Patent Lawsuits and Settlements

July 22, 2008

by Rob Tiller, Vice President and Assistant General Counsel, IP and Richard Fontana, Open Source Licensing and Patent Counsel

Since the settlement of the Firestar lawsuit last month, we’ve been asked to explain why Red Hat settled the case, rather than fighting to invalidate the patent at issue in the lawsuit. The news some days back that the Patent Office had issued an initial, non-final action rejecting the claims in a re-examination of the same patent has inspired similar questions. Here are our thoughts.

The patent asserted in the Firestar lawsuit was U.S. Patent No. 6,101,502. In a perfect world, this patent and others like it would not even be awarded. In an almost-perfect world, even if such patents were awarded, there would be a fair opportunity to challenge their validity. Unfortunately, that is not the world we currently live in with respect to U.S. patent law.

Not only is it relatively easy to get a dubious patent granted, but it is also very difficult to fight a patent once it has been granted. Under U.S. patent law, a granted patent has a “presumption of validity” in a lawsuit, and a defendant like Red Hat faces a very high burden in trying to challenge the validity of a patent. We hope that someday patent law will be changed to put the parties in a patent lawsuit on a more equal footing with
respect to validity challenges.

In the Firestar case, we were confident that we had good legal arguments, and we were prepared to make those arguments in court. But trials are extremely costly, and U.S. patent law favors the plaintiff in many respects. Moreover, this case, like so many other recent patent lawsuits, was brought in the Eastern District of Texas, a venue that is generally considered pro-plaintiff. Thus, even though we believed that on the merits these patents were not valid and that we did not infringe them, the outcome of an expensive trial was less than certain and carried definite risks.

We were also mindful that even if we prevailed at trial, our success would address only a particular patent and a particular product. With the settlement, we achieved considerably more. The settlement covers not just the ’502 patent that was the basis of the FireStar case, but also four other specified patents and any other patent owned, controlled, or enforceable by DataTern before the effective date, any patent issuing from or claiming priority to a pending patent application by DataTern, and any foreign counterpart of the listed patents. The license in the settlement is unlimited as to products. Moreover, the settlement grants a license and covenant not to sue not just to Red Hat, but to the free and open source software ecosystem of upstream developers and downstream distributors and users.

As for the reexamination proceeding for the ’502 patent, we expected and hoped that the patent examiner would initially reject the patent claims, and we took this possibility into account in our settlement. After the settlement, the examiner issued a “first office action” rejecting the ’502 patent based on anticipation and obviousness, and of course we think this decision was correct.

But as Groklaw reported last week, the ’502 patent “isn’t knocked out yet.” This office action is just an initial step in a proceeding that is far from final. The patent holder will probably argue to the examiner that the patent is valid over the prior art, a process that may repeat itself many times during the course of the re-exam. While initial office actions rejecting all claims are routine in re-exams, it is rare for the final result of a re-exam to be complete invalidation of all claims. In most re-exams, some or all of the claims of the original patent survive, though often with narrowing amendments. Thus, there is a strong possibility that the ’502 patent will survive this re-exam in some form. In any event, just as with the Firestar lawsuit, the outcome of the reexamination proceeding is impossible to predict with certainty.

If we could foretell the future, decision making on how to address patent aggression would be easy. But we must live in the world as it is, and must make important decisions in a zone of uncertainty. We continue to think that the settlement agreement was a good one for free and open source software, and we expect that it will stand the test of time.

Back to top