Open source IP case puts spotlight on patents (SearchOpenSource) [LWN.net]

Open source IP case puts spotlight on patents (SearchOpenSource)

Posted Jul 11, 2006 15:43 UTC (Tue) by kirkengaard (subscriber, #15022)
Parent article: Open source IP case puts spotlight on patents (SearchOpenSource)

Mmm ... escrow != free money. Escrow is subject to contractual obligations. Red Hat is obliged to care what happens to the money.

"Item 1.01 Entry into a Material Definitive Agreement.

...

Pursuant to the Merger Agreement, at the closing, $43 million of the cash consideration to be paid at the closing will be deposited into an escrow fund to secure certain indemnification obligations of the holders of capital stock, warrants and vested options of JBoss and to satisfy certain obligations of such holders to adjust the base consideration. The balance of the escrow fund in excess of any amounts held for unresolved claims will be distributed the holders of capital stock, warrants and vested options of JBoss at various times over the 18-month period after the closing." (RED HAT INC 8-K 10 April 2006)

So if it is the case that JBoss infringed, the money held for them is available for this purpose. I suppose I'm picking nits, since the money is being held for indemnification purposes, for Red Hat to pay out on behalf of JBoss should there be anything lurking under the table like this. It just depends on how credible a threat this turns out to be as to whether the JBoss shareholders lose their money.

(Log in to post comments)

Open source IP case puts spotlight on patents (SearchOpenSource)

Posted Jul 11, 2006 15:51 UTC (Tue) by kirkengaard (subscriber, #15022) [Link]

(I suppose this really depends on internal politics and how much love is lost on this account as to whether Red Hat takes up this litigation or just drops JBoss money in the pot and says, "Happy now?" I could be wrong on how obligated Red Hat should feel here.)

Liability to Seller, not to Buyer

Posted Jul 11, 2006 16:08 UTC (Tue) by AnswerGuy (guest, #1256) [Link]

The point of this escrow account is that it's spent money to RH Inc. It
either goes to the sellers (from whom RH bought JBoss) or to handle any
of these sorts of liabilities.

So, from the perspective of RH Inc's management it doesn't cost any more or less if they use this 43 mil to pay off one patent troll.

(However, they might not be able to use the $43M to pay legal fees for defending it --- don't know for sure).

Now, as the article points out, there are the longer term strategic considerations. Obviously if you pay off one troll, you make yourself a more attractive target for the rest of them. (This is a corollary to a "no negotiations" policy with host takers; it might cost a few lives at first --- but it will rapidly make hostage taking very unattractive. It makes the prospect into the logical equivalent of a murder/suicide --- with no upside potential).

Another, less dramatic, strategic concern would be a matter of customer perception. RH Inc may want to discreetly survey a small and carefully selected sample of their customer base to find out how settling might affect customer perception. This factor might cost them alot more than 40 million ... perhaps an order of magnitude more over the course of the next five years or so. (Beyond five years it probably wouldn't have any effect either way -- this particular case will be a distant memory by then).

JimD