Red Hat CEO On Patent Trolls: Just Pay Them Off

jbrodkin writes "Although Red Hat fights patent lawsuits when it deems it necessary, CEO Jim Whitehurst says it's often just better to pay the trolls to make them go away. 'When it's so little money, at some point, bluntly, it's better to settle than fight these things out,' Whitehurst said. Red Hat has been forced to pay out claims to the likes of FireStar Software and Acacia, and Whitehurst indicated Red Hat has paid off various other companies behind closed doors. 'Some of them are [public] but we often seal them in settlement,' he said."

Comments

This is

[Colourspace]

The stupidest thing I have heard a CEO say in a long time. Welcome trolls, we'll pay you to shut the fuck up.

Re:This is

[betterunixthanunix]

His job is to maximize shareholder value. If that means settling for a lower price than the cost of pursuing a court case, that is what he is going to do.

Re:This is

[sqlrob]

He just told trolls "Come and get it!", how is that maximizing value?

Re:This is

[bloodhawk]

Patent trolls like easy targets, As the CEO he has just announced that he will bend over for any patent troll as long as they aren't to greedy and only ram their fist in up to the elbow. Their is no possible way this can be explained as maximising value as every patent troll will now have Redhat at the top of their lists for viable targets as potential cash cow.

Re:This is

[The Dawn Of Time]

It's entirely possible that he, as the CEO, understands that his company is indeed in violation of these patents and sees this as a cheaper solution than trying to rewrite 200 years of law or fight a battle he knows he will lose.

I don't know for certain, of course. I'm no more privy to his thought process than you are.

Re:This is

[jimicus]

He may not be CEO for very long if he makes a habit of making announcements like this.

Re:This is

[MoonBuggy]

It's pretty much impossible to know that one is in violation of a software patent in a meaningful way, since most challenges don't revolve around "Our product doesn't come under those criteria", but instead go for "The patent is invalid and should never have been granted". The latter depends on subjective criteria like obviousness, which means going to court is a gamble every time - the policy to sometimes feed the trolls is probably just the product of a bit of statistical analysis on the outcomes of similar court cases.

Re:This is

[increment1]

That is not the point that the original poster is referring to. What is being referred to is that if you pay off trolls, you probably shouldn't announce that you pay off trolls, or you will end up with more trolls coming at you.

This is why the comment by the CEO is being referred to as stupid, since saying something like this can only lead to more patent trolls and nothing positive for the company.

Re:This is

[Twinbee]

Only to those cases where there's a a hint of honest IP defense. Standard troll crap gets fought (and presumably thrown out). I quote:

"When we feel like people are really abusing the patent regimen, and we have a good case that the patent is invalid, that it should never have been issued, it's not a patentable thing, or there's a lot of prior art, then we fight those out," Whitehurst said during an interview with Network World at this week's Red Hat Summit in Boston.

Re:This is

[d'fim]

He just told trolls "Come and get it!", how is that maximizing value?

It isn't.

The strategy was smart; announcing it to the world was stupid.

Re:This is

[Firethorn]

This sort of thinking is what led to the lawsuit-crazy period in the '90s. People would find some 'standing' to sue, pretty much irregardless of merit. Then they'd offer to settle for some fraction of the court costs (like $500). The accountants did the make, figuring it'd cost $5k to win the court case, but only $500 to make them go away.

HOWEVER, if you get a reputation for paying off, you attract MORE trolls. This would be known as a 'second order effect'. IE if you don't have a rep for settling, you might get sued once a year. Get a rep for settling, and you might get 100.

1x $5k is cheaper than 100x $500.

So settling with a patent troll may be, on first glance, cheaper. But if it results in more patent trolls threatening to sue you, the overall expense can actually flip.

It's this sort of reasoning behind why Walmart and a number of other companies will fight ANY settlement tooth and nail. It's to have a tough-guy rep to prevent others from suing in the first place.

Re:This is

[eviljolly]

I have to agree. This is something you are supposed to think, but not say. Once you lose your intimidation factor, more people are likely to attack.

Re:This is

[publiclurker]

The job of a CEO these days is to maximize HIS PERSONAL profits *while he's CEO*. People seem to have completely lost sight of any long term vision. FTFY

Re:This is

[JonJ]

Yeah, the actual method is a good strategy, but I would not *ANNOUNCE* the strategy

Yes, this is clearly something the patent trolls wouldn't find out unless he told them.

Re:This is

[Firethorn]

Doing actual research, no, lawsuits didn't really go up. Matter of fact, suits by individuals are decreasing.

Still, remember my point - the troll doesn't want to go to court, because he knows he'll lose. He's hoping for a 'shut up and go away' payoff that's less than what it would cost the business to have a lawyer handle their defense.

So, generally speaking, only the very initial steps of starting a lawsuit would be followed. If the business folds and settles, no lawsuit for the records. If they promise to fight, the troll is likely to fold in order to find an easier target. Also no lawsuit appearing in the courts. Only if the troll choses to fight it out, risking his own money, would it appear in the statistics.

And how the heck did 'math' get redone as 'make' in my post?

Re:This is

[Darinbob]

Because the trolls already know this very well and don't need to be told. It's the general public who might not know this yet.

Is this the elusive Step 2?

[joebok]

Phase 1: Collect Underpants
Phase 2: Sue Red Hat for an amount not too big, but not too small and get paid to shut up and go away.
Phase 3: Profit

Danegeld, anyone?

[gmfeier]

Didn't work then, doesn't work now.

The real harm's individuals and SMEs

[ciaran_o_riordan]

The discussion of software patents focusses way too much on court cases and big companies.

Companies have all sorts of expenses, and trolls is another. Some companies (particularly big ones) can afford that.

The real harm is when standards are ruined, or whole fiels (ex: video), or when SMEs and small developers are forced to stop distributing their software (or when they don't even start, since they know it would be doomed).

http://en.swpat.org/wiki/More_than_trolls

http://en.swpat.org/wiki/Harm_to_standards_and_compatibility

http://en.swpat.org/wiki/Audio-video_patents

Rudyard Kipling

[Anonymous Coward]

We never pay any-one Dane-geld,
No matter how trifling the cost;
For the end of that game is oppression and shame,
And the nation that plays it is lost!

Oh, Come On!

[jaskelling]

Or, you could actually have a spine and stand up for what's right. This is the same as companies that determine how much it costs to fix a product versus how much it costs to pay damages to the people it can injure. It's "good" business, but it's cowardly and only hurts everyone in the long run. And someday, it will come back to bite you in the ass. But hey, whatever works for you I guess.

Re:Oh, Come On!

[mlts]

There is choosing one's battles, to keep a company going versus going down like mp3.com.

On one side, there is paying off a troll.

The other side is if a troll managed to get a judge (likely in East Texas) to issue an injunction that no products can be sold, that will cause major revenue loss, even if the case has no merit. Same if the troll got the export regulators to prohibit export/import of the product.

It is a game of poker. How good is the troll's law firm, and how valid their patents would be in the eyes of nontechnical judges are all points of decision of when a company should fold and pay the troll off, versus digging in and doing battle.

It is really a lose/lose thing for RedHat. If they lose the battle, they might go bankrupt. If they win against a patent troll, they gain nada.

just business

[Adayse]

so he says that sometimes you should just settle so that when he fights he seems more reasonable..

Rudyard Kipling said it best

[Oriumpor]

It is always a temptation to an armed and agile nation
    To call upon a neighbour and to say: --
"We invaded you last night--we are quite prepared to fight,
    Unless you pay us cash to go away."

And that is called asking for Dane-geld,
    And the people who ask it explain
That you've only to pay 'em the Dane-geld
    And then you'll get rid of the Dane!

It is always a temptation for a rich and lazy nation,
    To puff and look important and to say: --
"Though we know we should defeat you, we have not the time to meet you.
    We will therefore pay you cash to go away."

And that is called paying the Dane-geld;
    But we've proved it again and again,
That if once you have paid him the Dane-geld
    You never get rid of the Dane.

It is wrong to put temptation in the path of any nation,
    For fear they should succumb and go astray;
So when you are requested to pay up or be molested,
    You will find it better policy to say: --

"We never pay any-one Dane-geld,
    No matter how trifling the cost;
For the end of that game is oppression and shame,
    And the nation that pays it is lost!"

Re:Rudyard Kipling said it best

[russotto]

Before there was Kipling, before there was "We don't negotiate with terrorists.", there was "Millions for defense, not one cent for tribute." (US Rep. Robert Goodloe Harper, in 1798). I'm sure the idea is older than that.

The trolls will come anyway

[rsilvergun]

he's just letting them know it's not worth litigating, because he'll settle for reasonable amount. These are all businessmen...

Possible GPL Violation?

[Nick Ives]

My understanding is that the GPL carries with it patent licenses. Red Hat can't license patents for just its own customers.

Reading section 11 of GPLv3 and section 7 of GPLv2 it seems fairly clear that unless Red Hat is licensing for all downstream recipients (which would essentially mean the entire GPL ecosystem, as anyone who wants a particular patent license would just have to make a derivative from the Red Hat code) they can't distribute.

3 Steps Ahead?

[bill_mcgonigle]

Heh... That's opposite thinking. When you "settle" with these jokers, it's typically a friggin' dogpile on you over time- they know you'll pay out so they'll come with their hands out and threatening to sue them. LOTS of them.

Hardly "maximizing shareholder value", now is it?

Well, if it attracts hundreds or thousands of small-dollar patent gnats to Redhat, they can probably afford to absorb that blow, but they'll also be able to go to Congress and testify, "we currently have 1734 software patent lawsuits in litigation, none of which a dispassionate observer would feel have merit. This is what software patents really do, destroy innovation. It's time to end the practice."