Microsoft's Strong IP Protections Give Windows an Advantage

by Alex Woodie

In the ongoing platform wars, it's not always enough to have a superior operating system or better technical support on your side. Increasingly, giving customers a more thorough intellectual property (IP) indemnification policy, and backing that with a gaggle of lawyers, is the key to winning over customers. This is an important area where Microsoft has held an advantage over Linux, its key competition in the entry and midsized server space. But how long will the advantage last?

Microsoft CEO Steve Ballmer put the Linux community on edge last November, when he suggested to a group of Asian business leaders that Linux infringes on 228 patents and that "someday . . . somebody will come and look for money owing to the rights for that intellectual property." While Microsoft has been a backer of The SCO Group--the company that claims IBM infringed on its Unix copyrights with its contributions to the Linux kernel--Microsoft has largely sat on the sidelines. However, since Ballmer made those comments, the Linux community has been waiting for the other shoe to drop, possibly in the form of a lawsuit against Linux vendors.

Now one news report indicates that the Linux community may be taking a more proactive stance to bolster its IP standing. Linux Business Week ran a story last week claiming that the Open Source Development Lab and a group of its backers, including IBM, Hewlett-Packard, and Intel, are planning to announce a project to rewrite the guts of Linux so they don't infringe on anybody's patents. The project, which the story labeled "Operation Open Gates," will be made public on January 25, according to the report. (However, the validity of the report has been called into question by OSDL itself, and an OSDL spokesman has reportedly called the Linux Business Week story "horse puckey.")

Something like Operation Open Gates (or Operating Open Gates itself, if the report is, indeed, true) could deal a great blow to Microsoft, which has made the perceived legal liability of Linux one of the hallmarks of its strategy to sway customers to its Windows Server System.

In addition to casting doubt on the legality of Linux, Microsoft has bolstered legal protections for its own Windows customers, and now has one of the strongest IP policies among the major IT vendors, according independent studies available on Microsoft's Get the Facts Web site.

In one report available on Microsoft's Web site, titled "Indemnification Becomes Open Source's Nightmare and Microsoft's Blessing," Laura DiDio, an analyst with the Yankee Group, says even small and midsized businesses should take care not to be caught in lawsuits over copyright infringement, patent infringement, or theft of trade secret claims.

"The necessity of purchasing outside indemnification for Linux could negate the perceived savings of the so called 'free' Linux licenses over Microsoft's proprietary Windows," DiDio writes. "And in certain instances, Microsoft's more comprehensive and specific indemnification provisions may tilt the total cost of ownership equation in Windows' favor, making it more economical than Linux."

In November, Microsoft expanded its IP indemnification policy to enable corporate and consumer customers to receive the same indemnification coverage previously offered only to volume licensing customers. "Customers have repeatedly told us that protection from IP claims is a fundamental issue of risk management and is essential for their IT solutions," said Kevin Johnson, group vice president of the worldwide sales, marketing and services group at Microsoft.

If faced with an IP claim against Windows, Microsoft has committed to taking certain actions to protect its customers, including removing the infringing code, replacing or rewriting the infringing code to make it compliant, and going to court on the behalf of customers (if there is infringement). Microsoft also does not impose a liability cap on how much it will reimburse customers if there is a proven infringement, which is something that few, if any, other vendors have done.

All together, Microsoft's policy adds up to "some of the most specific and comprehensive indemnification provision in the industry," says DiDio, who ripped IBM for its failure to offer Linux even basic indemnification coverage, such as that offered by HP. "When it comes to Linux indemnification, IBM's complete unresponsiveness is outrageous and unacceptable," she writes.

Some Microsoft customers cite the vendor's IP policy as one of the reasons they picked Windows over Linux. "We simply aren't interested in having to worry about potential legal risks of deploying Linux in this environment," says Jamey Anderson, manager of Local Area Network Services at ADC Telecommunications.

Similarly, Microsoft's indemnification was a major factor in Regal Entertainment Group's decision to go with Windows and not Linux. "Their coverage lets me focus on running the business and not waste time worrying about the potential disruption and costs of IP disputes," says Regal Entertainment's CIO, J.E. Henry.

The issue is far from resolved and promises to be the center of contentious debate in 2005. IBM kicked off the fireworks early this month with the announcement that it will essentially donate 500 of its software patents to the open source community. Whether the Linux community seeks to lessen the potential impact of IP suits by removing or replacing the areas in the operating systems' kernel that supposedly infringe on 284 patents has yet to be seen. But it would certainly change the dynamics of the Windows-Linux debate, and maybe we could even get back to the good old days when features, not lawyers, were the dominating force influencing platform decisions.