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Microsoft Patent Cartel (CPTN) Dodges German Federal Cartel Office

Posted in Antitrust, Finance, Microsoft, Novell, Patents at 8:42 am by Dr. Roy Schestowitz

Old policeman

Summary: The regulatory process regarding CPTN in Germany is hindered by a Microsoft manoeuvre which avoids contact with the German Federal Cartel Office

SOME SEEMINGLY-conflicting reports either confirm or refute the claims we covered the other day. It seems to be a bit of both and while AttachMSFT [sic] looks for a loan with which to buy Novell, it seems likely that Microsoft (MSFT) will get Novell’s patents after all.

Fortunately, while some people go by Microsoft’s word, Groklaw explains that it is more complicated than that and Steven J. Vaughan-Nichols emphasises that “CPTN Holdings is still trying to buy Novell’s patents”:

Sources close to Novell told me that was indeed the case. The CPTN group will be re-filing to obtain the patents. Their plans haven’t changed a bit. A Microsoft representative confirmed that CPTN was still planning on buying the patents. The PR rep said, “This is a purely procedural step necessary to provide time to allow for review of the proposed transaction.”

Now, this is not to say that the Novell deal is sure to happen. I find it more than a little odd that Attachmate was still looking for just over a billion dollars to close the deal in late December. Microsoft is already helping Attachmate buy Novell and Attachmate was already getting a steal of a deal on Novell.

The FSFE, whose leadership is mostly based in Germany, has just expressed concerns about CPTN:

As a consequence, if the sale of Novell’s patents to CPTN is allowed to go ahead, this will significantly increase the legal threat level for Free Software.

This is why FSFE is extremely concerned about the sale of Novell’s patents to CPTN. We have shared our concerns with the German competition authorities on December 22, 2010.

CPTN apparently withdrew its filing with the German authorities on December 30. This could mean that the companies behind CPTN are changing their strategy, or that they’re merely reformulating their application. It definitely doesn’t mean that the danger is over.

The competition authorities should only allow this deal if there are effective measures in place to prevent the patents in question from being used against Free Software in an attempt to restrict competition. As an effective measure, CPTN Holdings should be required to make the patents in question available under conditions which allow their use in Free Software, including in programs distributed under GNU General Public License (GPL) and other copyleft licenses.

The Microsoft booster simply says that “Microsoft’s Novell patent cartel dodges German regulators” (yes, that’s the headline from a Microsoft booster, who is close to the company). To quote:

But IT World has pointed out that this relates only to Germany and that CPTN continues to exist as a US limited liability company registered with the Secretary of State for Delaware (see here).

Further, Microsoft has told TechFlash that the withdrawal from Germany is a “purely procedural step necessary to provide time to allow for review of the proposed transaction.”

“Procedural” indeed.

Such is the concern over the deal that in December, the OSI lodged an official complaint with the Federal Cartel Office, asking regulators to investigate the sale of the patents.

OSI president Michael Tiemann announced the OSI’s request to German regulators in a blog post on December 29, the day before CPTN quietly wrapped up operations.

The still-widely-covered OSI complaint can perhaps be refiled as well, e.g. to address US regulators (although the FTC is clawless and toothless).

Going back a month or so, we have this analysis which discusses Microsoft’s partners/allies too:

Novell’s Patents Bought By Microsoft, Apple, EMC, & Oracle (From ZDNet) This news raises even more questions about the Novell acquisition. Is VMware really out of the picture? Is Apple getting into the enterprise space? Will Microsoft even get the lion’s share of the IP?

Android will be a potential target of CPTN, as a former Novell employee (Zonker) helps explain in a new column. Google also seems concerned about Nortel patents, thus showing everything that is wrong about the patent system especially once companies implode. To quote this recent report about it:

Apple, Nokia and Google are all expected to bid for Nortel’s huge patents hoard. The winner could help decide the licensing structures for LTE.

LTE deployments and trials may be stacking up, but one significant aspect remains fraught with uncertainty – the patent position.

In previous generations of mobile technology, individual IPR holders might argue bitterly over rights and royalties, but the process was well understood – and took place strictly behind closed doors, with bilateral agreements.

In other news, there is another investigation which seeks to block the Novell deal [1, 2] and it is covered in a press release that says in the beginning:

Novell Inc. announced on November 22, 2010 that it had agreed to sell the company to Attachment Corporation for $6.10 per share for a total transaction value of $2.2 billion. Attachmate is owned by Francisco Partners, Golden Gate Capital and Thoma Bravo. In conjunction with the sale, Novell announced that it has agreed to sell certain intellectual property to CPTN Holdings LLC for $450 million in cash.

Levi & Korsinsky LLP is going to challenge this deal, so maybe it’s premature to say that Novell is sold. It is also possible that Microsoft won’t get Novell’s patents at the end.

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