What’s yours is ours Rambler Group claims exclusive rights to world’s most popular web-server software, six months after it's sold to U.S. company for 670 million dollars — Meduza

On Thursday, December 12, Russian law enforcement raided the Moscow office of the IT company “Nginx,” which owns the eponymous web-server used by almost 500 million websites around the world. According to several reports, Nginx co-founders Igor Sysoev and Maxim Konovalov spent several hours in police interrogation. The search is part of a criminal case based on charges by a company tied to the Russian billionaire and Rambler Group co-owner Alexander Mamut, whose businesses believe they own the rights to the Nginx web-server because Sysoev started developing the code while working for Rambler in 2004. Meduza’s correspondent Maria Kolomychenko looks at how Sysoev and his partners spent 15 years creating the world’s most popular web-server before selling it to an American firm for $670 million, and how Rambler decided, half a year later, that it owns the technology.

The first report about the police raid on Nginx’s office in Moscow came from a Twitter user named Igor Ippolitov, who says he works at the company. Friends of Denis Kryuchkov (the creator of the IT-focused collaborative blog Habr) and “Diphost” hosting provider owner Filipp Kulin later confirmed the information.

A source in Russia’s IT industry told Meduza that security officials stormed Nginx’s office on Thursday morning, seizing the company’s computers and arresting and interrogating co-founder and Moscow office director Maxim Konovalov. Meduza confirmed that his mobile phone number was unavailable at this time. Journalists soon learned that police had arrested Igor Sysoev, another Nginx co-founder. On Thursday evening, The Bell reported that the authorities ultimately released both men, confiscating their phones.

Meduza’s correspondent visited Nginx’s office in Moscow around 3 p.m., local time, by which time the authorities had apparently left. The premises appeared to be slightly empty. Three employees who greeted Meduza’s reporter would not comment on the police raid. Later that evening, a representative from Nginx’s U.S. parent company, F5 Networks, confirmed that Russian law enforcement had come to the Moscow office, but declined to offer further details. “Earlier today, Russian police came to the Nginx Moscow office. We are still gathering the facts and as such we have no further comments to make at this time,” said the statement by F5 Networks.

The police work is part of a criminal investigation launched on December 4, 2019, into a conspiracy to commit large-scale copyright infringement. On his Twitter account, Igor Ippolitov shared photos of the search warrant, which summarized the case.

According to the documents, Russia’s Interior Ministry suspects “unidentified persons” of violating the exclusive property rights of “Rambler Internet Holding LLC” (part of the Rambler Group) to the Nginx software. Rambler says this may have inflicted 51 million rubles ($815,500) in damages on the company, which makes the offense a large-scale felony, according to the warrant presented to Nginx.

“We discovered that Rambler Internet Holding’s exclusive rights to the web-server Nginx were violated as a result of the actions of third parties,” an official representative from Rambler Group told Meduza. “In this regard, Rambler Internet Holding ceded the right to bring claims related to violations of the rights to Nginx to Lynwood Investments CY Ltd., which is qualified to restore justice on the issue of ownership of rights.”

“Lynwood Investments” is reportedly connected to Russian billionaire and Rambler Group co-owner Alexander Mamut, who owned the British book retailer “Waterstones” through Lynwood Investments. A spokesperson for the company told Meduza that it was formally named “A&NN Holdings Limited” when it received the rights to bring claims related to Nginx. Alexander Mamut, incidentally, also owns a firm called “A&NN Investments.”

Lynwood Investments’s spokesperson confirmed that the company asked Russian police to “assess the situation” regarding possible infringements on copyrights to the Nginx web-server. “Law-enforcement agencies recognized Rambler Internet Holding as the victim of actions by an unidentified circle of people and opened a criminal case against them,” said the company’s representative.

Lynwood Investments also emphasized that it intends to “seek justice by all available legal means” and it reserves the right to file civil claims “in any jurisdictions.”

Nginx’s creator says he designed the software in his spare time, but Rambler says it’s theirs nevertheless

Nginx’s key product is its eponymous web-server — software that facilitates the operation of websites by processing incoming network requests over HTTP and other related protocols. According to data published this month by the British Internet services company “Netcraft,” Nginx is the most popular web-server in the world. It is used by more than 479 million websites — roughly 37.7 percent of all the websites on the Internet. 

Igor Sysoev started developing Nginx in 2002 while working as a system administrator at Rambler. Two years later, he released the first version of the software. For years, Nginx was distributed as open-source software on a nonprofit basis. In 2011, Sysoev left Rambler and registered the company “Nginx, Inc.” with his business partner, Maxim Konovalov. In 2013, the business released the first commercial version of its Nginx Plus web-server, which offered clients additional features in monitoring, reconfiguration, and technical support.

In an interview in 2012 with the Russian magazine Hacker, Sysoev said he used his spare time to develop Nginx, until leaving Rambler and founding his own company. “In Russia, the laws are designed so that a company owns what’s been made as a part of job duties or under a separate contract. So there needs to be a contract with the person where it says: you have to develop a software product. At Rambler, I was a system administrator, I developed software on my own time, and the product from the very beginning was released under a BSD [Berkeley Software Distribution] license as open-source software,” Sysoev explained. 

The search warrant police officers presented on Thursday tells another story, claiming that the web-server software was developed “during office hours within the limits of established job responsibilities” on behalf of Rambler management by unidentified employees. State officials say these individuals violated the Internet holding company’s exclusive rights to the software and “illegally used it with criminal intent by distributing it for free on the Internet,” inflicting large-scale losses on Rambler. 

In Russia, regulations on legal relationships regarding works of science, literature, art, and software are codified in the Civil Code. According to Article 1295 of Russia’s Civil Code, the exclusive rights to products created by staff within their job responsibilities belong to their employers. State investigators base their case on this statute, arguing that Rambler owns the rights to Ngnix. Article 1297 also states, however, that individual workers own the exclusive rights to their creations, even as contracted employees, if the software was not developed as part of direct job responsibilities

Former Rambler Group executive director Igor Ashmanov told the tech news website Roem that the version of events described in the criminal case materials is “nonsense,” saying that Sysoev was never assigned web-server development work while employed at Rambler. “He worked at Rambler as a system admin. Software development wasn’t part of his job responsibilities at all. I suspect Rambler won’t be able to produce a single sheet of paper [proving otherwise], not to mention the nonexistent work assignment to develop a web-server,” Ashmanov said, adding that the company stipulated separately when it hired Sysoev in 2000 that he had his own preexisting project and retained the right to work on it.

Sarkis Darbinyan, a partner at the “Digital Rights Center” law firm, told Meduza that the statute of limitations on the copyright-infringement charges related to Nginx is 10 years. “In Nginx’s case, the statute of limitations expired long ago, given that it’s only logical to start counting from the release of the web-server’s first version, meaning in 2004. Those behind this case will likely try to attach it to a different timeframe, for example, the date Nginx was legally registered as a company, or they’ll say it took them 15 years to learn that Sysoev distributed this web-server,” says Darbinyan.

There’s been one similar precedent in Russia for contesting exclusive rights to software. As one of VKontakte’s shareholders, Ilya Shcherbovich’s “UCP Foundation” asked a court in 2014 to grant VKontakte the exclusive rights to Telegram, arguing that the messenger’s development took place inside VKontakte. The issue was resolved, however, when the holding company “Mail.ru Group” purchased 100 percent of VKontakte.

Nginx has new shareholders, and so does Rambler

After the company was officially registered in 2011, Nginx closed several rounds of investment worth more than $100 million. In May 2019, the American company F5 Networks bought the business outright for $670 million. Under the terms of the agreement, Igor Sysoev and Maxim Konovalov continue to manage the company, now as top executives at F5.

A few months after Nginx, Inc’s sale, there were changes to Rambler Group’s shareholder structure. In August, Sberbank agreed to buy 46.5 percent of the company for an undisclosed amount of money, though analysts guess the deal was worth between 9 and 11 billion rubles ($143.1 and $174.9 million).

A source close to Nginx’s former investors told Meduza that Rambler Group never once in Nginx’s 15-year existence expressed prior claims about exclusive rights to the software. “During this time, there were multiple rounds of investment, Nginx conducted its due diligence, and there were no questions whatsoever about the owners’ exclusive rights,” says the source. “Either the emergence of Rambler Group’s new shareholder is at play here, or the deal with F5 opened Rambler’s eyes to what they lost. In fact, there was nothing to lose: this product was never theirs.”

Story by Maria Kolomychenko

Translation by Kevin Rothrock

https://meduza.io/en/feature/2019/12/13/what-s-yours-is-ours