14 Dec 2009
The European Commission and Oracle-Sun
I spent last Thursday and Friday in Brussels, attending the European Commission’s Oral Hearing in the competition investigation of the acquisition of Sun Microsystems by Oracle. The proceedings at the Oral Hearing were confidential; I cannot write about the presentations made there by others. I can, however, summarize the three points I made during my brief presentation on Friday; my previous written submission to the commission is already available. I want to explain what I said and where I think we stand now that the Oral Hearing is over.
To the extent that the Commission is correct that the acquisition of MySQL by Oracle raises potential competitive problems, the GNU GPL provides all the remedy necessary. The GPL was designed to preserve the freedom of free software (which is also, in competition law terms, lowering barriers to entry to the market) under all foreseeable contingencies that would threaten freedom. The acquisition of all the copyrights in a free program by a hostile hand is among the most foreseeable of such contingencies. If the license could not secure freedom in this situation, it could not work at all.
If MySQL had more than one copyright holder, no one, including Oracle, would be able to make combinations of MySQL with proprietary software. Everyone would be working under GPL, and there would be a completely level playing field. It would be difficult if not impossible to label such an outcome harmful to competition. Therefore, as no one doubts that Oracle will keep MySQL under GPL in the short term, and as it can be expected for reasons of business rationality to accept third-party patches to the program, the likeliest outcome of the merger is no harm to competition. This is true regardless of the extent to which MySQL competes with Oracle’s flagship product, the issue around which a very contentious hearing and the investigation have centered.
Regardless of the narrow concerns raised concerning this one merger, prohibition of this transaction unless Oracle either divests itself of MySQL or changes its license away from GPL would have very bad public policy consequences. For the Commission to hold that GPL cannot secure competition here is tantamount, as I explained in point one, to saying that GPL cannot work as intended because it fails under simply foreseeable conditions. While untrue, such an expression of absence of confidence in GPL would undermine the free software production and distribution system in which the Commission and the European economies have a strong interest. Moreover, in addition to harming public confidence in the GPL and the free software system, such a prohibition would in effect penalize a company in strong market position from acquiring related free software. This is in turn equivalent to prohibiting a company in strong competitive position from freeing its own software, which not only turns the principles of competition law on their head, but would be profoundly injurious to all social and economic entrepreneurialism in free and open source software. No open source startup could hope or expect to be acquired by industry leaders, which has been a prominent exit strategy for such startups and their venture capital investors. To prevent market-leading companies that want to put software under GPL from doing so is neither ethical nor prudent public policy, for reasons that are apparent once one rises above the level of individual transaction details.
My view on the role of the GPL in this situation has been strongly contested by my friend Monty Widenius and others who work for Monty or who are otherwise in sympathy with his position. So far as I have seen their expressions of their views, no one has disagreed with my positions on the GPL in general. All the writers have concentrated their attention, as has Monty in his very thoughtful and educational personal conversations with me, on the particular business model consequences of GPL’s operation in this situation. Monty and his colleagues believe that MySQL cannot flourish without an ecosystem containing venture-funded small firms making proprietary add-ons, plug-ins and enhancements to MySQL. They believe that if Oracle is the copyright holder, it can and will act to stifle these firms by denying them “OEM licenses,” which actually are GPL exceptions in return for royalties. But they also recognize that such firms would be stifled if the license of MySQL, which is GPL, were simply to be uniformly enforced by any acquirer, instead of being held by a firm that needed the income gained by commuting the GPL for money.
This is why their argument has nothing to do, in the end, with competition law. Any holder of MySQL, be it for-profit company or non-profit trustee, that didn’t agree to commute the GPL for money would be equally unsuitable from their point of view. Whether Oracle is or is not “competitively constrained” by MySQL is irrelevant to the reasons for their concern. In fact, they don’t want the license of MySQL to be GPL, because they believe the GPL is unsuitable for economic reasons. This may or may not be right, but it isn’t a question to be resolved in a competition investigation.
In fact, I think they’re wrong. I don’t think the GPL is a bad economic fit for MySQL. I believe that Oracle sees clearly the nature of its business interests. It knows that MySQL is much, much more valuable to it alive than dead. In fact, Oracle has almost as much reason to improve MySQL as it has to improve its flagship product. For a small firm, like MySQL AB, dual-licensing revenue was the only efficient revenue source with which to develop the product. But for Oracle, service revenue is much more significant than dual-licensing royalties. As all parties who have spoken about the merger agree, regardless of which side they are on, enterprises that use Oracle are very likely to use MySQL also, because MySQL is the world leader in number of installs. Which means that companies that pay Oracle to service Oracle are very likely to pay Oracle to service MySQL as well, if Oracle is not only servicing MySQL but acting as primary funder and participant in a flourishing MySQL ecology. Even if Oracle were only willing to invest in MySQL the extent of its ability to increase the MySQL service business, Oracle would be the best thing that ever ichappened to MySQL. In fact, Oracle has an immense incentive to invest far more in MySQL than the extent of its increased winnings in the MySQL service market. MySQL driven technologically and economically by Oracle will be a price-zero full-GPL missile aimed at Microsoft SQL Server.
Which is why even if Monty is correct that venture-funded proprietary startups would disappear if MySQL were pure GPL, the outcome is still positive for MySQL: that venture market could never have been more than a few tens of millions of dollars, and Oracle will have the incentive to invest many times that every year. This isn’t a matter of trusting or distrusting Oracle: both Marten Mickos and I as independent observers unaffiliated with Oracle have come to similar conclusions. Having known both men for years, I yield to no one in my respect for Monty’s technical strategies, but I’m comforted to find myself in agreement with Marten’s business analysis.
The case team has given Oracle until Monday, December 14, to submit a remedy proposal. I have heard from reliable quarters that Oracle will make no such submission, believing that there is no harm to competition that needs a remedy. For the reasons that I’ve already given, I believe that this position, if taken, would be literally justified: MySQL has always been a GPL’d program, and under GPL there will never be a problem with securing a level playing field for MySQL.
If the “remedy” chosen is to permit the merger unconditionally, the likeliest outcome is the one most favorable to competition. For its own business reasons, Oracle will heavily invest in MySQL’s future. In due course, Oracle should upgrade the license of MySQL to GPLv3, and should accept and integrate third-party patches under that license. This will provide safety from any future patent aggression by any of the community’s members against the program. By diversifying its copyright ownership, MySQL will become a pure GPL commons. The companies that currently sell MySQL in proprietary combinations can continue to use and upgrade their products with their own maintenance and enhancements, if they don’t want to come into the GPL community. Oracle will continue to have exactly the same business reasons to support and lead the MySQL community, and the same reasons to be apprehensive for their position should they be poor stewards of the community’s value. And everyone else can invest in MySQL with the knowledge that they will always have access to the value of everyone else’s investments as well as their own. The modularity and flexibility of MySQL’s architecture will maximize the extent of the value everyone can realize from the commons. By selling support for the world’s most installed database, Oracle can project itself everywhere that Microsoft SQL Server might want to go, and can drive SQL Server into competition with a price-zero GPL’d community product, which experience as well as theory shows is a game Microsoft can’t win.
So the GPL ensures robust and beneficial competition in the global software industry. Once again.
| cases/oracle-sun | 2009.12.14-00:35.00
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