Once More unto the Breach

882 Patents

So I'm confused. (Not an unusual state for me, I know.) From the Novell acquisition 8-K as referenced in Andy Updegrove's excellent indepth analysis of the deal so far:

The Patent Purchase Agreement provides that, upon the terms and subject to the conditions set forth in the Patent Purchase Agreement, Novell will sell to CPTN all of Novell’s right, title and interest in 882 patents (the “Assigned Patents”) for $450 million in cash (the “Patent Sale”).

N.B. I'm presuming "Assigned Patents" in the above quote refer to the 8-K, and not the USPTO terminology below.

Taking a quick look at what the USPTO has to say about patents Novell owns as assignee, we find:

• Patents with Novell as Assignee Name or Novell as Inventor Name: 467
• Patent Applications [published] with Novell as Assignee Name or Novell as Inventor Name: 290

So 757 patents and applications. Even adding Attachmate's patent portfolio (14 plus two applications) doesn't really make a difference. I don't know how many "unpublished" patent applications exist in the mix. I don't know if there are a pile of provisional filings that don't show up in the list. I don't know if there are patents outside of the USPTO that are different (unlikely) or overlap in different jurisdictions (in which case one wonders at the import of them if only ~100 were cross-filed. Even doing a search through the USPTO "Patent Assignment Database (Assignments on the Web)" only brings up 775 patents with Novell's name on them.

So to me (naively) it looks like Microsoft vacuumed up the Novell portfolio because it could. I find it more interesting that US$450M was paid for the portfolio. That's about a half million dollars per patent. That seems like a rather large premium when the average patent is supposedly worth about US$75K to file and maintain over its lifetime. (Investors should be curious.) I'm betting it has more to do with Microsoft having a lot of cash and needing to make the overall deal terms palatable to all the partners. So as Brian Proffitt pointed out, I'm not sure things are any more dire today than they were a week ago.

Open Source Software Economics in Pictures

Updated [22-Mar-2010]: Added a little text around the Ohloh javascript widget so Google Reader sees a URL to follow.

Recently, I've encountered several technologists that still don't understand open source software economics and got suitably cranky about "people giving away software for free" and "destroying the value of innovation". I thought it time to try to reach for an easier way to demonstrate what's happening in the industry in pictures.

Everyone is familiar with the idea of a normal "bell curve" distribution representing R&D investment over time. As a technology is better understood and a product succeeds in the marketplace, R&D investment increases, and over time as new technologies advance, the R&D investment in the original technology and product wanes. The integral represents the total R&D investment over time. The function can also represent the "knowledge" gained or the increase in the intellectual asset base.

Good companies develop and invest in new successive waves of sustaining technologies. So, looking at Microsoft's success with PC operating systems, DOS was replaced by a greater investment in a more innovative Windows, was replaced by a larger investment in a more innovative NT.

This also fits nicely with Christensen's original observations about incumbent companies being good at sustained innovations and well run companies knowing how to jump from technology to technology along a sustaining innovation path. This all makes sense when considering a single company's R&D investment. It applies equally well to Sun Microsystems when considering that the steeper slope of successive sustaining innovations was on the hardware side versus the slower (but not inconsiderable) investment from SunOS (a BSD variation) to Solaris.

The investment curve for projects like Linux and Apache, with lots of individual and corporate contributors, still looks like a bell curve, but the contributions might better be viewed as a stacked bar chart. Individual contributors invest to meet their specific needs. Because there is enormous overlap in their common needs, they all share the overall investment.

Individual contributors get enormous return on their investment. (One gives a few bug fixes to the Apache httpd team, and in return one gets an entire HTTP daemon.) Corporate contributors give for the same ROI. They get enormous return on their investment in technology they use in a product complement space or as a component in their overall solution to the customer. (Before someone takes issue with my Red Hat example above below, understand the "solution" in the customers mind was "UNIX-like servers on inexpensive 'PC' hardware" and not "Linux".)

Christensen was careful in subsequent work to point out that the disruption wasn't about technology but about business model. The disruption often started when someone assembled standard cheaper lower performing parts into a solution that solved a completely different need with a very different cost basis. The new solution begins its own sustaining innovation curve until the new technology can compete with the incumbent compared against the criteria about which the customer/consumer cares.

The disruptive business model isn't about Linux so much as the ability for corporations to do collaborative development at the component/complement level in a "frictionless" well-managed Internet-enabled community. (The original OSF/1 shared-development of a UNIX-like replacement failed: too few players, too much politics.) Linux is a much stronger disruptive business solution as a way to handle a particular sourcing problem.

It would be interesting to consider the difference between projects with enormous inbound code contribution (versus all the other strengths a well run community brings to the table) distributed across a wide group of players like we see in the Linux and Apache projects, versus projects managed more tightly by a company like MySQL was. Another interesting attribute of this collaborative business model to investigate is how contribution mutates over time. Christensen's work demonstrated that an incumbent gets in trouble when they begin to over-deliver on functionality for attributes their customers consider important. The customer can't absorb the sustaining technology innovation any faster and literally won't pay for it. The slope of the sustained innovation of the competing technology is sufficient to cross into the space covered by the incumbent's solution.

In a shared collaborative development environment, however, because the technology isn't being driven by a single corporate entity, the community of corporations collectively contributes to their own needs and the technology may (i) stabilize where it needs to stabilize, and/or (ii) be taken in new and interesting directions. There is less pressure (if any) to over-deliver with new innovation. The consumers are the developers, but it's a very broad community indeed. This is what I believe just happened with the MeeGo announcement and the combining of the Nokia Maemo and Intel Moblin projects. This is a great inflection point for Linux into the new mobile Internet device space.

One only need read the report from the Linux Foundation charting the growth statistics in the Linux kernel to understand the enormous value generation happening release-on-release, four times a year. Using the Ohloh rules-of-thumb of US$55,000 per person year one gets US$142M of value creation in the 2.6 Linux kernel. The fact that some business models have been destroyed (Sun), or threatened (Microsoft) doesn't mean there's not enormous ongoing value creation in the technology.

Ohloh value chart for Linux 2.6 kernel.

Neither is intellectual property being "destroyed". Again, this is a disruptive business model discussion. Intellectual property is a business choice made on how a company will protect certain intellectual assets as legal property. Which assets to protect, and how, and which property to defend is a business choice based on the cost model a business uses with respect to turning assets into value propositions customers will buy. When a group of companies chooses to collaboratively develop a technology complement/component, they're making a business model choice on how they will selfishly share certain intellectual assets. Nothing was destroyed along the way.

The Microsoft versus TomTom Patent Debate is about the Mobile Internet not Linux

The Linux community is up in arms over Microsoft's filing a patent infringement suit against TomTom, the Dutch navigational unit manufacturer, determined to convey this as an opening move in the debate about what patents Linux does or doesn't infringe. This suit is very likely NOT about Linux. Let's look at the patents. From the complaint, Microsoft patents in the case (collectively, “the Microsoft patents-in-suit”):

• 6,175,789 (16 January, 2001) Vehicle computer system with open platform architecture
• 7,054,745 (30 May, 2006) Method and system for generating driving directions
• 6,704,032 (9 March, 2004) Methods and arrangements for interacting with controllable objects within a graphical user interface environment using various input mechanisms
• 7,117,286 (3 October, 2006) Portable computing device-integrated appliance
• 6,202,008 (13 March, 2001) Vehicle computer system with wireless internet connectivity
• 5,579,517 (26 November, 1996) Common name space for long and short filenames
• 5,758,352 (26 May, 1998) Common name space for long and short filenames
• 6,256,642 (3 July, 2001) Method and system for file system management using a flash-erasable, programmable, read-only memory

Also from the complaint, we have this statement (line 15):

6. Upon information and belief, Defendants are in the business of developing, manufacturing, and selling portable navigation computing devices and software for use on those devices, personal computers, PDAs, and smartphones (hereinafter known collectively as “Portable Navigation Devices and Software”).

This feels much more like positioning for location-based services and the coming mobile Internet war. Microsoft has been the "PC company" for a long time. It got there on the backs of a standardized PC "device". (In a Christensen economic world of a network of complements, Microsoft captured the innovation premium in the OS on commodity hardware.) That world is changing rapidly since Apple demonstrated what the mobile Internet can look like with the release of the iPhone. There has been a rush of delivering iPhone competitors to market since then. Nokia bought Navteq, then Symbian (the predominant mobile OS), to be released royalty free and as open source sometime in the future. Google released Google Maps with instructions to drive places, and then developed and released Android. There are considerably more handset devices on the planet than PCs [see note below]. This feels like a much bigger fight than the first shots in a Linux patent fight. This could have much bigger ramifications for Nokia (and the other handset manufacturers), Google, and Apple than Red Hat et al. These are the players that need to be naming themselves to this patent litigation suit.

Related commentary:

• Microsoft v. TomTom: Patent war, or no?, () Matt Asay's fine blog commentary
• Microsoft sues TomTom for alleged patent infringement, (25 February, 2009) by Ina Fried
• Has Microsoft's Patent War Against Linux Begun?, (25 February, 2009) Glyn Moody's commentary
• Beating the TomTom: Drums of War? (Not), (26 February, 2008) Andy Updegrove's excellent commentary
• Microsoft lawyer 'won't speculate' on Linux suits, (25 February, 2008) Ina Fried's CNET interview with Microsoft's Horatio Gutierrez, senior IP lawyer
• The Microsoft Press Release, (25 February, 2009)

Note: Communities Dominate Brands pointed out that there were 3.3 Billion mobile subscriptions in 2007 versus 900 Million PCs. Or to put this in better context:

Now as the phone handset makers like Nokia, Samsung, Motorola, SonyEricsson and LG ship over a billion phones annually (IDC, Jan 2007), we have a colossus of an industry of high tech pushing ever more powerful gadgets into our pockets. And yes, Nokia alone ships one million phones every day of the year, Saturdays, Sundays and Holidays included. For contrast note that the PC industry shipped 250 million new PCs in 2007, of which about 100 million are laptops (Computer Industry Almanac Jul 2007).

A Standards Primer

I have recently had several long discussions about the motivations and machinations that surround the development of technology interoperability standards. Over the past few years, I've also captured a lot of ideas and experience on the blog. I pulled it all together into one place in the following paper, "Understanding Technology Standardization Efforts" (PDF 86.2K).

For the record, I was a long term participant in the POSIX and UNIX standardization efforts. I was a working group participant, balloted many pieces of the standards and their amendments, and participated in the management of the standards effort at the IEEE as both an inaugural member of the Project Management Committee and a voting member of the Sponsor Executive Committee. I was an international participant at ISO, as document editor, and participated on behalf of three different national body delegations (Canada, U.S., UK) over a number of years. I began my participation in 1989 as a customer (working for EDS with GM and the U.S. government as their primary POSIX-interested customers), but quickly ended up as a vendor, working for MKS developing a conforming POSIX.2 implementation that formed the basis of implementations from IBM, DEC, HP, UNISYS and Sun. In 1995, I put my money where my mouth was on the importance of applications portability, standards and the coming juggernaut of NT and co-founded Softway Systems, implementing the POSIX and UNIX standards on NT to enable UNIX applications to be directly migrated to the platform. A large amount of free and open source software was incorporated into the product. Softway Systems was acquired by Microsoft in 1999, and I worked there for five years. Over the years I've been in regular contact with people standardizing C#/CLI, the Linux Standards Base, and ODF.

Several friends and colleagues from the standards world have reviewed the paper and provided excellent comments. The paper is much better for it. All mistakes obviously remain my own.

The OOXML Ballot Resolution

[Update (2008-2-25 13:45): There's an excellent press release from ISO that outlines exact history and next steps and requirements for this ballot.]

I have long maintained that technology standardization is commercial diplomacy and the purpose of individual participants (as with all diplomats) is to expand one's area of economic influence while defending sovereign territory. This week a lot of people are gathering in Geneva for the ISO ballot resolution meeting for Office Open XML (OOXML), Microsoft's Office product specification. The debate no doubt will be contentious.

Microsoft had a perfect opportunity to participate in the Open Document Format (ODF) standard's development at OASIS. They ignored that opportunity. The best time for technology standardization arises when a problem space is well understood, with sufficient real implementation knowledge to discern what works and what doesn't. Microsoft had arguably the best experience to contribute. They chose not to participate. Standardized document formats with multiple product implementations posed a threat to their Office business.

That threat became real when the Commonwealth of Massachusetts chose ODF as a basis for product procurement to best serve its citizens. Microsoft's response was not to adopt the ODF standard that already existed with multiple implementations (and continues to act as a hub for alignment with other international work like China's UOF standard), but to rush their own product specification into the standardization process.

They have over the two year process done a remarkable amount of work to bring the specification through ECMA to ISO, and have made great gestures to enable others to support the Microsoft specification.

But there's a problem.

Microsoft is an adjudicated monopoly in the United States. The EU continues to investigate possible abuse of their market dominance. (Market leadership and innovation are not what's being punished, but rather the abuse of a dominant position.) Microsoft can complain all they want, but the practices that enabled their success continue to plague them. We cannot collectively rewrite history. Microsoft is indeed held to a different measure. They have forfeited some of the freedoms that other companies enjoy. In many ways, they have lost our trust.

One can not judge Microsoft's newly declared preference for "openness" against the work they've done promoting their own product specification, but against their continued refusal to adopt ODF. In the end, OOXML as an ISO standard (with its attendant market confusion) will best serve the needs of Microsoft over its customers, and that's a shame.

Andy Updegrove has an excellent essay on his blog as we go into this week's ballot resolution deliberations. He takes a different approach. In it he argues that a particular class of standards should be held to a higher bar for acceptance, because they enable fundamental technology access in the world going forward. He makes an compelling case for why OOXML should be flunked out of the ISO process.

This promises to be a fascinating week.

FTC Settlement on Patent Abuse and Standards (and Open Source Implications)

Andy updegrove posted great news this morning on his standards blog. The US Federal Trade Commission (FTC) announced its resolution that a patent licensing promise made by a patent holder in a standards setting process is binding on a future holder of the patent.

National Semiconductor participated in an IEEE standards effort to develop the 100 Mbps "Fast Ethernet" specification in 1994. Two key (pending) patents were under their control, and they licensed them clearly, cleanly, and cheaply for US$1000 flat one-time fee to all takers. The patents changed hands, first to a group (2002) that wanted to change the licensing deal, then to N-Data (2003), a patent troll that was aggressively pursuing a changed expensive license.

Andy sums it up best:

"[T]he reliance upon promises made with respect to patents is of concern not only in the standard setting context, but with respect to open source software as well. The details of the settlement will provide significant guidance as to how the regulators would view similar conduct in an open source setting. Moreover, in the case of N-Data, the FTC has acted aggressively while acknowledging that the actions at issue might not rise to the level of violating relevant antitrust laws. In doing so, the Commissioners provide strong assurance to participants in standard setting that the FTC recognizes the importance of standards in the modern world. Finally, the details of the actual settlement demonstrate a willingness on the part of the FTC to craft a detailed and savvy set of requirements that addresses the realities of actual licensor-licensee conduct in the marketplace."

This is great news in the context of patent promises made to open source developers from the likes of IBM and Sun Microsystems, and through mechanisms like the Open Invention Network and the Linux Foundation's Patent Commons Project. It removes FUD slung around with respect to patents and intellectual property in both the standards arena and open source project communities. Each is a collaborative effort with significant economic importance and impact. Each will hopefully see the intellectual property landscape a little more clearly now.

Full details on Andy's blog.

Microsoft and Xen and Patent Leadership

Sam Ramji gave an excellent short talk at OSCON 2007 on Linux and Windows Interoperability: On the Metal and on the Wire.  Sam described the collaborative work being done inside the Microsoft open source labs to better enable virtualization with the Xen world. 

Indeed, Xen comes from a GPL licensed project where Microsoft was a sponsor of the original University of Cambridge work.  HP and Intel are still sponsors.  (Of course you need to use the Wayback machine to begin to see hints of this.)  This is all good.  But I couldn't help but wonder at two questions during Sam's presentation:

• What is the patent landscape around virtualization?
• What is Microsoft's position with respect to Xen and Xensource if someone were to attempt a patent run against the project?

A quick check of the USPTO patent database can give us a initial inexact feel for the space:

• Patents with VMWare as the assignee (22)
• Patents with Microsoft as the assignee (7117)
• Patents with Microsoft as the assignee and containing "virtualization" (20)
• Patents with Advanced Micro Devices and containing "virtualization" (4)
• Patents with International Business Machines and containing "virtualization" (130) !!!
• Patents with SWSoft as assignee and containing "virtualization" (2)
• Patents with SWSoft as assignee [SWSoft makes Parallels] (6)
• Patents with Intel as assignee and containing "virtualization" (100)
• You get the idea ...

It's a potentially messy space.  As virtualization lives so firmly on the hardware/firmware/software boundary, we don't even need to have the debate over the relevance and merits (or lack thereof) of software patents.  Somewhere in that collection of patents there are likely to be hardware patents, or firmware patents indistinguishable from hardware, and they may read on the Xen space.   

Are we afraid yet?  I'm rattling the sword very very loudly.  Worried at all?  Even an eensy-weensy bit?  Hopefully NOT.  VMware, Microsoft, Apple and SWsoft at a glance have been shipping products for some time.  Intel, AMD, and IBM have been building hardware to be virtualized for some time.  And Xen has existed for some number of years squarely in this space, and academia is not naive when it comes to patent filings.  As a company, Xensource has been basing its race for the gold ring on the Xen project.  Xensource may even be an easy first target to pursue for a patent troll on the way to bigger and better shakedowns (although I certainly wouldn't bet against Intel, HP, VMware, Microsoft, etc. getting involved early.)   

Which brings us to the second question. 

Here is a perfect (and safe) opportunity for Microsoft to get out ahead of the curve, and demonstrate that they can learn and that they do "get it" and indeed that they can lead with respect to the licensing debate.  They can make the patent grant, here and now, to the Xen project.  As an intellectually interesting challenge for their legal team, they would be creating a deliberate license directly related to a project licensed under the GPL and stating (within their control) how their patent license does apply downstream, so as to not interfere with their assertion of patent rights in other areas.   The point would be to see how promiscuous they could be with their patent rights in a well defined way.  Sort of an interesting idea.  Indeed, it becomes a historical and game changing idea with respect to their competitors.   

To date their competitors keep rolling positional hand grenades out into the field and the Microsoft legal team feels obliged to leap on every one of them.  Mention the GPL and the Microsoft legal team runs screaming with their hair ON FIRE (to borrow a phrase from Eben Moglen's great Ubuntu Live keynote.)  Develop an enabling and protective patent license around Xen, and they begin to provide a basis for future interesting debate. [Some of the lawyers may even get to make a name for themselves publishing the brief!]   

Of course hell could freeze over too.  But it's great to dream.

Interview with Beth Noveck as "Peer to Patent" Launches

The United States Patent and Trademark Office (USPTO) is swamped with patent applications and the patent examiners are drowning.  At this point in history, it can easily take 24+ months for an application to get through the system, and quality is suffering.  Beth Noveck leads the Peer to Patent initiative, a key effort to ease some of the pressure and vastly improve patent quality.  The program pilot began 15 June, 2007 with the support of the USPTO, after a long year of planning and organizing.  Its aim is to enable anyone with expertise to help vet applications for prior art, so the best possible patent is approved.  (The following flow diagram comes from the Peer to Patent site.)

The program is already at work.  Here's an example of one of the patents under peer review. (Sign up to participate.)

I've known Beth for a couple of years, since meeting her at the inaugural Government Open Source Conference in Portland.  When the opportunity to interview her came up at Assignment Zero, I decided it was time to contribute.  We never did get a chance to talk directly with her schedule and the pilot launch, but we managed to develop the interview over a few rounds of email.   The interview is up on the Assignment Zero site, (with promises of future publication in Wired). 

This is an important program and lots of companies that care about patent reform are sponsoring it.  It is perhaps most interesting that so many of them are in the computing and software fields.  But then we've also created the biggest mess for ourselves. 

The Microsoft Xandros Deal

"Microsoft, Xandros Broad Collaboration Agreement Extends Bridge Between Commercial Open Source and Microsoft Software"

And so it begins again ...

What was Announced
The actual details will presumably be held secret for as long as possible, just like the Novell Microsoft deal. Here are the details from the announcement on Microsoft's press wire: 

Over the next five years, Microsoft and Xandros will focus on five primary efforts:

• Systems management interoperability: Xandros and Microsoft believe advances in system management technology can significantly reduce the cost of operating large computer networks running diverse platforms.  Xandros will partner with Microsoft to deliver value-added heterogeneous management capabilities that will work with the next generation management capabilities that will work with the generation of Microsoft  System Center and Xandros Systems Management products, which provide end-to-end service management.  Xandros will also join Microsoft and other management vendors in implementing the WS-Management set of protocols in Xandros BridgeWays cross-platform management products and in various systems management standardization efforts.
• Server interoperability.  Xandros will license a broad set of Microsoft server communications protocols. Xandros will develop enhancements to Xandros Server, allowing it to interoperate more smoothly with Windows Server in a network setting.
• Office document compatibility.  Xandros and Microsoft share the view that competing office productivity applications should, by design, make it easy for customers to exchange files with one another.  To that end, Xandros will join Microsoft and other companies that are building open source translators fostering interoperability between documents stored in Open XML and Open Document Format.  Xandros will ship translators in upcoming releases of its Xandros Desktop offering. 
• Intellectual property assurance.  Through the agreement, Microsoft will make available patent covenants for Xandros customers.  These covenants will provide customers with confidence that the Xandros technologies they use and deploy in their environments are compliant with Microsoft's intellectual property.  By putting a framework in place to share intellectual property, Xandros and Microsoft can speed the development of interoperable solutions. 
• Microsoft sales and marketing support.  The companies are committing to a set of sales and marketing efforts to promote the output of their technical efforts.  As part of this effort, Microsoft will now endorse Xandros Server and Desktop as a preferred Linux distribution dues to Xandros' efforts to establish rich interoperability and deliver IP assurance to its customers.  Also, a specialized team of Microsoft staff will be trained on the value propositions of this collaboration to customers and channel partners.  Xandros will also become a member of the Microsoft Interop Vendor Alliance. 

Fine.  Whatever.   I really wish marketing people would remember how to speak English like the rest of us.  The hyperbole and bombast just deaden the senses. 

What might it mean for Xandros
Xandros is looking for love (possibly in all the wrong places).  A quick tour of DistroWatch for the comparative view for Xandros over the past 12, 6, 3, and one month periods shows it falling from 25th to 28th to 31st to 40th respectively.  Ubuntu sat in first until the past month when it dropped to second in interest behind PCLinuxOS.  The harsh part of the story is that regardless of which period you view, there are a lot of well know, well packaged systems ahead of Xandros including Ubuntu, OpenSuSE, Fedora, Debian, Gentoo, and Mandriva and that's just staying in the top dozen.  Even FreeBSD consistently ranks above Xandros on distrowatch.

I appreciate this is "interest" rather than sales as measured for Linux vendors.  But I'm looking for brand recognition here.  I even had to remind myself who Xandros was when I heard the news.  While that simply shows my ignorance, Xandros has been trying to be the "business person's" linux desktop, but Ubuntu and Novell have got to be hammering them pretty hard at this point in history.   

Novell signed its deal with Microsoft seven months ago.  They've made a lot of noise about how the coupon program has been GREAT for business.  (Other views differ.)  They weathered the community storm.  They have consistently said they don't believe Linux infringes any Microsoft patents, and that the IP related parts of the deal weren't about any current Linux patent infringement.  If you buy the public message, then the deal has likely been net positive for Novell, if only for the cash injection.  For Xandros this deal is their perceived chance to get some commercial love which they probably would like about now.

Corel is an investor in Xandros along with Linux Global Partners.  Corel has had a bizarre history with Microsoft, alternately suing and collaborating with them.  It should come as no surprise that a Corel spin-off like Xandros considers a deal with Redmond good business.

Xandros is giving:

• Xandros will implement WS-Management in BridgeWays (presumably in the next five years).
• Xandros is now a server communications protocol licensee.
• Xandros will join the ODF translator community.

Xandros is getting:

• The same deal on IP from Microsoft, i.e. Microsoft is generously promising not to sue Xandros customers.  Whatever.
• Lots of co-sales and co-marketing love. 

"By putting a framework in place to share intellectual property, ...."  There is no "sharing" happening today.  A quick search of the USPTO database reveals the number of patents with "assignee name" of Xandros: ZERO.  The number of patents with an "assignee name" of Microsoft: 6776.  The number of patents with an "assignee name" of Corel (one of Xandros investors): 40.  It might be interesting to know what rights Xandros had to Corel patents, and what rights they may have just cross licensed, but that's Corel's problem.

What does it mean for Microsoft
They get a new protocol licensee which I'm sure they'll be pleased to trumpet to the EU. 

They get a renewed messaging platform for their continued infatuation with customers and patents instead of customers and solutions.  It's a broken platform which shows no leadership, but that apparently won't stop them from pushing it. 

They get to continue the messaging shades of grey around Microsoft Office Open XML and ODF.  "Xandros and Microsoft share the view that competing office productivity applications should, by design, make it easy for customers to exchange files with one another."  Microsoft sees its death in ODF.  They will fight like a cornered rat and message appropriately. 

"Microsoft will now endorse Xandros Server and Desktop as a preferred Linux distribution dues to Xandros' efforts to establish rich interoperability and deliver IP assurance to its customers."  I've confidence the discussions with Novell on this are hysterical in both meanings of the word.  It has the potential to be a distracting headache from a reasonable partnership with a first-tier commercial distributor of Linux, to be able to tout an IP message with a third-tier player. 

Is there an implication with GPLv3?
Damned if I know.  GPLv3 is not truly finalized, and I've confidence better minds, legally trained and hard-wired to the current GPL development process will weigh in here.  BUT, I'd be hard pressed to say this deal actually matters.  Linux is what it is.  The way it's licensed will be decided by the community that invests in it.  The GPLv3 will be what it will be.  It will be used by the communities that choose to use it.  Any conjecture on whether Microsoft signing a deal with a third-tier commercial Linux distributor is going to effect the process seems a bit wild.  I've confidence saner heads will prevail.  Well ... after an initial snarl or two. 

Should anyone care?
I saw Allison Randall on a recent OSBC panel on whether the Novell-Microsoft Deal was "good" for open source. She sat with Sam Ramji (Microsoft), Justin Steinman (Novell), and Jonathon Corbet (LWN.net).  Sam and Justin did a mostly fine job of clarifying the agreement, but Allison's point that the deal is irrelevant for open source was more important. 

The Novell-Microsoft deal was a deal between two vendors just like any other deal involving co-marketing, technical co-operation, and IP cross licensing.  (With Xandros there's apparently no cross license as they have nothing to license.)  Novell thinks its best serving its customers.  Microsoft thinks its best serving its investors.  So too with this Xandros-Microsoft deal.

There is no more patent infringement validation here, despite Microsoft posturing, than the Novell-Microsoft deal.  A hundred companies using free and open source software in their offerings to customers could sign patent cross licensing or covenant deals with Microsoft, and it means nothing with respect to the veracity of Microsoft's infringement claims.  Patents are tickets to negotiations.  They are (sometimes) interesting opportunities for discussions.  But they are utterly unproved until they enter a courtroom.   Some companies see a Microsoft deal as a strategic leg up in their business.  It means nothing with respect to possible claimed infringement, and even less to other mainstream players like IBM, and Red Hat.   It's all just business. 

Out, out, brief candle!
Life’s but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

- Macbeth, Act V, Scene V

[Disclaimer: Microsoft is a client of mine.]

 

Microsoft Messaging on Patents and Open Source Software

Sam Ramji, Bryan Kirschner, Michael Francisco (and briefly Bill Hilf) from the Microsoft open source software lab were front and center last week at the Open Source Business Conference (OSBC), largely because of an article published the previous week in Fortune.  There were several discussions that centered around patents and software business from an open source perspective, and I realized there are several disconnects between the Microsoft legal team and their PR machine, and most of the rest of the world. 

The first disconnect appeared during Microsoft's day long event for open source ISVs the day before OSBC.  Microsoft represents a US$44B revenue stream.  Most of the executives from software businesses in the event represent companies that run US$2M to US$20M.  There is a world of difference between the way these companies need to behave with respect to intellectual property tools and their software assets. 

Most small companies don't care about patents in the same way as a large company must.  A small company will likely file for a patent or three because it can make a real difference in their valuation in both funding and M&A activity.  The management team, however,  applies a different calculus to the problem.  Filing for three patents with good patent attorneys could cost ~US$50K.  That's half a head count for a year.  And the patents won't be approved faster than 24-36 months.

Was the small company to discover a large company infringing their claims, they have very few real options.  They have a ticket to a negotiation implied in their ownership of the patent.  They can't afford to be greedy in the discussion because they can't afford the legal costs of a prolonged legal debate if business negotiations fail. Patent "cross licensing" deals with large companies with thousands of patents are not exactly balanced for small companies.

Most companies just don't live in the space of large cross licensing deals like a Sun, Microsoft, IBM, Intel, etc.  That doesn't mean the smaller company management teams don't respect intellectual property or don't care about it, they just value patents differently in their business model.  I imagine the average $20M company executive would happily entertain the painful and frustrating headache of $100M/year of inbound litigation with which Microsoft lives, if it came with a $44B revenue stream. 

These executives don't want "special" rules for intellectual property.  But neither do they need to think and apply the same rules the same way as companies that are Three Orders of Magnitude bigger.  Indeed, for most of these executives, trademark (i.e. brand management) and copyright management is everything to them, and they're very savvy with respect to copyright licensing. 

The second disconnect is the Microsoft talking point about return on investment for the R&D expense.  Microsoft rightly claims on the order of $7B spent each year on research and development.  The PR talking point is that "they want a return on that investment."  The rest of us see a $44B revenue stream and think, "and what part of that revenue stream shouldn't be considered ROI?"  This is what happens when you let lawyers (cost side of the balance sheet) think they can be a profit center. 

This brings us to the third disconnect.  The Microsoft executive and legal teams look to the IBM claims of $2B-$4B/year in IP licensing revenues and thinks, "why not us?"  Why not indeed.  Well let's look at some of the differences.  You see it's really a business marketing problem. 

Microsoft historically has a culture of putting programs in place so as to scale efficiently and keep margins high.  This is good business practice.   So the legal team did as well: here's the "IP Licensing" home.  [I think it's significant that the URL contains a segment named "about".  Remember --  legal is a cost center.  Most of the legal concerns that reach the public eye would rightly show up under "about" on most company web sites.]  As you explore this part of the site, you'll find all goodness about why you should license Microsoft IP through their licensing programs 'cause they're smart guys that invest a lot in R&D.  (And they are and they do.)

But it's different than the business model practices developed over the long haul by IBM.  Go look at the model Microsoft is chasing: here's the IBM IP licensing page.  The page starts with the statement that they're the market leader in awarded patents (regardless of R&D investment), and they're "expanding their use of intellectual property to accelerate the adoption of open standards and open source software through creative licensing and stewardship programs."  There's a prominent link on the simple page to all the program work in which IBM invests to modernize and reform the patent system and "reinvent the invention system."  It is a remarkable piece of positioning. 

Here is the company that clubbed Microsoft like a baby seal in the early cross licensing days, essentially playing the reformist hero.  It is masterful marketing. IBM thinks through the business strategy from all angles (including support for open source software), then tells a GREAT story about it.  [Indeed, an IBM executive would have wept for laughing so hard if they'd been present for the vaguely unprofessional bashing Sam Ramji took at the 451 Group reception at OSBC from a panel made up of Dan Kohn (Linux Foundation), Jeremy Allison (Google ex-Novell), and Eben Moglen. Andy Updegrove was the only balanced voice on the panel.  Sam had to stand in the audience with the rest of us plebes and wait his turn for the mic.]

It's not that Microsoft doesn't want reform in the patent system, they simply don't talk about the work they do sponsor.  And when they try to message reform it fails.  They come across complaining about the inbound $100M/year litigation costs, with the additional hammering they've taken by Eolas (~$500M) and the Sun license (another $2B).  They try to say they too want reform because they're victims too!  But it's a poor story up against the $44B revenue stream.   It has all the negative impact of Paris Hilton fretting about her approaching jail time while shopping for ten thousand dollar handbags.  (I wonder how much inbound litigation IBM takes a year?)

What they need is a leadership message.  One that resonates with a clean position with which the rest of us mere mortals can sympathize and possibly even support.  Daniel Chalef (CEO, Knowledge Tree) offered the start of one for them during the ISV day but it was likely lost and not recognized for the brilliance it represents.  Daniel suggested Microsoft take a leadership position in the EU AGAINST software patents. 

This is fabulous.  It could even be cleanly messaged as "encouraging the EU to not follow in the footsteps of the U.S. until such time as patent reforms have been implemented and proved."  They would not be saying no software patents, but rather encouraging the EU to not make the same mistake the U.S. made until the U.S. figures out how to clean up the mess we all agree exists.  It would show leadership, align with their current positioning, and not sound like victimized whining, nor would it clash with their licensing programs.   

IBM is leading the reform movement and winning friends with its messaging while happily licensing and defending its intellectual property.  It comes at a cost and maybe the margins aren't as good as Microsoft's historical packaged software margins, but business it is.  Sun has reinvented its executive messaging cleanly to say they've got to play the game as a large business in the U.S., and they'll only use the portfolio defensively.

It's time for Microsoft to do the same before they're again [possibly mis]quoted as making veiled threats against customers.   Microsoft is a software company.  It's about time they again acted as one and stopped pushing their IP licensing business to the forefront of their messaging.  It's not (nor will it ever be as big as) the business we (their customers) know they're in so it only serves as too frustrating a distraction.