The Open Invention Network (OIN), as the new firm unveiled on Thursday is known, could mark a breakthrough in resolving how to protect vendors and customers from patent royalty disputes resulting from freely shared Linux code.
If OIN's approach to managing intellectual property wins acceptance, it could overcome a big stumbling block to wider corporate adoption of Linux and pose challenges for major opponent Microsoft, which has argued that relying on "open source" software poses legal risks.
OIN is funded by the world's largest computer company, IBM, two consumer electronics giants--Sony of Japan and Philips of the Netherlands--and Linux distributors Red Hat and Novell.
Market researcher IDC estimates that the worldwide Linux business will grow 25.9 percent annually, doubling from $20 billion this year to more than $40 billion by 2008.
If patent risk is lifted, Linux use could accelerate at an even faster rate, said Richard Doherty, an industry consultant with Envisioneering Group of Seaford, N.Y.
"This is the green light that a lot of companies have been waiting for," Doherty said. "Unless your name was Novell or Red Hat, you couldn't be sure you had clear legal title to Linux."
"We will see Linux go into medical devices, consumer electronics and traffic lights, where patent uncertainty may have held companies back," he said.
Initial OIN patent holdings include a set of electronic commerce patents that were purchased from business-to-business software pioneeron behalf of Novell.
Patents owned by OIN will be available without payment of royalties to any company, institution or individual that agrees not to assert its patents against others who have signed a license with OIN, when using certain Linux-related software.
Traditionally, patents have been pursued for two primary reasons--to defend one's own intellectual property or for barter to trade in cross-licensing agreements to gain access to other companies' patents. OIN represents a new form of cross-licensing that its backers say could spur innovation.
"A lot of lawyers are going to throw their hands up and ask, 'How do we make money from this?'" Doherty said. "The answer is, 'Maybe they don't.'"
The company, which will be based in Westchester County, where IBM is headquartered, offers a new model for managing intellectual property in which patents are openly shared to aid the advancement of Linux.
"If a company decides that they had a need for a license, we would be willing to license them...(but) only in return for them agreeing not to go against Linux," said Jerry Rosenthal, a former IBM vice president of intellectual property who is now Open Invention Network's chief executive.
Rosenthal said in a phone interview that he had a pool of funding that was all he needed to go out and acquire the patent portfolio to defend core Linux software and applications. "I am very comfortable that I have sufficient funding to do what I need to do for the foreseeable future," he said.
"This is really about Linux and the opportunity to expand the Linux economy," he said. "We are seeking no royalties."