Munich Demands Clarity

The mayor of Munich, Germany, Christian Ude, recently found a creative way to focus worldwide attention on the unavoidable conflict between the current “business as usual” patent system, which favors large corporations, and the innovative business models and greater customer choices made possible by Linux and its open source licensing model. It may be surprising that a municipality, even one as large as Munich, finds itself at the forefront of a worldwide political and financial debate about open source software, but Ude understands what’s at stake, and succeeded in translating the often confusing and ideologically charged conflict into something even non-developers can understand: taxpayers’ money.

Two years ago, Munich launched a five-year, $40 million initiative, “Project LiMux,” to migrate its more than 11,000 city-employee desktops from proprietary applications running on Microsoft Windows NT to a completely free and open source stack. Famously, the city’s plan to switch to Linux could save so much tax money that not even a last-minute price-cut and a direct personal appeal by Microsoft CEO Steve Ballmer could persuade Munich to stay with Windows.

But on August 4 of this year, Mayor Ude announced that Munich was temporarily “suspending” bidding on the LiMux project. Why? Because LiMux faced a disturbing, hidden cost of uncertain size: potential demands for patent royalties on dubious software patents granted by the European Patent Office (EPO). This liability — a veritable “Linux Patent Tax” — had not been priced-in to the estimated $40 million city budget, and the Mayor asked a very reasonable and responsible question: all told, how much will analyzing, mitigating, litigating, and paying off these added liabilities cost the city? Would the total cost of ownership (TCO) of a Linux-based stack, including carrying third-party liability without a “big brother” standing behind the software, remain less than proprietary alternatives? Ultimately, Mayor Ude asked why taxpayers should shoulder the burden of the alleged “benefits” of software patents, and he called upon the German government to resolve the issue.

In its short life, the EPO has already granted more than 20,000 software-related patents. But Europeans don’t want software patents, and the European Parliament, the closest thing the EU has to a democratic body, already voted in favor of an absolute ban on software patents. Yet software patent liability in Europe is, like the vampire in a “B” movie, not dead the first time you kill it. You’ve got to drive exactly the right kind of stake through its heart. This is what Mayor Ude is attempting to do.

To follow the twists and turns of the “back story,” a bit of knowledge of how EU and German legal procedures work is helpful. The basic idea behind the European Union (EU) is to standardize laws across all of Europe, eliminating the economic inefficiencies of needing to comply with separate laws in each country. Consistent with this goal, EPO patents can be applied for once, and when issued are intended to have the force of law in all the member countries of the EU, including Germany.

The European Parliament, which makes EU-wide rules, voted in September 2003 not to permit any EPO patents on “data processing.” They did this in full recognition of its importance in minimizing future patent liability for use of open source software throughout the EU. Unhappy with the vote, a group of big companies privately lobbied individual EU governments directly and succeeded in obtaining in May 2004 a “Directive” from the EU Council of Ministers, which appears to undermine the Parliament’s software patent ban. Rest assured that the tedious procedural details are best left to legal specialists, but the EU Council of Ministers Directives can in certain circumstances override votes of the EU Parliament. And so, what had appeared to be a settled issue — no software patents in Europe — was thrown wide open once again.

Munich used the August 4 “suspension” of LiMux to call upon the German federal government to clarify its policy, which seemed to be of the two-faced, “have your cake and eat it too” variety beloved of politicians everywhere — in effect, “we support open source software and software patents, too.” True to form, the German federal government promptly announced that the Directive of the EU Council of Ministers, which it had voted for, represented no substantive change in position from the vote of the European Parliament.

On August 11, Mayor Ude held a second press conference, clarifying that Munich is going ahead with LiMux regardless of what the federal government does. The clear implication is that Munich has concluded that whatever the incremental cost of dealing with Linux patent liability turns out to be, the TCO, including that cost, is certainly less than the TCO of remaining with proprietary alternatives.

My own company, Open Source Risk Management, which analyzes and underwrites risks associated with Linux and other open source software, agrees completely with this conclusion.

The real issue is how to bring democratic forces to bear so that the “Linux Patent Tax” imposed by status quo users of the patent system can be reduced, or better yet, repealed altogether.