Putting Sun’s Kodak Settlement in Context

There seems to be some confusion surrounding Sun’s settlement with Kodak (which clouded what otherwise would’ve been very positive Q1 news last week, including (non-GAAP) positive operating income, margin improvement, etc.) – so I thought I’d provide some clarity (see http://www.sun.com/investors for full financials and GAAP/non-GAAP comparisons).

First things first: nothing’s changed. In terms of patents, and intellectual property, nothing whatsoever about the Kodak settlement suggests Sun’s position on IP has changed. Moreover, the settlement was all about ensuring what Kodak was doing to Sun, they could do to no one else in the Java community.

But let’s get the issues out on the table.

First, this settlement is proof we’re committed to protecting our customers and communities.

How? As a result of this settlement, the Java community, our customers, licensees and shareholders, have now been freed from worrying about Kodak’s litigation. We paid $92M (not $82M) to protect our constituents from their lawyers. Do we believe their patents are invalid? Yes (just crack a Smalltalk textbook). Was it worth having this suit hang over our heads, no. Absolutely not. That’s why we settled – not to validate Kodak, not to validate those patents, but to let our customers and employees and stockholders focus on market opportunity, not litigation.

Second, nothing’s changed in our policy regarding intellectual property.

We still believe IP is what keeps our industry alive, and we still believe its the most durable asset created by Sun. And a $92M Kodak settlement is just that, a settlement to get this behind us. So that we can get back to creating IP for a networked world, and stop flying back and forth to Rochester, NY. Headquarters of the Kodak Corporation. Home to most of their employees, and an economy reliant upon the revival of Kodak for an economic turnaround. Did I mention the trial was heard by a Rochester jury?

Third, patents still matter.

And moreover, our settlement with Kodak shows exactly why – when confronted by an aggressor, we want the ability to battle back. To settle for $92M, not for a billion. But bear in mind, we’ve shied away from being a patent aggressor. We’ve always, except when confronted by clear and well established transgressions, relied upon innovation as our competitive weapon, never litigation. (And we’ve always been open to new ideas.)

Now, with all that said, I’d like to make a few more points.

Are software patents without controversy?

No, not at all. Some systemic changes need to be made. But the assertion that patent coverage should be eliminated from the software industry makes no sense.

There’s this great irony: spend time with Sun’s microprocessor team, and guess what – they’re all writing software. Spend time with our data center switching team – they’re all writing software, too. Viewed simplistically, computing hardware is software burned into and onto physical things. And over time, more and more routine software elements end up in hardware, for acceleration or optimization. SSL accelerators, JVM on a chip, you name it. So, where do you draw the line on patents? Firmware? FPGA’s? Silicon? Systems?

Yes, we should reform the system to stop granting spurious patents. And yes, we should disincent spurious litigation. That’s what we’re advocating in Europe, before the legislature there settles on the worst rather than the best of US practice. Eliminating patent coverage to benefit copyright-only companies is imbalanced – but safeguards are needed if the system is to protect innovation rather than allow predators to tax standards. Safeguards, I agree, that aren’t in place today.

Finally, don’t believe those that are playing the community.

What do I mean? For IBM to claim, “as an ally that believes in the positive power that the Linux community is having on collaborative innovation, I can assure you we have no intention of asserting our patents against the [GNU]Linux kernel…” is a throwaway comment. Communities and kernels and individuals without assets are not useful targets for IBM-style corporate litigation. IBM can’t get the billions they do in IP licensing by suing Groklaw‘s readership (no offense, PJ), or even Linus himself – so their comment is a shirtsleeve off their vest. For the real money, IBM would have to go after corporations.

So how about IBM starts naming the companies to whom they’ll issue their patent amnesty? Let’s start with Red Hat. If IBM’s not going to sue Red Hat, then shouldn’t IBM state that in writing? MySQL clearly spawned from collaborative innovation, will IBM grant patent amnesty to them, too? In writing? IBM, demonstrate your commitment to the community, start documenting the companies to whom you’re issuing patent amnesty. Love to see the list.

Comments about “we won’t sue the kernel” or “we won’t sue the community” show the cynicism with which IBM is pursuing its marketing initiatives. They’re playing the community like a violin, not protecting it.

Novell’s announcements? They got it right – whether a product is open or closed source is a sideshow. What matters is whether a company will stand behind its products. As we did in settling with Kodak. We not only protected our products, we protected our customers. Further, we protected the Java community from litigation. But even Novell’s policy has limitations – they’ll only protect their enterprise servers, not their developer communities. Will they protect JBoss? MySQL? I doubt it (and I wonder why they referenced them in their press releases?). But no company’s coffers are deep enough to protect the universe (read the last two sentences in David Berlind’s cogent analysis).

The net of which is, investing in intellectual property is how Sun invests in our future. Protecting our customers is a part of our commitment to them, to stand behind what we do, in open source, closed source, community source, binary, streamed formats or otherwise. That was the strategy before the Kodak settlement, that is the strategy after the Kodak settlement. Don’t believe the conspiracy theorists – or the companies that don’t stand behind their IP – who say this was all about setting up Kodak to attack the rest of the planet.

That’s as spurious as the litigation.


Given the volume of emails folks have been sending to me (misaddressed) regarding the invalidation of Kodak’s patents, please use jonathan.i.schwartz@sun.com. Thanks for the help, much appreciated.

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