Patent Dispute May Reach Beyond Microsoft-Open Source

Lora Bentley

Is Microsoft fighting a losing battle? That's the question posed by an op-ed piece in today's Los Angeles Times. Maybe so, the writer concludes.


The software maker abandoned its formerly vague patent infringement threats against Linux and open source somewhat when it pinpointed the number of Microsoft patents it believes are infringed. Interestingly, however, the company insists it has "no plans to litigate" the issues. Instead, Microsoft wants the Linux and open source users to license the infringed technology -- in much the same way Novell did late last year.


That may sound silly at first. If you're so sure your patents are being infringed, why not sue and make sure it stops, right? Well, there are a few reasons, and the LA Times story points most of them out.


First, the general climate in the world of patent law is not holder-friendly these days. Congress is in the process of revamping the patent system -- reform for which Microsoft was a key lobbyist, by the way -- and a recent U.S. Supreme Court decision in a patent infringement case reframed the "obviousness" test to make it harder to obtain a new patent and easier to invalidate existing ones.


Second, with respect to Linux and open source specifically, if Microsoft does sue, there are industry groups (the Open Invention Network, the Linux Foundation) and large, open source-friendly companies (IBM, Sun Microsystems) standing ready to defend Linux and open source users in court. What's more, if Microsoft raises its patents in court, they will be tested against the new and tougher obviousness requirements, which means there's a chance they would be invalidated. Then where would Microsoft be?


As the LA Times piece points out, whether Microsoft litigates the issues or not, the patent dispute with open source may well result in even fewer patent restrictions industry-wide than currently exist. But given that the trend toward open source and open standards shows no signs of slacking, that's not necessarily bad.

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May 31, 2007 4:31 AM Clifton Hyatt Clifton Hyatt  says:
If people had understood how patents would be granted when most of today's ideas were invented and had taken out patents, the industry would be at a complete standstill today....The solution is patenting as much as we can.A future startup with no patents of its own will be forced to pay whatever price the giants choose to impose.That price might be high.Established companies have an interest in excluding future competitors.� 1991 Bill Gates, MicrosoftThe quote above is the primer to what Microsoft is about.It is about "excluding future competitors", plain and simple.Let me make my case for why.Let's assume FOSS developers do _not_ want to violate the law.As there is not a _single_ instance of _any_ FOSS project being charged (I think we can all agree SCO doesn't count) much less found guilty of violating either copyright or patent, the previous assumption seems valid by any reasonable metric.Certainly the numerous calls to simply point out what might be considered a violation from many quarters would reinforce that assumption, as would the open nature of development.You simply can not expect to succeed with an intentional violation when that violation will exist open to the scrutiny of the entire world.Now lets go over some hypotheticals.1) Microsoft's patents are valid.2) They successfully prosecute someone with deep pockets, let's say IBM.2) they are awarded the maximum damages possible.4) There is no counter action.What could the hypothetical consequences be of those hypotheticals?1) IBM has (wildly, astronomically high) a charge of 4 billion to pay out, huge bite but they will go on.2) All offending code has to be adjusted to deal with the patents, lets say it takes a year (again wildly inflated for our hypothetical).This is an ideal set of hypotheticals and would seem to satisfy the stated desire and requirement of Microsoft toward their fiduciary shareholder responsibility and business 101.Now for any other company 4 billion would be the lottery but for MS it a quarters proffit.While shipping reduced functionality software would be a blow to FOSS until they deal with rewrites, it won't be a killer.It could stall adoption, it could send some to Novell, it could even eat into the install base.But the truth is it's FOSS, even if all the paid programmers leave, it will continue.In all the countries that haven't yet introduced sw patents, among all the poorer countries that face the choice of reduced functionality software or the increasing difficulty of pirating it will go on.Microsoft suing and wining doesn't change the rules of the game, it doesn't get them what they want.So what do they want?MS has a monopoly of some 90% on desktops, market share of some 60% in servers, what about 95% of office suites.This is the bulk of their revenue.Their first directive is to not lose revenue, their second directive is to increase revenue.There are three primary ways MS can increase revenue (not withstanding the marginal increases to be had from increased efficiencies)1) Derive more revenue from their current market share.2) Increase their market share.3) Successfully enter new markets.Yea, I know much of this is elementary, bear with me.Microsoft's ability to increase revenue from current market share comes from two quarters, price increases and reducing piracy levels.The primary constraint on price increases comes from Linux, without it they are once again the lowest price offering (granted OSX as a broken out item is less than XP but as a system it is generally higher). Reply
May 31, 2007 4:32 AM Clifton Hyatt Clifton Hyatt  says:
While they have historically drastically undercut UNIX much of the current server market can't support UNIX pricing levels, the point being that for the current installed base there are modest limits to what they can achieve through price increases.Piracy is another matter.If we assume an average global piracy rate of 50% we are talking about real money.To take advantage of that MS needs two things, one they need a way to enforce payment and second they need to be the lowest cost or only choice (especially if we assume that one of the primary motivations to piracy is economic).The easiest, surest way to enforce payment is a technological kill switch, a capability MS is clearly building toward.Now once they build that kill switch before they throw it they have to make sure there is no credible alternative, and certainly not one that is cheaper and arguably of comparable functionality.Increasing market share, MS is a victim of their own business success here.It's hard to go anywhere but down with some of their market percentages, unless you factor in the growth of their current markets.Currently about 1/6 of the world is computerized, if we assume a conservative 1/2 of the population ends up computerized that is a threefold increase in market size.Unfortunately for MS the next 2/6 are less affluent than the current 1/6, how much of that market can they count on capturing if they aren't the lowest cost option?This is what MS has to be most focused on.If Linux remains in the market what percentage of this increasingly cost conscious 2/6 will break to Linux, 30%, 50%, 70%, especially if they are forced to actually pay for it?If it is even the conservative number a very important thing happens, their position as a monopoly falters.MS's record on entering new markets has two success rates one for markets that have a corollary to a market they currently dominate, and a very different one for markets without that corollary.Additionally, the resistance from possible partners for new markets has increased over time do to there predatory business practices.Clearly their ability to quickly dominate new markets and set defacto standards is fundamentally affected with the loss of monopoly positions.Without monopoly position they have to compete in ways they haven't had to for some time.MS has two advantages over nearly all other competitors, first is their monopoly position and second is the extent of the network effect that they can bring to bear throughout their platform.FOSS is the only other cohesive entity that has been able to credibly challenge the former and can match the latter.From a global perspective it is FOSS that provides the competition and obstacle to all of MS's growth opportunities, market by market.And these growth opportunities dwarf by many orders of magnitude even the the most wildly optimistic possible monetary wins from litigation.The only worthwhile goal here for MS is "excluding future competitors", and they can't achieve that by actually going to court.But what happens if they can get Redhat and other successfull commercial organizations to do similar Novell deals?It seems you would begin to fracture the FOSS comunity and this has to be their goal.Their efforts to date have been to divide FOSS participants, whether that is their effort to differentiate between paid and non-paid developers or one FOSS distributor from another.If Novell developers are free to develop code that is "safe" from MS patents but no one else is safe to use it, they have created a division. Reply
May 31, 2007 4:32 AM Clifton Hyatt Clifton Hyatt  says:
If other distributors do a similar Novell deal only "distributors" that MS is willing to do such a deal with are safe to distribute the code.If MS is successfull propagating the Novell deal it fractures the FOSS ecosystem _as well as_ giving them a revenue stream, but the primary goal is to short circut the virtuous cycle of FOSS licenses.Divide and conquer is the goal here and that is not accomplished by going to court.Foss can't continue as it has on code that is patent encumbered, and if MS can get a percentage of FOSS players to accept that premise they have taken the first step to halting it.That's the game they are up to.It's not about collecting royalties on patents, it's about rolling in a Trojan horse to destroy the community from within. Reply

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