Last year, people got reasonably upset when it came out that Red Hat had settled one of many patent lawsuits filed against it, this time from patent troll giant Acacia. People were upset both at the decision to settle and then to keep the terms secret. Red Hat, after all, has spoken out many times against software patents and patent trolls. Slashdot points us to the news that Red Hat's CEO has explained that sometimes it's just easier to pay up. It's clear that he really doesn't want to and thinks the whole practice is distasteful, but there are times when he recognizes it's just cheaper to pay up:

"When it's so little money, at some point, bluntly, it's better to settle than fight these things out."

He does say that they fight on bigger cases or cases they feel are especially ridiculous. But, in others, it's just cheaper and easier to settle. I certainly understand the reasoning. And I definitely understand the short-term cost-benefit analysis. If you can pay off the patent holder for less than it'll take to fight the case, even if you win, that seems like a good deal. Except... in the long run, this may be penny-wise and pound-foolish, because as you build up the reputation as a company who will fold as long as the settlement demands are under a certain level, then all you do is encourage more trolling behavior, leading to more new lawsuits with more patent holders demanding a handout.

Again, I can certainly understand the basic reasoning for settling, and can't really begrudge any company that decides to settle to avoid a lawsuit, but it is a little disappointing that this just perpetuates the problem.

Twitter recently settled a complaint from the FTC concerning some of its security practices. That story, by itself, isn't all that interesting: basically Twitter had some problems when it was growing, the FTC slapped them down, and the company is now promising to be more careful , going forward. Nothing too out of the ordinary. However, ChurchHatesTucker points out one odd aspect to the settlement:

"Under the terms of the settlement, Twitter will be barred for 20 years from misleading consumers about the extent to which it protects the security, privacy, and confidentiality of nonpublic consumer information, including the measures it takes to prevent unauthorized access to nonpublic information and honor the privacy choices made by consumers."

From that quote, it certainly sounds like Twitter will actually be allowed to mislead consumers about the extent to which it protects the security, privacy and confidentiality of nonpublic consumer information after those 20 years are up. I mean, why even put such a term on something like this?

In the meantime, it seems worth pointing out the contrast here, where the FTC (part of the Obama administration) is slapping down Twitter for revealing nonpublic consumer information... at the very same time that the very same administration has demanded all sorts of nonpublic consumer information about Twitter users. Mixed messages much?

We've been following the case in suburban Philadelphia of the Lower Merion School District, which was sued by a student for spying on the student in his home with district issued laptops (the kid was disciplined for supposedly using drugs, with the evidence being a photo of him in his room at his laptop -- the kid claims he was just eating Mike & Ikes candy). While the district initially denied it was spying on students, later reports found 58,000 images were taken, including 469 of another student who also sued.

While the feds declined to bring criminal charges, it looks like the school district has now settled the outstanding lawsuits mainly by giving the lawyers a big chunk of money. In total, the school district paid out $610,000, with $425,000 going to the lawyers. The student who brought the first case will get $175,000, and the student in the second case will get $10,000 (the article mistakenly suggests two separate payments of $185,000, but I believe that's wrong). The district, in its announcement admits that, in total, this whole thing is costing about $1.2 million, which is actually being covered by insurance.

The situation is a bit tricky, because, in some sense, taxpayers are footing the bill for the district's ridiculous policy choices (even though insurance is covering the direct cost). I would imagine that this sort of thing will act as a reasonable deterrent to other school districts considering (or already using) similar technology.

For years, we'd heard the stories of the mass infringement "pre-settlement" sending law firm operations in the UK, such as (for a time) Davenport Lyons and ACS:Law -- and we wondered why nothing like that had popped up in the US. Earlier this year, of course, up popped the US Copyright Group operation (really an off-shoot of DC-law firm Dunlap, Grubb and Weaver). Since then we've seen more and more such operations set up -- with many focused on the porn industry.

Ars Technica has a list of just a few of the law firms (and the silly names they've come up with) who have jumped into this game in the US. The more we see of this, the sooner it is that (as in the UK) backlash and hopefully legal sanctions will come as well. There's little indication that any of these attempts have anything to do with actually protecting copyright or preventing infringement. Instead, they appear to be using the court system as a way to scare people into paying lots of money. Yes, it's probably true that many of the people accused did infringe, but there is little effort made to ascertain the reality of the situation. Instead, the focus is on discovering who the people are so they can be hit with a "pre-settlement" offer.

Of the software companies out there, Red Hat has been the most aggressive in fighting against software patents. It's stood up on principle, and earlier this year even won a lawsuit from one of Acacia's many, many shell companies (and it won in East Texas too, making it that much more impressive). However, Slashdot points us to the news that, in another lawsuit involving another Acacia shell company (this time, called Software Tree) it looks like Red Hat has settled -- and, unfortunately, it's keeping pretty quiet about what happened. I'm sure that's part of the terms that Acacia negotiated (patent hoarders never want the details of settlements released), but it's unfortunate, because it leaves everyone else in the dark, and lets Acacia continue to shake down others with this patent. The patent in question (6,163,776) covers "System and method for exchanging data and commands between an object oriented system and a relational system," because, you know, without patents, no one would have ever figured that out.

Last month, Microsoft sued typosquatter Alf Temme for redirecting mistyped domains like "ho0tmail.com" and "hot5mail.com" to his own website, which sells ridiculously expensive exercise machines. Typosquatting has been going on since the early days of the internet, and the practice eventually resulted in the passage of the Anti-Cybersquatting Consumer Protection Act (ACPA), which essentially makes typosquatting illegal. That said, Temme is complaining that the $500,000 settlement offer that Microsoft has requested from him amounts to "extortion" in his eyes. Microsoft originally sued for $2.4 million, or about $100,000 in statutory damages for each of the 24 domains named.

Typosquatting seems to attract persistently slippery individuals. For example, even after typosquatter John Zuccharini served time and was fined for his typosquatting behavior in 2003, it was not long before he returned right back to his typosquatting behavior in 2007, earning him another $164k in fines.

Temme claims that Microsoft's $500,000 settlement offer is "in effect trying to do is put a small company of eight employees out of business." While the David & Goliath angle might play well, digging a little more deeply into the story casts a different light. Considering that Temme has registered around 1,000 domains that could be considered typosquatting, it's clear that he has made a habit of this deceptive practice. Furthermore, Temme has already lost $130,000 to Dell in a similar lawsuit. So, while Temme claims that he would happily turn over the domains in question, to do so would merely make typosquatting even more profitable than it already seems to be. Likening mistyped domains to prime real estate, Temme equates the practice to buying "some property next to Disneyland."

Though this case may have some slight similarities to the pre-settlement groups that have been set up to deal with copyright infringement, the difference is clear: in this case, unlike the copyright "criminals," not only is Temme in clear violation of typosquatting laws, he has made it an integral part of his business practice to do so. So, whereas the pre-settlement groups use a shotgun approach in an extortion-like shakedown, Microsoft's offer is specific to the Temme case only. Settling potential lawsuits, by themselves, is not a form of extortion. It's just when the potential viability of the actual lawsuits are suspect that questions of extortion-like actions begin.

That said, Temme must be selling a good number of $14,000 exercise machines if he considers these fines to be just a part of his cost of doing business.

For a long time, we've noted that while class action lawsuits do serve a useful purpose, it seems like all too often they're abused. Quite frequently, we see the only "class" that really benefits from such lawsuits are the lawyers who file the lawsuit, who end up taking the bulk of any "settlement." In some cases, it's even worse -- where not only do lawyers get the bulk of the settlement, the rest of the class actually gets pushed into buying more products from the company that was sued. Such class action lawsuits not only make the lawyers richer, they actually act as marketing for the company that was sued. One of the worst such cases we can remember involved Netflix, which "settled" a class action lawsuit by giving current customers a "free" one-month upgrade -- but if you didn't manually downgrade your account, they started charging you the higher price the following month. That's not a "settlement" so much as a way to get a bunch of customers to upgrade. If I remember correctly, that settlement was actually thrown out.

Eric Goldman points us to an interesting profile of Ted Frank, a lawyer who is focusing on trying to stop such bad class action lawsuits and settlements by objecting to the settlements when they seem so far over the line. While, as the article notes, there have been a bunch of "professional settlment objectors" in the past, most have been doing it for money (getting some of the attorney's fees). Frank, however, hasn't taken attorney fees (though he says it's a possibility in the future), and is funded by a charity:

"The whole reason I started this is because there is a high probability of district courts rubber-stamping settlements," Frank says. "I think these are very bad settlements that the [9th U.S. Circuit Court of Appeals] will ... provide guidance for when judges should or shouldn't approve settlements."

Again, the concept of a class action lawsuit isn't bad, but it's definitely been widely abused -- so it's nice to see someone pushing back from within to try to stop the worst abuses.

With everyone talking about the Jammie Thomas case, someone who preferred to remain anonymous, alerted us to the fact that Mavis Roy, a woman who did not own a computer for a while, but was still sued by the big record labels, has "settled" her case with the record labels with neither side having to pay anything. We had written about this case earlier in the year. She did not own a computer on the dates she was accused of file sharing, and then when she got the legal threats from the RIAA she thought it was a joke and ignored them. Finally, some law students took up her case, and it appears they've worked out this "settlement." While Roy suggests this is a "victory" in that she didn't have to pay anything, she's right that it's not that much of a victory when the recording industry is still able to bring such bogus lawsuits to court with no penalty:

"I am still unsettled that the record companies are able to treat upstanding American citizens in this way. Invading people’s privacy and accusing people of things that don’t even make sense. It is such a sad waste of the courts time."

While it's great that she was able to get out of it without having to pay off the labels, nothing about this result provides any incentive for the labels to make sure they have actual evidence before filing future lawsuits.

When the settlement between Google and authors and publishers, over Google's book scanning project, was announced, many saw it as a big victory for everyone -- as it allowed Google to continue moving forward with plans to scan books, while also creating a "business model" for authors and publishers. However, some of us were very troubled by the implications of the settlement. It seemed clear to us that Google had a strong argument for why its actions were perfectly legal. Settling did a number of dangerous things. It failed to clear up the legal issue at all (effectively making it cost prohibitive for anyone else to work on a similar project). It set in permanent place a business model which seemed hugely bureaucratic and inefficient. That business model is basically set in stone and set by the terms of this agreement, rather than any real market mechanism. Finally, it signaled (loudly) to the world that Google was plenty willing to pay a few million dollars to settle with opponents, even when it had a strong legal position, knowing that it would make life more difficult for competitors.

It appears that as the details have come out, more and more people are troubled by what the settlement actually will mean in the long run. Robert Darnton, the head of the Harvard library system (which had already complained about the settlement) has written a thoughtful piece, detailing his worries about how this creates an effective monopoly, and the many, many downsides that this causes.

Prior to this settlement, we had been one of the bigger defenders of Google's book scanning program against those who worried that it was creating a de facto monopoly. That's because there were no exclusive agreements. However, with the new settlement, while again others could enter in theory, Google has effectively priced the rest of the market out. Prior to this, there was a reasonable argument to be made that anyone could scan books and create an index, so long as they weren't displaying too much of the books. Now... Google has set a market price of $115 million, plus a set-in-stone business model, as the entry price. It's pocket change to Google, but it's a big barrier to others.

This is definitely raising concerns from a variety of other sources, who were at least cautiously optimistic when the deal was announced. The EFF now points us to James Grimmelmann's worries about the deal (pdf). While Grimmelmann does support the deal and say it will be net positive for society, he then goes through a pretty detailed list of problems with the deal, almost all of which go back to the idea that this deal gives Google effective monopoly power over digitized books.

Finally, as for my initial fear that this would signal something of an "open season" on Google, with demanding money from Google for Google daring to provide the service of helping others find their works, we're already seeing some of that in the early stages. Some in the newspaper business are using the book settlement as a template for how Google should pay them too.

In the long run, I think Google is going to regret this deal. Yes, in the short term it handed Google a monopoly and removed a distracting lawsuit from the table. But, it did some very dangerous things that will harm Google in the long term. It signalled Google's willingness to pay up even when it shouldn't have to. It set in stone a business model way before anyone knows what the best business model is for online books. And, finally, in knocking all competitors out of the market, Google has taken away its own best incentive to continue innovating and serving customers at the best of their ability in the book search realm. The end result may be a worse product that isn't nearly as useful (and revenue generating for Google) as it would have been if it had real competition in the market.

Two recent patent battle lawsuits made news this week, and both highlighted one troubling aspect of patent lawsuits: patent holders trying to damage others beyond the company that infringed. Now, before the patent system defenders rush to post angry comments, this is not a new thing. It's been quite common for a while. Nor is it surprising. If you were a patent attorney representing one of these patent holders, you'd probably do the same thing: going after third parties is probably a good strategy to force the other company to settle. However, it does highlight how patent law is used in ways that clearly are outside of its intended purpose. That is, it's being used to punish plenty of innocent third parties by removing innovation from their grasps, rather than encouraging innovation.

The first case involves a patent lawsuit concerning Microsoft's Visual Studio. WebXchange claims it has patents that Visual Studio violates -- but rather than suing Microsoft, WebXchange sued three Microsoft customers, claiming that by using the software, they were violating the patent. This is clearly an attempt to scare Microsoft into settling, out of a fear that other customers won't use Visual Studio to avoid getting sued by WebXchange. Microsoft is fighting back, asking a judge to declare the patents invalid, but in the meantime, WebXchange has been able to drag Microsoft's customers into a patent battle, putting extra pressure on Microsoft to settle.

The second case involves Spansion suing Samsung for patent infringement concerning Samsung's memory chips. In this case, Spansion isn't just going after Samsung, but demanding an injunction that would block US sales of a variety of popular gadgets that use Samsung's memory chips -- including iPods and Blackberries. Once again, while it's unlikely that a court would order such a block, by dragging other companies such as Apple and RIM into the mess, Spansion is abusing the patent system's threat of an injunction to put extra pressure on Samsung to settle.