patent licenses on an OSS licensor s patent portfolio. Part IV analyzes the scope of patent grant backs that might be extracted from OSS users based on defensive revocation provisions included in many OSS licenses. Part V investigates the compatibility of patent licensing with OSS license models and the impact of proposed changes to SSO patent policies on participants patent portfolios. II. OSS: Express and Implied Patent Licenses Many OSS licenses are presumed to be primarily copyright licenses. Copyright licenses grant permission to reproduce, prepare derivative works, distribute, perform, and/or display the copyrighted software. All of the quoted permissions are the exclusive rights of a copyright holder enumerated in 17 U.S.C Yet few OSS licenses grant only these statutory rights. Instead many OSS licenses grant recipients permission to use the software, a term used in the patent statutes. 7 OSS licenses also incorporate grants, for example, to copy or redistribute the software; terms not precisely specified in either the patent or copyright statutes. On the one hand, a court might infer that because use is a statutory patent term, by granting recipients permission to use the software, patent rights necessary to implement the OSS are implied. On the other hand, a court might infer that no patent rights have been granted because the permission to use the software is not sufficiently clear since no mention is made of patents and other terms are used without any recognized statutory analogue. It is therefore not clear whether a court would find that a patent use right was intended or effective. Software, unlike other copyrighted materials, moreover, blurs the lines between the exclusive rights conferred under the patent and copyright statutes. For example, software is often made, an exclusive patent right, by reproducing the software to produce another copy of the software. Using the software requires the software to be compiled and copied into a computer s memory F.3d 1271 (Fed. Cir. 2009) U.S.C. 271(a) states: Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. (emphasis added). Page 3

5 The act of using the software, therefore, may require the preparation of a derivative work in addition to the right to reproduce the derivative work. 8 Software may be sold, but it is often distributed under a license. It is unclear whether the distribution of software under a license is equivalent to selling the software under the patent laws. 9 A. OSS Licenses Without Express Patent Grants Several common OSS licenses illustrate how the rights granted to recipients of OSS are blurred as a result of the language of the license. For example, the Apache Software License v. 1.1 and the BSD License, common permissive OSS licenses, both state: Redistribution and use in source and binary forms, with or without modification, are permitted provided that the following conditions are met: 10 A party might argue that it reasonably interprets this language to grant both patent and copyright licenses to recipients of the OSS to make an unlimited number of copies of the software, make changes to that software, run the software with or without the modifications by compiling such software or modified software, and sell and/or distribute the software with or without modifications. On the other hand, a party might argue that because the drafters added an explicit patent grant of limited scope to a later version of the license, the Apache License, Version 2.0 ( Apache License 2.0 ), 11 the drafters did not consider the terms of the earlier version sufficient to grant any patent rights. 12 The MIT License, another commonly used permissive OSS license, provides: 8 17 U.S.C. 117(a) states it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided: (1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner ; See DSC Communs. Corp. v. Pulse Communs., Inc., 170 F.3d 1354, 1361 (Fed. Cir. 1999) (stating [a]s we have seen, section 117 limits the copyright owner's exclusive rights by allowing an owner of a copy of a computer program to reproduce or adapt the program if reproduction or adaptation is necessary for the program to be used in conjunction with a machine ). 9 E.g., Acacia Subsidiary Settles Patent Litigation with Red Hat, BUSINESS WIRE, Apr. 29, 2011, available at Caroline McCarthy, Linux Patent Suit Ruled Against Google, CNET NEWS, Apr. 21, 2011, available at Complaint, Bedrock Computer Techs. LLC v. Software Techs., Inc., No. 6:09- cv (E.D. Tex. June 16, 2009); Verdict Form, Bedrock Computer Techs. LLC v. Google Inc. No. 6:09-cv (E.D. Tex. Apr. 15, 2011). 10 THE APACHE FOUNDATION, APACHE LICENSE, VERSION (2000), available at (emphasis added); BSD LICENSE, supra note 1, 1 (emphasis added). 11 THE APACHE FOUNDATION, APACHE LICENSE, VERSION (2004), available at html [hereinafter APACHE LICENSE 2.0]. 12 Commentators have argued that the University of California made no patent grant in the BSD license. Indeed, later in the license the University specifically used the phrase this software is provided by the copyright holders and contributors, suggesting by its absence that there are no patent holders or that those patent holders are not granting anything in the license. LAWRENCE ROSEN, OPEN SOURCE LICENSING 78 (2005). Other than in the context of patent exhaustion for the sale of goods, the courts have only inferred a patent grant when all the elements of equitable or legal estoppel are proven by the litigant. Thus, the issue of whether a court might determine that a patent right is given by the use of terms such as use remains one for which reasonable arguments could be advanced for either position, and it is not certain which way the courts may ultimately rule. Page 4

6 Permission is hereby granted, to use, copy, modify, merge, publish, distribute, sublicense, and/or sell copies of the Software, and to permit persons to whom the Software is furnished to do so, subject to the following conditions 13 Again, it could be argued that it is reasonable for a recipient of OSS licensed under the MIT License to assume that it was receiving grants to both copyright and patent rights based on the express language of the MIT License grant, but the absence of any mention of patents may indicate that patent rights are not being conferred by the license. The GNU General Public License, Version 2 ( GPLv2 ), the quintessential restrictive or copyleft license, is careful to craft the license grant in terms that closely track exclusive rights granted by the copyright statute. The relevant license text provides: You may copy and distribute verbatim copies of the Program's source code as you receive it, in any medium, provided that 14 You may modify your copy or copies of the Program or any portion of it, thus forming a work based on the Program, and copy and distribute such modifications or work under the terms of Section 1 above, provided that 15 You may copy and distribute the Program (or a work based on it, under Section 2) in object code or executable form under the terms of Sections 1 and 2 above provided that you also do one of the following 16 Note that there is no mention that the license grant is limited to copyright permissions. As discussed above, software unlike other copyrighted materials may uniquely implicate both patent and copyright rights depending on one s interpretation of the rights granted to licensees. Consequently, one might reasonably argue that a GPLv2 licensor is granting rights under both patent and copyright licenses under the GPLv2. Conversely, one could reasonably argue that the GPLv2 explicitly mentions patents in the preamble and in sections 7 and 8, yet fails to include an express patent grant. A court might find that the authors of the license could have made an express patent grant, as they later did in the GNU General Public License, Version 3, 17 and their failure to do so creates an ambiguity that does not rise to the level of inferring a patent grant based on the bare terms of the license. B. OSS Licenses with Express Patent Grants Because OSS licenses all permit downstream licensees to modify the software, there is also a question as to whether or not any patent licenses would flow to the modifications and/or the combination of the modifications and the OSS distributed by the licensor. To avoid confusion about the extent and scope of patent licenses associated with OSS licenses, many OSS licenses include an express patent license. For example, the Apache License 2.0 provides: 13 MIT LICENSE, supra note 1 (emphasis added). 14 GPLV2, supra note 2, 1 (emphasis added). 15 Id. 2 (emphasis added). 16 Id. 3 (emphasis added). 17 FREE SOFTWARE FOUNDATION, INC., GNU GENERAL PUBLIC LICENSE, VERSION 3 11 (2007), available at Page 5

7 Subject to the terms and conditions of this License, each Contributor hereby grants to You a perpetual, worldwide, non-exclusive, no-charge, royalty-free, irrevocable (except as stated in this section) patent license to make, have made, use, offer to sell, sell, import, and otherwise transfer the Work, where such license applies only to those patent claims licensable by such Contributor that are necessarily infringed by their Contribution(s) alone or by combination of their Contribution(s) with the Work to which such Contribution(s) was submitted. 18 It would appear that the Apache License 2.0 therefore expressly limits the patent grants to a party s own additions or modifications, alone or combined with the software that party received under the Apache License 2.0. In other words, if party A licenses a Work under the Apache License 2.0 and party B adds X to that Work and distributes X plus the Work to party C under the Apache License 2.0, then party C would expect to receive a patent license from B (not A) to X alone and X in combination with the Work. Interestingly, the Apache License 2.0 narrowly defines Contributions as follows: Contribution shall mean any work of authorship, including the original version of the Work and any modifications or additions to that Work or Derivative Works thereof, that is intentionally submitted to Licensor for inclusion in the Work by the copyright owner or by an individual or Legal Entity authorized to submit on behalf of the copyright owner. For the purposes of this definition, submitted means any form of electronic, verbal, or written communication sent to the Licensor or its representatives, including but not limited to communication on electronic mailing lists, source code control systems, and issue tracking systems that are managed by, or on behalf of, the Licensor for the purpose of discussing and improving the Work, but excluding communication that is conspicuously marked or otherwise designated in writing by the copyright owner as Not a Contribution. 19 The language requiring that the contribution be intentionally submitted to the Licensor may significantly impact the expectation stated above. C, in the example above, may expect a patent license from B if B submits X to A to be incorporated in the Work and A distributes X plus the Work to C. Such a licensing model makes sense in the context of a community development project such as those hosted by the Apache Software Foundation ( ASF ) in which contributions are submitted to the ASF for inclusion in certain projects and the project code is licensed by the ASF under the Apache License 2.0. With this understanding, however, we must re-evaluate the first example in which B adds X to the Work and directly distributes the Work. In that case, B may be the licensor for the entire Work that now includes X by definition, in which case the patent license for the Work including X arguably applies to B. 18 APACHE LICENSE 2.0, supra note 11, 3 (emphasis added). 19 Id. 1 (emphasis added). Page 6

8 Other licenses, such as the Common Development and Distribution License Version 1.0 ( CDDL ), expressly provide for the result described above where B is only licensing patents with regard to X and the combination of X plus the work. The language in the CDDL by way of comparison to the Apache License 2.0 provides: [E]ach Contributor hereby grants You a world-wide, royalty-free, non-exclusive license: (b) under Patent Claims infringed by the making, using, or selling of Modifications made by that Contributor either alone and/or in combination with its Contributor Version (or portions of such combination), to make, use, sell, offer for sale, have made, and/or otherwise dispose of: (1) Modifications made by that Contributor (or portions thereof); and (2) the combination of Modifications made by that Contributor with its Contributor Version (or portions of such combination). 20 The CDDL defines Modifications as follows: 1.9. Modifications means the Source Code and Executable form of any of the following: A. Any file that results from an addition to, deletion from or modification of the contents of a file containing Original Software or previous Modifications; B. Any new file that contains any part of the Original Software or previous Modification; or C. Any new file that is contributed or otherwise made available under the terms of this License. 21 It follows then that under the CDDL, patent licenses will be limited to those files set forth in the definition of Modifications. Another common license is the Eclipse Public License v 1.0 ( EPL ), which provides: and Subject to the terms of this Agreement, each Contributor hereby grants Recipient a non-exclusive, worldwide, royalty-free patent license under Licensed Patents to make, use, sell, offer to sell, import and otherwise transfer the Contribution of such Contributor, if any, in source code and object code form. This patent license shall apply to the combination of the Contribution and the Program if, at the time the Contribution is added by the Contributor, such addition of the Contribution causes such combination to be covered by the Licensed Patents. The patent license shall not apply to any other combinations which include the Contribution. No hardware per se is licensed hereunder OPEN SOURCE INITIATIVE, COMMON DEVELOPMENT AND DISTRIBUTION LICENSE (CDDL), VERSION , available at [hereinafter CDDL]. 21 Id ECLIPSE, ECLIPSE PUBLIC LICENSE - V 1.0 2(b), available at [hereinafter EPL]. Page 7

9 Contribution means: a) in the case of the initial Contributor, the initial code and documentation distributed under this Agreement, and b) in the case of each subsequent Contributor: i) changes to the Program, and ii) additions to the Program; where such changes and/or additions to the Program originate from and are distributed by that particular Contributor. A Contribution originates from a Contributor if it was added to the Program by such Contributor itself or anyone acting on such Contributor s behalf. Contributions do not include additions to the Program which: (i) are separate modules of software distributed in conjunction with the Program under their own license agreement, and (ii) are not derivative works of the Program. 23 Since the patent grant under the EPL is limited to the specific changes, not the entire file to which changes are made or in which the OSS code is included, the patent grant under the EPL is even narrower than the patent grant in the CDDL. 24 C. Impact of Case Law on the Scope of OSS Patent Licenses 1. Intel Corp. v. Broadcom Corp., 173 F. Supp. 2d 201 (D. Del. 2001) An implied license will likely not be found when the license includes an express patent license. 25 In Intel Corp. v. Broadcom Corp., an agreement contemplated a joint development effort to be accomplished through the exchange of proprietary technology, including patent rights. 26 The agreement explicitly set forth the terms of patent licenses to be exchanged between the parties. 27 Broadcom asserted that another provision, which dealt with Intel s non-patent intellectual property rights in the deliverables, implicitly contained a patent license broader than the express patent license. 28 The federal district court rejected the assertion, stating [w]hile it is true that patent licenses may be implied by language or conduct of the owner,... where an agreement contains a specific provision expressly defining the scope of the patent license implied licenses 23 Id A number of weaker copyleft licenses follow the CDDL model, such as the OCLC Research Public License 2.0, the Reciprocal Public License Version 1.1, and the Reciprocal Public License (RPL) Version 1.5. OPEN SOURCE INITIATIVE, OCLC RESEARCH PUBLIC LICENSE 2.0 (2002), available at OPEN SOURCE INITIATIVE, RECIPROCAL PUBLIC LICENSE VERSION 1.1 (2002), available at [hereinafter RPL 1.1]; OPEN SOURCE INITIATIVE, RECIPROCAL PUBLIC LICENSE (RPL) VERSION 1.5 (2007), available at A number of weaker copyleft licenses follow the EPL model, such as the Mozilla Public License Version 1.1 and the Common Public License Version 1.0. MOZILLA, MOZILLA PUBLIC LICENSE VERSION 1.1, available at [hereinafter MPL 1.1]; OPEN SOURCE INITIATIVE, COMMON PUBLIC LICENSE (CPL) VERSION 1.0, available at [hereinafter CPL]. 25 Intel Corp. v. Broadcom Corp., 173 F. Supp. 2d 201, 213 (D. Del. 2001). See, e.g., Atlas Corp. v. U.S., 895 F.2d 745, (Fed. Cir. 1990) (stating [t]he existence of an express contract precludes the existence of an implied contract dealing with the same subject, unless the implied contract is entirely unrelated to the express contract ); Wal-Noon Corp. v. Hill, 119 Cal. Rptr. 646, 650 (Cal. Ct. App. 1975) (stating [t]here cannot be a valid, express contract and an implied contract, each embracing the same subject matter, existing at the same time ). 26 Intel Corp. v. Broadcom Corp., 173 F. Supp. 2d at Id. at Id. Page 8

10 dealing with the same subject matter are not generally recognized. 29 It would appear that under Intel Corp. v. Broadcom Corp., an OSS license that includes an express patent grant to some specific patent rights may preclude a finding of broader implied patent rights. 2. TransCore LP v. Electronic Transactions Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009) In 2009, the Federal Circuit entered its decision in TransCore, 30 which if interpreted broadly, provides that a patent holder could be legally estopped from enforcing patent rights that it owns against a licensee when the patent rights are necessary to exercise the license at issue. TransCore manufactures, sells, and installs automated toll collection systems, and is the assignee of several patents related to automated toll collection system technology. 31 In 2000, TransCore sued Mark IV Industries, its competitor, for patent infringement. 32 In the settlement agreement, Mark IV agreed to pay $4.5 million in exchange for an unconditional covenant not to sue and a release of existing claims:...tci hereby agrees and covenants not to bring any demand, claim, lawsuit, or action against Mark IV for future infringement of [listed issued patents]... This Covenant Not To Sue shall not apply to any other patents issued as of the effective date of this Agreement or to be issued in the future. 33 Several years later, ETC won a bid to install and test a new tolling system, which was bought from Mark IV. 34 TransCore sued ETC for infringement of three of the patents that were part of the earlier settlement agreement and another related patent that was necessary to implement the licensed portion of the tolling system ( Necessary Patent ), which had been pending before the USPTO at the time of the settlement. 35 The Federal Circuit held 36 that the rights to the related patent that was not identified in the settlement agreement were exhausted by the authorized sales under an implied license to practice that patent by virtue of legal estoppel. 37 Legal estoppel applies when a patentee has licensed or assigned a right, received consideration, and then sought to derogate from the right granted. 38 The court reasoned that the Necessary Patent was broader than and necessary to practice at least one of the patents included in the settlement and in order for Mark IV to obtain the benefit of its bargain with TransCore, Mark IV must be permitted to practice the Necessary Patent to the same extent it may practice the patents listed in the settlement agreement. 39 The court determined that because Mark IV is permitted to practice the Necessary Patent, TransCore 29 Id. 30 TransCore LP v. Elec. Transactions Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). 31 Id. at Id. 33 Id. 34 Id. 35 Id. at The Federal Circuit also concluded that a non-exclusive patent license is equivalent to a covenant not to sue because a patent holder cannot convey an affirmative right to practice a patent, it can only convey a freedom from suit. Id. at Id. at Id. at Id. Page 9

11 is legally estopped from asserting the Necessary Patent against Mark IV in derogation of the rights granted to Mark IV under the three earlier-issued patents. 40 The court provided that the language of the settlement agreement stating [t]his Covenant Not To Sue shall not apply to any other patents... to be issued in the future is not contrary to this determination. 41 The court explained that [t]his language may protect TransCore against broad claims that future patents generally are impliedly licensed, but it does not permit TransCore to derogate from the rights it has expressly granted and thus does not preclude a finding of estoppel. 42 The release also included a provision that stated [n]o express or implied license or future release whatsoever is granted to MARK IV or to any third party by this Release. 43 Despite this provision, the court nonetheless implied a license within the scope of the covenant not to sue. Although there is no case law directly on point, under TransCore s legal estoppel holding, an OSS recipient might argue, under a broad interpretation of the holding, that it has an implied patent license from upstream licensors to the extent that such patent rights would be necessary to avoid any derogation from the OSS license granted to the recipient even if the OSS license does not expressly grant such patent licenses. Conversely, the patent holder might argue that this interpretation is too broad because in TransCore, there was a settlement agreement, the settlement agreement contained an express patent grant, a later issued patent was necessary to practice that express patent grant, and there clearly was consideration. 44 In the case of a copyright-only OSS license, the patent holder could argue that there is no settlement agreement that a court would be reluctant to disturb, there is no patent grant to derogate from, and no consideration was provided by the licensee. Although TransCore did not specifically address whether downstream code modifications could result in an implied patent license, the court also specifically noted that the scope of the laterissued patent was broader than the earlier patents and rights in the later-issued patent were necessary to practice the earlier patents. The court also took into consideration that the one accused of infringement was not receiving the benefit of the bargain it had made in its agreement unless it had a license to the later-issued broader patent. Applying this reasoning to downstream code modifications, on the one hand, there is a plausible argument that a patent holder has conveyed an implied patent license for at least some downstream modifications made by recipients of the code the patent holder has distributed under an OSS license. On the other hand, this interpretation could lead to an ever-expanding scope of patent licensing, resulting in claims that all combinations of the OSS and modifications of the OSS with any other functionality create in an implied patent license for every downstream user. Courts may be hesitant to start down that slippery slope. 40 Id. 41 Id. 42 Id. 43 Id. at It should be noted that consideration for the license was a factor in the TransCore decision. Whether or not an OSS license is an agreement pursuant to which a downstream recipient can show consideration in exchange for the license was not addressed in TransCore and is beyond the scope of this paper. Page 10

12 D. Impact of Commercial Licensing Practices on the Scope of OSS Patent Licenses Many software developers bundle their proprietary code along with OSS and distribute the bundle under a commercial license. Permissive OSS licenses allow software distributors to redistribute the OSS under commercial terms. Copyleft OSS licenses require redistribution under the same copyleft license. As a result, many commercial entities carve out OSS from their commercial licenses when they distribute copyleft OSS, but not when they distribute OSS licensed under permissive OSS licenses. 1. Redistribution under Commercial Terms OSS subject to commercial terms is arguably not licensed by the commercial software distributor under any terms other than the distributor s own commercial terms. But permissive OSS licenses all require that the software distributor reproduce the OSS license along with any applicable copyright notices when distributing the OSS. There is a question, therefore, whether there is an expectation that all downstream recipients of the commercial software reproduce the license and notices with all copies of the software that such downstream recipients may make. 45 If such an expectation or requirement exists, then there may be a reasonable argument that the distributor is also distributing the OSS under the terms of the applicable OSS license. Most commercial licenses will also include a no-implied license provision like the one in TransCore. As in TransCore, however, it is unclear whether a court would find that a distributor that distributes OSS bundled with proprietary software under commercial terms has granted recipients of the OSS it distributes implied patent licenses notwithstanding the no-implied license provision in the commercial license agreement. 2. Excluding OSS from Commercial Licenses As mentioned above, most software distributors that distribute copyleft OSS will expressly exclude such OSS from their commercial license terms in order to comply with the terms of the copyleft license. The distributor may state that the OSS is licensed exclusively by the authors or copyright owners of such OSS and not by the distributor. In doing so, it would appear less likely that the distributor would nonetheless be found to have itself licensed the OSS it distributes. 46 If the distributor modifies or adds to the copyleft code, the copyleft license will require the distributor to license its copyrights and patents in connection with its modifications and additions according to the terms of the copyleft license even if the OSS is excluded from the terms of the commercial agreement. 45 See Heather Meeker, Outsource Software Development and Open Source: Coming of Age in the 2000s, 24 SANTA CLARA COMPUTER & HIGH TECH. L.J. 869, 880 (2008) (advising outsource providers that [g]athering the [copyright] notices to be included for open source can be time consuming, so it is best to gather them in a central source as you perform development. Doing so will save your customer the time and effort of backtracking. ). 46 An analogy may be drawn to the example when there is a pass through of a manufacturer s warranties from the manufacturer through the distributor to the customer. The warranty in this example is actually being made by the manufacturer to the consumer. Page 11

13 The impact of commercial licensing in connection with OSS bundled with or integrated into proprietary software raises a series of complex and unresolved issues. For this reason, patentees distributing OSS along with their proprietary software should consider clearly stating in their commercial license agreements that any OSS included with the proprietary software distribution is being licensed solely by the authors and owners of the OSS and not by the patentee. III. Impact of OSS Distribution on Patent Portfolios Many commercial software developers and others that use OSS in their products, services, or operations may have significant patent portfolios. Such commercial users do not always evaluate the impact of their OSS distribution on their patent portfolios. As discussed above in detail, there may be risks that the distribution of OSS could result in broad patent licenses. While a user may not be interested in asserting patents against downstream recipients of the OSS the user distributes, such users may want to preserve the value in their patents for other purposes. For example, a patent that reads on OSS that the user distributes might also read on a competitor s proprietary software product. The user may want to enforce such patent against its competitor to either enjoin the sale of the competitor s product or at least extract a royalty in an effort to create a cost differential between its own products and its competitor s products. The user may also wish to preserve value in patents that read on OSS distributed by the user for defensive purposes and to secure freedom from suits against its own products and services. To the extent that there would be a viable argument that a reasonable royalty for the patent is zero, the patent would have little value in a defensive countersuit or in a cross-license. Establishing a reasonable royalty for a patent is not a precise science under the law. In the U.S., the courts typically will apply the Georgia-Pacific 47 factors as a framework for determining a reasonable royalty in a patent infringement suit. Although there are fifteen factors that a court might consider under Georgia-Pacific, 48 the first factor is particularly relevant in this context; the 47 Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, (S.D.N.Y. 1970), modified and aff d, 446 F.2d 295 (2d Cir. 1971). 48 The fifteen factors identified by the district court in Georgia-Pacific are: (1) The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty. (2) The rates paid by the licensee for the use of other patents comparable to the patent in suit. (3) The nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold. (4) The licensor's established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly. (5) The commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promotor. (6) The effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales. (7) The duration of the patent and the term of the license. (8) The established profitability of the product made under the patent; its commercial success; and its current popularity. (9) The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results. (10) The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention. (11) The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use. (12) The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions. (13) The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer. (14) The opinion testimony of qualified experts. (15) The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement; that is, the amount which a prudent licensee -- who desired, as a business proposition, to obtain a license to manufacture and sell a particular article embodying the patented Page 12

14 royalty that was agreed upon in other deals. An infringer could conceivably argue that the reasonable royalty determination should account for the fact that a patentee licensed the patent for free to all for its OSS distribution. Patentees would likely respond that there would be substantial differences in the circumstances in which it licensed its patent for free. 49 The question, however, is how much weight a court might give to the infringer s argument. To the extent that there is no current case law directly on point, patentees may want to balance the possible risks of royalty-free patent licenses with the importance of preserving value in their patents that may be licensed, either through an express or implied license, associated with OSS distribution. Still further, a party s right to use the OSS may be terminated under some OSS licenses if that party asserts certain patent claims. Such defensive revocation clauses may be tantamount to a broad patent grant back if the OSS is a critical component of a commercial user s products, services, or operations. The scope and trigger of such defensive revocation provisions are discussed in more detail in Part IV, but patentees should also recognize that such defensive revocation provisions, depending on the circumstances, may devalue a commercial user s patent portfolio. IV. Defensive Revocation and Effective Patent Grant Backs As discussed above, several OSS licenses include defensive revocation provisions that may effectively require a user to forgo enforcement of its patents against the OSS and/or its licensors. For example, anytime the OSS used or distributed is important to a user s business, is not easily replaceable, or is required by the user s customers, the user may have no practical choice but to preserve its permission to use the OSS. Defensive revocation provisions vary in terms of their scope and the manner in which they are triggered. There are, however, at least three general ways to categorize these provisions: (1) the user loses its OSS license (copyrights and patents) if the user claims that the OSS infringes the user s patent; (2) the user loses the patent licenses granted through the OSS license if the user claims that a licensor is infringing the user s patent; and (3) the user loses its OSS license (copyrights and patents) if the user claims that the licensor infringes a user s patent. A. Lose OSS License Based on Claims Against Licensors on Account of OSS The Mozilla Public License Version 1.1 ( MPL ) and a number of company-specific OSS licenses, such as the Nokia Open Source License Version 1.0a and the Sun Public License Version 1.0, fall into category (1) above. These licenses provide: If You initiate litigation by asserting a patent infringement claim (excluding declaratory judgment actions) against [Initial Developer] or a Contributor (the [Initial Developer] or Contributor against whom You file such action is referred to as Participant ) alleging that: invention -- would have been willing to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was willing to grant a license. Id. at When analyzing licenses relating to Georgia-Pacific factor 1, the Federal Circuit stated comparisons of past patent licenses to the infringement must account for the technological and economic differences between them. Wordtech Sys., Inc. v. Integrated Networks Solutions, Inc., 609 F.3d 1308, (Fed. Cir. 2010). Page 13

15 (a) such Participant s Contributor Version directly or indirectly infringes any patent, then any and all rights granted by such Participant to You under Sections 2.1 [Initial Developer copyright and patent licenses ] and/or 2.2 [Contributor copyright and patent licenses] of this License shall, upon 60 days notice from Participant terminate prospectively, 50 The Open Software License v. 3.0 ( OSL ) offers another variation of a category (1) defensive revocation provision in that the entire OSS license is revoked upon the assertion of patent claims against the licensed OSS work. Termination for Patent Action. This License shall terminate automatically and You may no longer exercise any of the rights granted to You by this License as of the date You commence an action, including a cross-claim or counterclaim, against Licensor or any licensee alleging that the Original Work infringes a patent. This termination provision shall not apply for an action alleging patent infringement by combinations of the Original Work with other software or hardware. 51 The OSL defensive revocation, however, is triggered when asserting against any licensee of the OSS whereas the MPL variety of defensive revocation provisions are triggered when the assertion is against the initial developer or contributor. B. Lose Patent License Based on Patent Claims Against the OSS Licensors The Apache License 2.0 and the EPL fall into category (2) above. The Apache License 2.0 provides: If You institute patent litigation against any entity (including a cross-claim or counterclaim in a lawsuit) alleging that the Work or a Contribution incorporated within the Work constitutes direct or contributory patent infringement, then any patent licenses granted to You under this License for that Work shall terminate as of the date such litigation is filed. 52 The EPL similarly provides: If Recipient institutes patent litigation against any entity (including a cross-claim or counterclaim in a lawsuit) alleging that the Program itself (excluding combinations of the Program with other software or hardware) infringes such 50 MPL 1.1, supra note 24, 8.2; OPEN SOURCE INITIATIVE, NOKIA OPEN SOURCE LICENSE (NOKOS LICENSE) VERSION 1.0A 8.2, available at [hereinafter NOKOS LICENSE]; OPEN SOURCE INITIATIVE, SUN PUBLIC LICENSE VERSION , available at [hereinafter SUN PUBLIC LICENSE]. 51 OPEN SOURCE INITIATIVE, THE OPEN SOFTWARE LICENSE ( OSL ) V , available at php. 52 APACHE LICENSE 2.0, supra note 11, 3. Page 14

16 Recipient s patent(s), then such Recipient s rights granted under Section 2(b) [patent license] shall terminate as of the date such litigation is filed. 53 Unlike the category (1) licenses, the Apache License 2.0 and EPL defensive revocation provisions are triggered by instituting an action against any recipient of the OSS and the scope of the defensive revocation is limited to the patent rights granted to the user. Like the category (1) licenses, the Apache License 2.0 and EPL defensive revocation provisions, however, are limited to patent infringement claims asserted against the OSS licensed by the user. The MPL and a number of company-specific OSS licenses in addition to the defensive revocation provisions quoted above also provide: If You initiate litigation by asserting a patent infringement claim (excluding declaratory judgment actions) against Initial Developer or a Contributor (the Initial Developer or Contributor against whom You file such action is referred to as Participant ) alleging that: (b) any software, hardware, or device, other than such Participant s Contributor Version, directly or indirectly infringes any patent, then any rights granted to You by such Participant under Sections 2.1(b) [Initial Developer patent licenses] and 2.2(b) [Contributor patent licenses] are revoked effective as of the date You first made, used, sold, distributed, or had made, Modifications made by that Participant. 54 As a result, these licenses have defensive revocation provisions that fall into both categories (1) and (2). C. Lose OSS License Based on Patent Claims Against OSS Licensor Other company-specific OSS licenses, such as the Apple Public Source License Version 2.0 and the RealNetworks Public Source License Version 1.0, have defensive revocation provisions that fall into category (3). As an example, the Apple Public Source License Version 2.0 provides: This License and the rights granted hereunder will terminate: (c) automatically without notice from Apple if You, at any time during the term of this License, commence an action for patent infringement against Apple; provided that Apple did not first commence an action for patent infringement against You in that instance. 55 Similarly the RealNetworks Public Source License Version 1.0 provides: The term of this License is perpetual unless terminated as provided below. This License and the rights granted hereunder will terminate: EPL, supra note 22, MPL 1.1, supra note 24, 8.2. See NOKOS LICENSE, supra note 50, 8.2; SUN PUBLIC LICENSE, supra note 50, APPLE, APPLE PUBLIC SOURCE LICENSE VERSION (2003), available at Page 15

17 (c) automatically without notice from Licensor if You, at any time during the term of this License, commence an action for patent infringement against Licensor (including by cross-claim or counter claim in a lawsuit); 56 The RealNetworks Public Source License Version 1.0 also provides that it will terminate: (d) upon written notice from Licensor if You, at any time during the term of this License, commence an action for patent infringement against any third party alleging that the Covered Code itself (excluding combinations with other software or hardware) infringes any patent (including by cross-claim or counter claim in a lawsuit). 57 The defensive revocation provision in the RealNetworks Public Source License Version 1.0 is therefore also triggered based on a patent claim against any party to the extent the infringement claim is on account of the licensed OSS, not any product or service. D. Other Variations Among Defensive Revocation Provisions It should be evident from the quoted language above that each defensive revocation provision may vary in other ways as well. For example, must the user actually file a patent infringement lawsuit or simply threaten to file a lawsuit to trigger the defensive revocation? There are also differences among the provisions as to whether the revocation occurs automatically or is left to the discretion of the OSS licensors. 58 Some of the OSS licenses address which rights survive after revocation and other do not. 59 Some OSS licenses with defensive revocation provisions include language defining valuation mechanisms for the patents licensed pursuant to the OSS license after revocation. 60 Still further, some of these provisions clarify whether or not revocation may be triggered by claims of indirect infringement and/or combinations OPEN SOURCE INITIATIVE, REALNETWORKS PUBLIC SOURCE LICENSE VERSION , available at 57 Id. 58 See OPEN SOURCE INITIATIVE, THE ACADEMIC FREE LICENSE , available at ( This License shall terminate automatically...as of the date You commence an action ) [hereinafter AFL 3.0]; OPEN SOURCE INITIATIVE, ARTISTIC LICENSE (2006), available at (...this Artistic License to you shall terminate on the date that such litigation is filed. ); THE CODE PROJECT, THE CODE PROJECT OPEN LICENSE (CPOL) (b), available at (...your License from such contributor to the Work ends automatically. ); CDDL, supra note 20, 6.2 (providing a sixty day window within which the claim may be withdrawn or the parties may enter into written agreement); MPL 1.1, supra note 24, 8.2(a) (providing a sixty day window within which the claim may be withdrawn or the parties may enter into written agreement). 59 See CPL, supra note 24, 7 ( Recipient s obligations under this Agreement and any licenses granted by Recipient relating to the Program shall continue and survive. ); MPL 1.1, supra note 24, 8.4 ( In the event of termination, all end user license agreements (excluding distributors and resellers) which have been validly granted by You or any distributor hereunder prior to termination shall survive termination. ); NOKOS LICENSE, supra note 50, 8.4; SUN PUBLIC LICENSE, supra note 50, See MPL 1.1, supra note 24, 8.3 ( If You assert a patent infringement claim, then the reasonable value of the licenses granted by such Participant shall be taken into account in determining the amount or value of any payment or license. ); NOKOS LICENSE, supra note 50, 8.3; SUN PUBLIC LICENSE, supra note 50, See AFL 3.0, supra note 58, 10 ( This termination provision shall not apply for an action alleging patent infringement by combinations of the Original Work with other software or hardware. ); CDDL, supra note 20, 6.2 ( alleging that the Participant Software directly or indirectly infringes any patent ). Page 16

18 To the extent that OSS licensed under a license with a defensive revocation provision is being used as a key component of a product or service or in connection with core business operations, patentees should carefully evaluate the scope and triggers for such defensive revocation before becoming reliant on such OSS. V. RAND Patent Licensing and OSS Distribution As mentioned above, OSS is software that is released under an OSS license. The Open Source Initiative ( OSI ) has developed a definition having ten criteria, the open source definition ( OSD ), against which it evaluates OSS licenses to determine whether or not a license meets these criteria. 62 Of the ten requirements of the OSD, a few are said to be inconsistent with RAND or RAND-RF licensing commitments. In particular, the following requirements of an OSI-approved OSS license are of interest: 1. Free Redistribution The license shall not restrict any party from selling or giving away the software as a component of an aggregate software distribution containing programs from several different sources. The license shall not require a royalty or other fee for such sale. 3. Derived Works The license must allow modifications and derived works, and must allow them to be distributed under the same terms as the license of the original software. 7. Distribution of License The rights attached to the program must apply to all to whom the program is redistributed without the need for execution of an additional license by those parties. 8. License Must Not Be Specific to a Product The rights attached to the program must not depend on the program s being part of a particular software distribution. If the program is extracted from that distribution and used or distributed within the terms of the program s license, all parties to whom the program is redistributed should have the same rights as those that are granted in conjunction with the original software distribution. 10. License Must Be Technology-Neutral No provision of the license may be predicated on any individual technology or style of interface. 63 In other words, OSS must be available royalty-free, and the OSS license must permit modifications to the code, permit code extraction and reuse separate from the product in which the code was originally included, and must not require downstream recipients of the code to 62 Open Source Initiative, The Open Source Definition, (last visited Apr. 26, 2011) [hereinafter OSD]. The Open Source Definition is only one definition of an open source license. Other definitions may be valid as well. 63 Id. 1, 3, 7, 8, 10. Page 17

19 provide an explicit gesture of assent to establish a contract. 64 This section focuses on the perceived friction these requirements of the OSD can cause in connection with RAND/RAND- RF patent licensing, though to understand these points of friction, one must understand OSS distribution and use models. The question, however, is not whether RAND licensing creates friction with the OSD or any specific OSS license but rather whether software that benefits from a RAND patent license may be distributed under a particular OSS license. A. Open Source Software Distribution According to the OSD, recipients of OSS, whether in source or executable form, must not be required to physically accept the terms of the OSS license, e.g., by click through agreement, to use and distribute the code. 65 As a result, OSS licenses are self-executing and are embedded in the OSS itself. If the OSS is downloaded, for example, by a user in source form, the actual OSS license will generally be included as text in the source code comments. When the source code is compiled, the comments will be stripped from the resulting executable files and there may be no retention of the OSS license. If the OSS is downloaded in executable form, there are typically text files accompanying the executable files designated as Notice.txt, Readme, License.txt, and other similarly named files that contain the OSS licenses. Since there is no negotiation over terms, no requirement to acknowledge the terms, and the existence of the OSS license may not be apparent, those downloading the OSS may erroneously perceive that there are no license terms and conditions with the OSS they download. B. OSS Business Models While OSS must be available for free, many entities still profit from OSS. OSS can reduce development and testing costs if the OSS can be developed by a community of developers working for free. However, most cutting edge and innovative software today is still developed by paid developers employed by corporate employers that retain ownership in the software. For many products and services that require truly innovative software, those products and services will generally use software developed in a traditional manner and distributed under a non-oss license. Employers also pay their employees, however, to participate in communities so that the development costs for non-differentiating software can be distributed across the community participants including the employers that support the projects. 66 OSS, irrespective of development model, can nonetheless be given away to drive sales of higher value software, complementary hardware, complete IT solutions, and related services. For example, Oracle promotes and invests in Linux, the free software operating system, so that it can sell its high end databases to corporate IT customers to run on their free Linux servers. 67 OSS 64 Id. 65 Id For example, the Open Handset Alliance, which originated Android and was led by Google, has many mobile operator, handset manufacturer, semiconductor, software, and commercial companies as members. See Android, Open Source Project, Philosophy and Goals, (last visited Apr. 26, 2011); Open Handset Alliance, Members, (last visited Apr. 26, 2011). In another example, IBM joined the community to collaborate on the development of OpenOffice. IBM Joins OpenOffice.org Community, PRWEB, Sept. 10, 2007, available at 67 See Oracle, Oracle Linux, (last visited Apr. 26, 2011). Page 18

20 can underpin a profitable software support service such as IBM s Global Services Division, which reported revenues of over $56 billion in C. Points of Perceived Friction As discussed above, most SSOs operate under a patent policy that results in participating patentees providing assurances that they will license essential patent claims on RAND or RAND-RF terms. Although there may be different views as to what terms and conditions of a patent license are RAND, there is generally some common ground for agreement. For example, most will agree that a RAND patent license may include reasonable royalties. This is perhaps the most contentious term for those who wish to implement an ICT standard and distribute the implementation under an OSS license. For this reason, some SSOs have adopted RAND-RF policies that prohibit reasonable royalties. However, even with a RAND-RF patent policy there are a number of common patent license terms that are said to create tension for OSS distributors and users. For this reason, some users are advocating that SSOs not only change their RAND policies to RAND-RF policies but that they change them to self-executing patent non-asserts or covenants not to sue ( CNS ). 69 Such CNS policies take away the freedom of standards development participants and implementers to negotiate mutually acceptable terms. More importantly, the value of patents subject to such policies is substantially diminished. Not only is the patentee unable to seek a reasonable royalty or fee but the patentee cannot require other RAND terms such as reciprocity and reasonable termination provisions. 70 Such CNS policies also preclude a patentee from conditioning its license in a RAND manner to avoid patent exhaustion since the CNS is selfexecuting, contains all the terms and conditions, and applies to all parties. Patent policies that 68 Total Global Services is made up of Global Technology Services ($38B) and Global Business Services ($18B). Press Release, IBM, IBM Reports 2010 Fourth-Quarter and Full-Year Results, (last visited Apr. 26, 2011). See also Press Release, IBM, IBM Awarded Contract to Modernize the U.S. Government s Acquisition and Procurement System (Feb. 18, 2010), available at ( The project will include the integration of nine key GSA applications into a single system -- based on open source software -- designed to simplify the entire acquisition and procurement process ); Chris Preimesberger, Red Hat CEO Likens Company to Facebook, Wikipedia in Collaborative Innovation, EWEEK.COM, Aug. 18, 2009, available at Source/Red-Hat-CEO-Likens-Company-to-Facebook-Wikipedia-in-Collaborative-Innovation / (Red Hat CEO discusses its business model of monetizing enterprise and technical services based on software that is licensed for free). 69 For example, the OpenAjax Alliance IPR Policy states Each Member and Contributor, on behalf of itself and its Affiliates, covenants not to assert its Covered Claims against any Covered Product created by the Alliance, by any Member, or by any other party OPENAJAX ALLIANCE, MEMBERS AGREEMENT FOR THE OPENAJAX ALLIANCE Attachment A 2.2 (Aug. 16, 2006), available at [hereinafter OPENAJAX IPR POLICY]. OASIS also has a non-assertion mode, that states Each Obligated Party in a Non-Assertion Mode TC irrevocably covenants that it will not assert any of its Essential Claims covered by its Contribution Obligations or Participation Obligations against any OASIS Party or third party OASIS, INTELLECTUAL PROPERTY RIGHTS (IPR) POLICY (2010), available at [hereinafter OASIS IPR POLICY]. 70 Some do have very limited narrow defensive termination provisions, but they may be inadequate for patentees that are frequently the subject of patent infringement suits. For example, the OpenAjax Alliance IPR Policy states the covenant may be suspended or terminated with regard to any Member or any other party that asserts a patent in litigation against a Covered Product or otherwise knowingly asserts or threatens to initiate a lawsuit which would assert that all Covered Products would infringe a patent owned or controlled by it OPENAJAX IPR POLICY, supra note 69, Attachment A 2.2. And the OASIS policy states The covenant described in Section may be suspended or revoked by the Obligated Party with respect to any OASIS Party or third party if that OASIS Party or third party asserts an Essential Claim in a suit first brought against, or attempts in writing to assert an Essential Claim against, a Beneficiary with respect to a Covered Product that implements the same OASIS Final Deliverable. OASIS IPR POLICY, supra note 69, Page 19