Software disputes leave business exposed

The resolution of the Blackberry dispute in the US courts last week should not lull IT chiefs into a false sence of security - the risk of legal costs remains.

The resolution of the Blackberry dispute in the US courts last week should not lull IT chiefs into a false sence of security - the risk of legal costs remains.

IT departments can do little to head off the threat of their organisations being affected by major patent disputes involving their software suppliers, industry analysts have concluded.

In addition, where software suppliers are forced to alter their products as a result of patent judgements, IT departments have little option but to upgrade.

The resolution of the Blackberry case in the US, where manufacturer Research In Motion (RIM) settled a dispute with NTP about patents for mobile push e-mail technology, gives a clear illustration of the vulnerability of business. The judge hearing the long-running case had threatened to close the US Blackberry network if a settlement was not reached.

The case is the latest in a string of patent disputes that have cast a shadow over corporate technology users. In 2000, SCO sued IBM, claiming it had breached SCO's intellectual property rights by using a version of Unix code in its distribution of Linux. SCO subsequently started legal action against rival open source software suppliers and Linux users. This led to firms such as Novell and Red Hat offering to indemnify users of their Linux distributions.

Last August, Lloyd's of London syndicates began to offer insurance for users of open source software, to protect them against the risk of being sued by proprietary software makers claiming violation of their patents.

"It is hard to ensure that you are not caught in the middle of a dispute between a patent owner or, for that matter, the owner of any other intellectual property rights," said Adam Rose, partner of business and technology services at commercial law firm Berwin Leighton Paisner.

"All the IT department can do is buy established goods from recognised suppliers and seek intellectual property rights indemnities from the suppliers.

"In the Blackberry case, RIM was willing to throw a lot of money into protecting its reputation and market position," said Rose. He added that indemnities for software development work were more likely to be offered, but said buying IT hardware and software off the shelf would not usually deliver strong intellectual property rights indemnity cover.

"There are grounds for suing a supplier under the Sale of Goods Act if a third party does bring an intellectual property rights claim that interferes with your purchase, but it is not an ideal solution, and, even if successful, would likely not cover all costs suffered," said Rose.

Angelo Basu, a senior associate at law firm Pinsent Masons, said a corporate IT department could ask its advisers to conduct patent searches in respect of any novel technology that it was looking to procure.

However, this may not be easy, as the supplier may not disclose enough detail about the way its service operates. Even if enough detail is disclosed, it would still be necessary to second-guess which holders of related patents might be able to construct an NTP-style argument, Basu said.

He warned, too, that while supplier indemnities may be worth having to provide for compensation, "This would not deal with the practical problems a business might face if it suffered a total loss of service and needed to switch to a competing product."

David Kaefer, director of business development for intellectual property licensing at Microsoft, said that, as with insurance, "You need to carefully evaluate the wording of indemnification guarantees to understand what commitment the provider is making."

Kaefer said Microsoft offers a legally binding commitment to customers and its partners which describes what types of intellectual property disputes qualify.

"It also talks about the steps we will take as a company if we are found to infringe another company's intellectual property rights." This includes guaranteeing to pay the legal costs of Microsoft's customers or partners if they are sued directly, he said.

Kaefer added that licensing was "typically the least disruptive way to remedy an infringement situation for a customer or partner", and Microsoft had "a strong preference to seek licences, but when reasonable licences are not available we seek to remove the infringing software code".

Ben Booth, chairman of the IT director group BCS Elite, advised companies to choose "safe" technologies. "Stay away from the bleeding edge, except for specific areas of business where it pays to be ahead and take the lead.

"It comes back to normal judgement - follow the track record of a supplier and its products and follow the market to see if there are 100,000 installed copies out there. If there are only five, or if you're buying the first one, you may get into trouble.

"The reality of the situation is that if you're buying a mainstream product from a reputable supplier, you will not suffer. I see this as a lot of chest-beating by the suppliers, which usually gets resolved and doesn't affect users on the ground."

Ollie Ross, research manager at the Corporate IT Forum, said, "Corporates are acutely aware of the risks involved in implementing 'new' technologies, or adopting technologies from niche, new or very small suppliers. The likelihood of these companies being acquired or failing is high. Their business plan and road map are often uncertain. This is why so few large companies are early adopters."

She added, "Business demands tried and tested solutions and most prefer to work with a selection of suppliers in 'new' technology areas such as mobile communications devices, where the hardware/software relationship can be critical and changing, rather then opting to put all their eggs in one basket. This will often apply even to desktops and laptops, to ensure continuity of supply and service.

"Put simply, if the ruling had gone against RIM, large corporates would simply have thrown away their Blackberry devices and replaced them with something else. They just aren't a strategic deployment."

But with the Blackberry case only just resolved, there is already another patent battle looming, this time regarding rich media on the internet.

The patent, which has been awarded to a San Francisco website development firm, covers all rich-media technology implementations, including those relying on the widely used Flash, Flex, Java, Ajax, and XAML platforms.

Microsoft found to infringe patents

Already this year, Microsoft has been forced to alter two of its mainstream software products following patent judgements.

In January it issued new versions of Office 2003 and Office XP which both change the way the application suite's Access database interacts with the Excel spreadsheet program.

Companies using Office were forced to upgrade to a new version of the software to avoid infringing the patent in question. Microsoft indemnifies customers when using its products, but only if they use the latest versions available from Microsoft under their licence.

And this month, Microsoft had to update its Internet Explorer browser following a patent dispute with University of California-backed company Eolas Technologies. The browser update changes how the browser handles web programs known as Activex controls.

Microsoft said end-users were expected to install the updated Internet Explorer over the next four to six months through their usual software update channels.

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