11 december 2019, at morning, police conducted search at home of nginx developers and Nginx Inc. founders Igor Sysoev and Maxim Konovalov. Police also conducted search at Nginx Inc. Moscow office.
On 8 June 2020 Lynwood Investments filled a case in US claiming that they own rights to nginx and proprietary extensions Nginx Plus.
What is nginx and Nginx Inc.?
Nginx Inc. is a company founded in 2011 by Igor Sysoev and Maxim Konovalov to provide commercial support for nginx.
What happened with Russian case?
The Rambler Internet Holding company found that it’s exclusive rights on NGINX web server, which was developed by it’s employees with use of corporate resources, were violated by third parties. The company gave the right for infringment claims to Lynwood Investments CY Ltd (named A&NN Holdings Limited at the time of the deal), which has a competence in this type of cases.
Lynwood Investments CY Ltd had appealed to law enforcement bodies for the evalution of this situation. They recognized Rambler Internet Holding as victim of actions by unidentified violators and initiated a criminal case.
Lynwood Investments CY Ltd would not comment the case until the court’s decision. Wherein we would try to restore the justice with all ways possible and we reserve right to file lawsuits in any jurisdiction where it’s needed to protect our interests.
On 16 December 2019 Rambler Group board of directors was called. It was decided to: drop contract with Lynwood, ask them to withdraw police statement, ask police to stop criminal case against Nginx Inc., familiarize Nginx Inc. and F5 Networks with some of materials regarding Rambler’s claims about possible copyright violation, order HR comittee to investigate Rambler’s employees actions about Nginx Inc. case regarding communications with board of directors.
Per vc.ru information, on board of directors meeting was also stated that 15 January 2015 the right to protect Rambler’s interests was passed to A&NN Holdings Limited (now — Lynwood Investments CY Limited). Lynwood collected the evidence regarding Rambler’s participation in nginx development, then turned to the police. Nor Rambler Group’s management, nor Sberbank (who carried due diligence as part of deal with Rambler Group at that time) were not notified. 4 December 2019 Rambler Group recieved notice from police declaring them as victim in criminal case. Rambler Group’s management were not notified in that case too.
The case was dismissed after Office of the Prosecutor General of the Russian Federation admitted facts of violation of the law during pre-trial investigation.
On 8 June 2020 Lynwood Investments CY Limited filled a case in US District Court for the Northern District of California. Igor Sysoev and Maxim Konovalov (Nginx Inc. founders), Andrey Alexeev, Maxim Dounin, Gleb Smirnoff (former Rambler employers, hired by Nginx Inc. later), Angus Robertson (CEO of Nginx Inc.), venture funds Runa Capital and E.ventures (early Nginx Inc. investors), F5 Networks (current owner of Nginx Inc.), and Nginx Inc. juridical persons maned as defendants.
In issued press-release Lynwood explained it’s claims:
Lynwood seeks damages of at least $750 million in the action. […] The lawsuit, however, alleges that Lynwood, not NGINX, Inc., F5 Networks or the other named defendants, is the rightful owner of the NGINX enterprise, including the NGINX software and related commercial software offerings known as NGINX Plus, through an assignment from Rambler.
The NGINX software was developed principally by defendant Igor Sysoev and other former Rambler employees during the course of their employment with Rambler, located in Moscow, from 2001 to 2011. The suit alleges that the NGINX software and related proprietary extensions thereto, including NGINX Plus, constitute works for hire owned by Rambler, and now Lynwood as Rambler’s assignee.
According to the complaint filed by Lynwood, the underlying facts giving rise to the suit were discovered after a whistleblower currently residing in the U.S. disclosed the misconduct in 2019. Lynwood then conducted its own extensive investigation, including a forensic analysis, to verify the whistleblower’s revelations before filing suit. The investigation revealed evidence that the former Rambler employees had gone to great lengths to hide their plans and efforts to take the NGINX software and related enterprise and monetize it for their own benefit, without Rambler’s knowledge, consent or participation, the complaint states.
At the same time RBC sources said that negotiations are underway about reduction of Mamut’s shares. Source claimed that case against Nginx Inc. could be a reason to redistribution of Rambler Group shares so Sberbank will have majority, as it may violate agreement on which Sberbank bought shares.
Why it’s important?
Theese claims is more than corporate conflict. Nginx is very popular free and open source project, used by millions of people all around the globe. Accepting Lynwood Investments CY Ltd claims means huge blow for free software movement and nginx community.
What’s wrong with theese claims?
There is many questions. Nginx was developed by Igor Sysoev since 2002, who was Rambler employee at the time. He worked as system administrator, not as programmer. Development of web server was outside of his job duties. Nginx was a personal pet project of Igor, which he developed at free time. Denis Kalinin (since 2000 — Rambler’s CTO, 2004-2007 — CEO).
I didn’t give such an order. And I couldn’t — Igor was not a programmer at Rambler.
I can’t imagine how somebody could give system administrator an order to develop server software.
Igor Ashmanov, who hired Igor in 2000, said that it was speciffically negotiated that Igor has his own project.
Besides, when I hired Sysoev - it was in 2000 - we have talk specifically that he had his pet project and he’d have the right to work on it. It was called “mod_accel” or something, he renamed it in 2001-2002.
Andrey Kopeiko, a witness in case.
I was direct boss of Igor Sysoev since 09/01/2000 to 11/09/2005.
I never gave him any orders neither written or oral to develop neither mod_accel nor nginx. I don’t know if somebody could gave such order over my head.
In the spring of 2004, as I remember, Igor posted nginx on his website (hosted outside Rambler) and send an announce to a mailing list Russian Apache, after which nginx userbase substantially increased.
In the fall of 2004 Rambler-Photo launched (probably, date 10/04/2004 taken from that), which was first use of nginx on Rambler’s production servers.
Sergey Valisiev, Rambler’s CEO from 1999 to 2004, also says there was no orders.
I can say absolutely frankly, no orders was given to develop nginx or any project like nginx by Rambler’s management. I don’t remember anyone of Rambler’s management at that time mentioning anything about such project, and moreover, the rights to it.
That search warrant is strange in itself too. Some lawyers questioned wording (here, here, in Russian). It’s also somewhat unusual to bring a copyright case to the police instead of court. That makes possible to conduct a search trying to find some evidence when your case is too weak to stand in court.
Igor gave an answer about nginx copyright in 2012 interview to Hacker magazine.
— Interesting, you were Rambler employee and worked on nginx. Did Rambler had any rights? How did you keep the rights to project?
This question not only interest you, and we worked on it pretty thoroughly. In Russia, company have rights only to something made as part of job duties or by separate agreement. So you need to have an agreement which says you should develop a software product. I worked as system administrator at Rambler, developing at free time. Product from the start was released under BSD licence, as an open software. Rambler started using nginx when main functionality was ready. Futhermore, first nginx users were Rate.ee and zvuki.ru, not Rambler.
Nginx Inc. passed due diligence several times, as part of F5 Networks deal and previous investments.
We don’t know. Igor started nginx development in 2002, Nginx Inc. was founded in 2011. Rambler never had any problems with that before.
Marker.ru even published official commentary of Rambler’s press office regarding Nginx Inc. getting funded.
We don’t have any problems with that, on the contrary, we are happy to assist technological growth.
In 2019 Nginx Inc. close a deal with F5 Networks for $670m.
Also in 2019 Sberbank bought 46,5% of Rambler Group.
Maxim Konovalov link the case directly with F5 Networks deal
It’s also hilarious that the company Nginx was officially registered in 2011, and it’s now 2019, and in all this time Rambler never raised any issues. Though you’d think they could have come and said, “Guys, what are you doing? Let’s work this out.” Nobody did this. And now it’s all perfectly clear: there was the deal with F5, the big money became palpable, and then we see the desire to grab a piece of it for themselves. It’s a typical racket. Simple as that.
As Yuri Sinodov pointed, F5 Networks deal is not complete yet. In case of negative adjustment, Nginx Inc. shareholders could lose up to $8,7m.
“Total Closing Consideration” shall mean an amount in cash equal to Six Hundred and Seventy Million Dollars ($670,000,000), plus the Total Closing Consideration Adjustment Amount (which may be a negative number).
“Adjustment Escrow Amount” shall mean two million dollars ($2,000,000).
“Indemnity Escrow Amount” shall mean an amount equal to one percent (1%) of the Total Closing Consideration.
If the Negative Adjustment Amount is greater than the Adjustment Escrow Amount, then […] deliver to Buyer from the Indemnity Escrow Fund […] an amount in cash equal to the (x) the Negative Adjustment Amount, less (y) the amount paid to Buyer from the Adjustment Escrow Fund […], or such lesser amount as may be then remaining in the Indemnity Escrow Fund.
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