Open Hardware

Ten years ago, I supported Sun’s microprocessor organization. The buzz those days was around something called “UltraSPARC I”, our first 64 bit RISC microprocessor. At that time, the industry was focused on the 32 bit CISC architecture; so, UltraSPARC 1 was considered a very significant advance in microprocessor technology.

Last year, we released an entirely new microprocessor – the “UltraSPARC T-1”, which Sun is using in it’s latest UltraSPARC server offerings. The T-1 incorporates a CMT (chip multi-threading) design containing 8 cores capable of running 4 threads each for a total of 32 threads with stellar throughput and performance gains. (For my non-technical brethren, it’s an amazing bit of innovation for the compute world. Trust me, just say “chip multi-threading” at your next cocktail party when speaking to an IT professional – they will be impressed).

As with UltraSPARC 1, the UltraSPARC T-1 is another example of breakthrough microprocessor technology. But this time, it isn’t just the technology that is so unique, it’s also the change in our business model. Because simultaneous with the release of the T-1 based systems, we also released the T-1 design to the world under an OSI approved open source license as part of the OpenSPARC program.

As a result, this innovative design is now available to anyone under a GPL (General Public License). Under this license, developers can take the T-1 design as expressed in verilog (which is actually similar to source code in the software world) and create modifications or entirely new designs that they are free to distribute and monetize without payment of royalties to Sun.

While open source in the context of software has been with us for more than 15 years, this is the first time that a microprocessor design has been made available under an open source license. Within our legal team, there was a question as to whether the open source (software) model would work in the hardware world. A significant amount of effort went into determining which license was appropriate, the structure of the governance model and understanding any third party technology included in the verilog that could inhibit our ability to release under a free or open source license. Because hardware has a longer development cycle, we have been waiting for an indication that this concept – open source for hardware – would work.

We recently received our first validation when a company called Simply RISC released a design based on a single T-1 core. What’s interesting here is that Simply RISC has taken the T-1 design, originally targeted at high-end systems, and used it to create entirely new market opportunities for embedded systems.

More to come…

Reg FD

Every few weeks, our CEO, Jonathan Schwartz, talks to me excitedly about a blog he wants to post to provide his insights on our financial results or significant new customer relationships or product releases. He believes (as do I) that his blog, along with other channels of communication, is an important source of information for our employees and investors and entirely consistent with the intent of Reg FD. Unfortunately, to date there hasn’t been any specific regulatory guidance from the U.S. Securities and Exchange Commission as to how a company can use the Internet alone (via webcasts, blogs or website postings) and conform with Reg FD. As a result, Jonathan and I have some interesting discussions and he gets some advice that I’m sure he feels is, at times, overly conservative.

A constant focus for us is how to drive greater openness and transparency in our business. It’s part of our corporate DNA. Witness the fact that over 4,000 Sun employees have blogs, including Jonathan. It’s also a part of our approach to technology – whether open standards for document or identity interchange or open source software and hardware.

At the core of all this is the Internet. Today, there is simply is no more effective medium for the timely dissemination of information to the widest possible audience. And, we are only in the early stages of its growth. It is an unparalleled way for companies to have direct and immediate communications with employees, customers, suppliers and, especially, shareholders.

We are excited by the SEC’s desire to support investors by harnessing the power of the Internet. The Commission has been active in promoting the use of interactive data systems (including XBRL) to provide valuable tools for investors. The Commission has also proposed the use of the Internet as a ubiquitous communication vehicle for the electronic distribution of proxy materials on a “notice and access” basis. These actions are consistent with the Commission’s belief in the utility of the Internet to drive corporate transparency and the flow of information to investors.

But throughout history, the pace of technological adoption has always surpassed the speed of adaptation of the law to these changes. By their nature, legislation, regulation and judicial decisions always play “catch up”. To some degree this is the case today with regard to Reg FD. As enacted in 2000, Reg FD was intended to put all investors on an equal footing when it comes to receiving material information about a company. In order to meet its requirements, companies must provide material information on the basis of widespread dissemination through the filing of a Form 8-K or “through another method (or combination of methods) of disclosure that is reasonably designed to provide broad, non-exclusionary distribution of the information to the public.” But, as I mentioned, we don’t yet have clear guidance on how we can use the Internet to satisfy this requirement.

With this in mind, Jonathan and I recently sent to SEC Chairman Christopher Cox a letter sharing our views on the value the Internet in support of Reg FD. While the Commission is embracing the Internet’s advantages in other areas, we think that the time is right for it to also take another look at Reg FD.

Visit to the East Coast

I just returned from a quick visit with our field attorneys in Sun’s offices in Toronto, Somerset and Manhattan.

These trips always have a “Planes, Trains and Automobiles” feel to them as I race from office to airport to rental car to hotel to office. Yet, I wish I could break away from headquarters to do this more often. It is a great opportunity to understand the challenges facing our employees in the field. And, it is a wonderful reminder of the very talented and energetic people we have in our organization (to Frank and Mike – Welcome Aboard!).

On this trip, it was clear that morale was high following our recent product and market share announcements. Then again, it could also be the result of some or our “innovative” employee communications like this one spotted in the HR area of the Toronto office.

I visited our office in Manhattan only days before the 5th anniversary of 9-11. I viewed this behind the receptionist desk.

It contains several items recovered from wreckage of the World Trade Center and a hand-written note from the person who found them. Sun had an office in one of the towers.

It took some time before I could get the lump out of my throat.

The “Tax” on Innovation

Sun has always been about innovation. Last year, we spent more than 15% of revenue on R&D. Previous R&D investment has lead to the development of the Solaris operating system, the Java programming language and most recently our CoolThreads chip-multi threading technology. With this focus on innovation, the current wave of patent cases brought by patent “pirates” or “trolls” is especially baneful as it requires us to redirect focus and resources from invention… to litigation.

For those of you who are new to this area, here’s the reality. An individual, law firm or small group of investors will form a partnership or LLC to acquire a broadly written patent that can be used against the maximum number of target companies. The “plaintiff” then files suit – in many cases without any contact or notice – and usually in a location advantageous to plaintiffs. One of the current venue’s of choice (and there are several) is a court located in the small town of Marshall, Texas where over 88% of jury verdicts favor the plaintiff. For Marshall, patent litigation has become an important part of the local economy. In fact, rumor has it that in the town’s barbershop the “doctrine of equivalents” is a common topic of conversation. Call me “old fashioned”, but I still prefer baseball.

In most of these cases, the plaintiff will be represented by an attorney who is working on a contingency basis. In other words, rather than an hourly rate, the attorney is compensated based on what is received through settlement or trial – usually this is between 30% and 50% of any recovery. Thus, there is no real cost to the plaintiff in litigating the case and plenty of upside for the attorney.

When the case is filed, the plaintiff requests an injunction as well as claims substantial damages. The company is then faced with a big decision. Does it settle to avoid the risk of a sizable judgment and the possibility that it will be prevented from shipping it’s product? Or, does it fight the case in court? We always choose the latter and have invested significantly in legal resources to help us defend against these cases. But, as a shareholder, and with all respect to my colleagues, I’d rather invest in creative engineers than creative attorneys.

What I’ve described is a destructive perversion of the intent behind the U.S. patent system. The plaintiffs in these cases are not investing in R&D “to promote the progress of science and useful arts”, nor are they adding value to society. Instead, they are using the current system to maximize lucrative settlements.

With this as backdrop, we were happy to recently host a visit to Sun by Congressman Lamar Smith. Along with Senators Hatch and Leahy, he has been a leader in the push for patent reform. In the course of our meeting, we shared our views on the need for significant changes to the current patent system, including the repeal of Sec. 271(f), limits on injunctive relief and the need to restrict damage awards to the value of the invention described in the contested patent. (Under the current system a plaintiff claiming a patent on a small, inexpensive component like a heat sink can claim damages based on the total profit for the entire product – even if it is something that contains thousands of other components.)

In the recent decision in eBay v. MercExchange, the judiciary has shown a willingness to level the patent litigation playing field. It’s nice to see that the legislature now appears to be taking similar steps.

Jokes about lawyers

On occasion, I feel frustrated with the many jokes targeted at my profession. Then again, sometimes I think they may be

What a long strange trip it’s been.

Perhaps it’s just the aging process. But I’ve been reflective lately and thinking about the amazing changes I’ve witnessed during my career. As an in-house attorney in Silicon Valley, I’ve been fortunate enough to experience two major technology shifts – arguably, the most significant technology shifts in the last century.

I still remember the day in 1994 when one of my colleagues at Sun sent me instructions on how to use something called the “Mosaic browser”. It was about 4 p.m. in the afternoon when I first accessed the Internet…. and well after midnight when I logged off and went home (after repeated calls from my wife inquiring about my whereabouts). I was simply stunned. I wasn’t sure of exactly how, but I knew that the world had changed forever. Of course, Mosaic later became Netscape which lead to eBay, Google, Amazon, Salesforce.com, YouTube, Facebook, Technorati and, well, this blog.

As the internet rapidly evolved from just a means for the exchange of technical information to an engine for economic and social change, we lawyers debated things like: How do we ensure that engineers don’t inadvertently reveal trade secrets via an FTP site? What trademark rights attach to a domain name? Which jurisdiction or choice of law applies if a server is located in one country, but the wrongful conduct occurs in another? What is the appropriate tax structure for electronic commerce? And, should employees be permitted to access the Internet while at work? (That last question seems particularly silly in hindsight.)

And, now, as the legal community has developed a framework and as cases have been decided, this area of law has become, maybe not routine, but for the most part – settled.

The second significant change has been the advent of the open source movement. For years, our legal team devoted itself to building barriers around our intellectual property. We spent countless hours creating restrictive license grants and strong confidentiality provisions limiting access to our proprietary information. We also frequently negotiated with customers the appropriate terms for source code escrows. (These days when a customer makes that request, we smile and point them here.)

Since 1991, when Linus Torvalds released the Linux kernel the legal practice has been evolving to support this innovative business and licensing model. As a result, the internal conversations in my organization are now focused around things like: What is the most appropriate license for sharing our IP (CDDL, BSD, GPL, Apache, etc.)? How can we create the strongest community? How do we effectively balance commercial and community interests? What is the best way to handle indemnification issues? What is the appropriate brand? How can we most effectively conduct due diligence on our products to ensure that we have the rights necessary to open source third party components? And, with OpenSPARC we’ve had to consider export issues as well.

It makes me wonder what is coming in the next decade.

P.S. Happy 15th Birthday Linux!

Thanks, ACC.

In an earlier post, I referenced the “Reebok Rules” for in-house counsel. I had many requests for copies of this as evidently it isn’t available on the web.

Thanks to the great folks at the Association of Corporate Counsel (ACC), I am able to provide a copy here in PDF.

In the interest of full disclosure, I am on the board of ACC and Sun has been a long time member. It’s a great organization for in-house professionals.

Narwhals and “CoolThreads”

Last night, my son asked me “what kind of computers does your company make?” I was eager for the opportunity to get him excited about what I do and where I work. So, I told him about our new X64 enterprise systems. I even tried discussing our plans to open source Java. In the end, I failed miserably. Instead, of childish wonder, all I saw in his eyes was polite boredom.

You see, his 10-year old frame of reference consists of the Apple systems we use at home (love my new MacBook Pro). This was disappointing for me. I wanted him to be proud of where I work and at least minimally competitive in that classic playground duel of…”My dad works at…”. Granted I didn’t expect to dethrone the traditional incumbents, but a father has to dream.

Five years ago, I had the unique opportunity to spend time exploring Ellesmere Island. Located high in the Arctic Circle, it is a place of overwhelming natural beauty and rich in archeological sites. They say everyone has a place that they connect with above all others. For me, it is Ellesmere.

On this trip, I was accompanied by a fascinating guide who was also a trained Canadian biologist. Over the course of two weeks, we kayaked and hiked under the midnight sun and he introduced me to Walrus, Eider Ducks, Arctic Hares, Ring Seals, Musk-Oxen and Narwhals (those are Narwhal tusks in the picture below).

I returned home from this exploration with a renewed appreciation for nature and an awakening to the perils of global warming. The fact that I could hike around in shorts and a windbreaker less than 500 miles from the North Pole was a good clue that something was happening.

Over the following years, my concerns have increased. A visit to Canada’s Columbia Icefield earlier this year, didn’t give me any comfort. Nor did, reading Jared Diamond’s excellent book “Collapse”.

Despite this, I remain optimistic about the power of innovation to create solutions to the problems of global warming and our increasing dependency on fossil fuels. Over the past year, we have seen increased investment in alternative energy. Demand for hybrid and electric automobiles is increasing as is utilization of solar and wind power. And, I’m really happy to that Sun is doing it’s part with our new line of “CoolThreads” T1000 and T2000 servers. These are so amazingly energy efficient that California’s largest public utility now provides a rebate toward their purchase. This is a first for the computer industry. As companies increase reliance on data centers, these servers will help dramatically reduce cost, space and energy.

And, while my little 5th grader may not think our products are as “cool” as an iPod. Someday, he will.

Mr. Edison’s lawyer

The year is 1882. Thomas Edison is competing with George Westinghouse and Nikola Tesla to bring electric power to the consumer. He speaks to his lawyer about the project.

Edison: “I’ve got this idea. I want to bring electric power to every residence in Manhattan.”

Lawyer: “It can’t be done!”

Edison: “Sorry, that’s my bad ear – I couldn’t hear what you said. Anyway, what we will do is build these huge turbines powered by dams or coal. These will in turn drive large generators which will transmit electricity to transformers and then deliver it for home use. Cool, huh?”

Lawyer: “I’m telling you, it can’t be done. And even if it could, do you understand the multitude of legal issues, potential liabilities, contracts that would need to be negotiated, rights-of-way and other approvals we would need to receive?”

Edison: “What? Quit speaking into my bad ear. It will be great! Bringing electric power to the home will create new businesses and other opportunities to benefit mankind.”

Lawyer: “That sounds a tad bit nebulous. You haven’t actually invented anything yet to use this electricity – have you?”

Edison: “Sorry, still can’t hear you. Can you have all the legal stuff done by Friday?”

This year, we went live with the Sun Grid. For those of you not familiar with the concept, a compute grid is an aggregation of horizontally-scaled computers with storage and software. Combined they provide significant compute power. And, with the Sun Grid, that power is available to companies, developers and individual users, over the Internet, with payment by credit card or PayPal. No 200 page agreement – just a “click and accept” license.

To illustrate the concept of the Sun Grid, we frequently point to the development of consumer electric power at the turn of the 20th century. At that time, Westinghouse, Edison and Tesla were battling with competing solutions – AC or DC or AC/DC (sorry, couldn’t resist). The complexity of these solutions, including the creation of hydroelectric plants, enormous turbines and transformers and wiring of cities and homes must have seemed insurmountable to all but these three talented individuals. And the potential use of electric power was certainly unimaginable to everyday consumers. Yet, a little more than a century later, we plug an appliance into a socket and it works. I don’t know about you, but I’m not too interested in who manufactured the generators or electrical lines that carry the electricity I use – I just want it to work. (By the way, a good book on this subject is “Empires of Light”).

The idea behind the Sun Grid is that in the future, just as with electric power, individuals will access their compute power, software applications and storage over the Internet. It is an intriguing idea that presents an interesting, but complex array of legal and regulatory challenges. In the course of developing the Sun Grid we have had to consider legal issues involving: data privacy, data security, regulations applicable to on-line commerce, DMCA, tax, Sarbanes-Oxley, Digital Rights Management, state and federal consumer protection statutes, licensing of third-party applications in a hosted environment and US export controls. We have also looked at laws that are applicable to certain types of customers and markets. For example, there are specific legal frameworks that apply to certain heavily regulated industries such as banking (Graham Leach Bliley) and health care (Health Insurance Portability and Accountability Act). And, the number of laws and regulations we will need to consider will only increase as the Sun Grid becomes available outside the US.

Thankfully, (although I’m sure they felt like Mr. Edison’s lawyer at first), we have some very talented people who quietly, behind the scenes are getting the job done.

Working to be unnoticed.

Years ago, over lunch I was recruiting someone to join our legal team. As we walked into Sun’s cafeteria, she stopped, looked around at the employees in the food lines and said “This place looks like the lunch room of the United Nations”. Her comment caused me to pause. To that point, I had never noticed the incredible rich diversity of the individuals surrounding me. In Silicon Valley, our industry and at Sun, diversity is generally the norm.

Our organization has a team of employees that focus on issues of diversity and inclusion. Participation is voluntary, but always large and enthusiastic. Their efforts have been recognized by awards from the MCCA and the CMP. The team has developed of variety of programs around mentoring, internships and recruiting. We are also an active participant in an array of diversity focused organizations.

Some of their ideas have been very creative. One I particularly enjoy helps to address the challenge of creating connections between members of a dispersed global organization. It’s something we call “Day in the Life”. Once a quarter, we pick an employee who describes, in a recorded presentation, the business, legal, and social environment in which he or she works. Personal insights are often provided as well. It’s an interesting way for someone working in the Bay Area or Bangalore to understand what it is like to work in Dubai, or Budapest or Caracas or…

My observation is that it takes a tremendous amount of dedication and focus to ensure that diversity is something that we don’t notice – it just is.