Top Microsoft strategist highlights a change in IP policy
Open source is not going away. Why should it?
That's a quote from Microsoft CEO Steve Ballmer in Marshall Phelps' new book, Burning the Ships, and it's a question that Phelps tries to answer.
In the course of doing so, Phelps portrays Microsoft as desperately striving to adapt to a new world of aggressive enforcement of intellectual property (IP), but ends up suggesting a rising IP hegemon eager to shape a new world of such enforcement.
It's not pretty.
Phelps is the man who turned IBM's patent portfolio into a $2 billion business (as he reminds the reader several times), but his goal at Microsoft wasn't to generate cash through licensing, he declares. Nor is Microsoft's new IP strategy a rehash of the old world where IP is treated as a negative right (i.e., the ability to protect one's IP from the wiles and avarice of competitors), but rather IP becomes "a bridge to collaboration with other firms."
But this is where the contradictions begin.
Phelps indicates that Microsoft cannot go it alone in the world...then points to statistics that claim 42 percent of the world's IT people depend upon Microsoft technology. Microsoft apparently has done quite well going it alone.
He further agonizes that Microsoft must expand its partnership footprint...even while identifying 640,000 vendors in Microsoft's partner ecosystem that earned more than $425 billion in revenue in 2007. It's unclear, based on his own evidence, how Microsoft is starving its partners and, indeed, Microsoft has always made much of what an impressive partner it is with 96 percent of its sales going through partners.
Phelps berates patent trolls and others for forcing Microsoft to pay hundreds of millions of dollars in licensing fees...but then goes on to explain how Microsoft's new IP strategy has his team on the road constantly signing up new licensees for patent royalties and other agreements.
The money quote comes from Nathan Myhrvold, a former Microsoft executive and arguably now the world's largest patent troll with his company Intellectual Ventures, who declares himself "shocked" by the actions of patent trolls who could "just go and buy a patent and then use it" against Microsoft.
Oh, the irony, given that this is a concise definition of Myhrvold's current business plan and, apparently, Microsoft's.
Indeed, this is where Phelps' IP strategy for Microsoft departs from its stated intent. Phelps writes:
...(I)ntellectual property should always serve the business, not be the business....Microsoft didn't need money (from its patent portfolio)--it had billions of dollars of cash in the bank. Instead, Microsoft needed to transform its relations with the rest of the industry and build collaborative relationships with other firms. So that became the focus of our new IP strategy.
This sounds impressive, and it would be if it accurately depicted how Microsoft has approached the industry with its IP. Instead, Microsoft has spent the past several years menacing the open-source community and others with the threat of its increasingly large patent portfolio, and now claims "more than 500 patent and technology collaboration deals with companies large and small around the world."
I say "menace" because Phelps nearly always talks about these agreements in light of Microsoft approaching a prospective IP "partner." If Microsoft's IP were needed to build such cooperative bridges, presumably more of these "partners" would be approaching Microsoft, rather than waiting for Microsoft's heavy knock on the door.
Novell, as Phelps highlights and which CNET recently noted, is an exception to this rule, having approached Microsoft.
As with Novell, Phelps routinely neglects to mention facts that might cast Microsoft's IP actions in anything less than a warm and glowing light. For instance, he talks up Microsoft's generous decision to share 30,000 pages of technical documentation, conveniently forgetting to mention that the action was spurred by its desire to get out from under the European Commission's antitrust eye. (It didn't quite work.)
But nowhere is Phelps' selective memory more illuminating on Microsoft's intentions for its new IP strategy than when discussing open source. Here Phelps outdoes himself, starting with his characterization of why Microsoft wanted to build a bridge to the Linux world:
(Our customers) also wanted to stop worrying about the potential legal liabilities involved in using (open-source) software that was the subject of IP disputes. (p. 100)
The cheek Phelps uses here is breathtaking. First of all, he reiterates over and over throughout the book that Microsoft is a regular target for firms claiming Microsoft's technology violates their IP, suggesting that Microsoft may be the one with an IP problem, not open source, which has almost never been the subject of an IP-infringement lawsuit.
Except those funded (or started, as in TomTom) by Microsoft, of course, as SCO's failed suit against Novell appears to have been. In other words, this pitch-black Microsoft pot is calling a nearly lily-white kettle black, even as it attempts to smear the kettle with black paint.
This is galling in the extreme.
Ironically, Phelps suggests that the open-source charm offensive was all about providing interoperability to customers, but then declares two pages later that IP license agreements "wouldn't solve the interoperability problem." Well, of course not. But then, it's not really about interoperability. Patents are not critical to interoperability, as Microsoft's deal with Red Hat demonstrates.
Let's call a spade a spade. Microsoft's patent-licensing scheme has little to do with helping customers achieve interoperability. According to recent IDC data, IT execs rank interoperability way down on their list of priorities when buying a new server operating system.
Microsoft's plans are actually about providing Microsoft with a way to more effectively compete with free.
Customers aren't taking Microsoft's word for it. Phelps explains that while every CIO with whom Microsoft discussed its pending open-source plans purportedly expressed sympathy and encouragement, not one of them was willing to join negotiations or sign up for Microsoft's patent license. Phelps suggests this was out of fear of retribution. But couldn't it also simply mean that these CIOs were expressing lip service to Microsoft's initiative, lip service that wasn't worth backing up with any real action?
Phelps declares that the key point of his book is the "role that intellectual property can play in liberating previously untapped value in a company and opening up powerful new business opportunities." Unfortunately, he never explains why this new "collaboration imperative" is necessary, given that Microsoft's pre-patent offensive strategy netted it billions of dollars each quarter in free cash flow and a hugely impressive partner ecosystem.
In other words, the old Microsoft seemed to be doing quite well before Phelps made it an active patent tax collector. Will his new Microsoft fare as well?
Follow me on Twitter @mjasay.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
To many companies are stealing ideas from others. If you want to give your ideas away for free fine, but if if you choose to protect your investment that is also your right.
The TomTom suit was settled very fast and very much in Microsoft's favor.. I think it is pretty clear TomTom knew it had nothing to stand on... I am sure they could have hire an army of lawyers to fight Microsoft; as they are a multi-billion dollar company which removes the fear of Microsoft.
I will agree that Microsoft and Open-Source are headed for a confrontation over patents. My guess is they will come to a settlement, but it will favor Microsoft.
:-)
This is what you remind me of:
http://www.linuxtoday.com/news_story.php3?ltsn=2009-04-08-008-35-OS-CY-0002
You want to see what you gain and how valuable you are, but fail to see what you rob from society and how much you depend on it.
No man is an island, but a small number of the more savvy and unethical ones are leveraging an unconstitutional law because they can't compete and refuse to acknowledge that they just aren't that smart compared to the rest of the world. They leverage the many that don't patent (too busy creating) to then stick a government monopoly subsidy in everyone else's path.
Disgusting.
>> It is the broad patents that are granted that are bad and where I agree on patent reform.... To many companies are stealing ideas from others.
I would sympathize with you a little if you recognized that anything beyond a short monopoly period and only for "really innovative" inventions would be detrimental and unfair.
I've considered that we might allow a monopoly only until other independent creations came around, but all of this is ugly and likely not to be judged fairly.
Broad patents are unavoidable. Some are worse than others, but patent writers shoot for the broadest they can get. Fact is, tomorrow, you will know more than today and only then would be able to write a more narrow patent. By definition, then, the first to file are filing the broadest patents and these yield the greatest gains. Risk/reward is twisted.
Contrast with copyright. If you write a simple story about a dog and a cat, I don't violate your copyright if I take the idea further and develop it further, especially not if I only roughly approximated your story because I did not know about it very well. Well, copyright may also be a bit broken, but at least we can imagine how taking plots and other story attributes further would not violate copyright. Well patents work in the opposite way. That is their weakness.
Software engineering/science inventions:
That super power might be justified in some circumstances or it might at least be tolerable to society, but not for software when you have so many people that can participate/invent in the field of software because distribution, manufacturing/copying, etc, costs are basically $0 and the entire engineering design and initial manufacture can be done at $0 marginal beyond the cost of a cheap PC and where anyone in the world can collaborate also for roughly $0.
Key points to note for why software is different (or more problematic) than other engineering disciplines is the large number of participant-inventors, the lack of overhead costs to run the invention process/business, and how the grossly crude patent system of awarding so much power to so few can't, especially in this case (because of the large number of inventors), avoid stepping on many many toes and hence doing great harm to progress (to society). It's grossly unfair to give so few so many undeserved benefits (exclusivities and for so long) while simultaneously taking away these benefits/credit from so so many others.
Software patents completely misappropriate due credit, give the wrong people too much control, and then seal this mistake for 20 years.
In general about inventions:
Necessity is the mother of invention. When there is a need, we don't need to read patents. This is pretty much true. Many people can in fact come up with similar solutions (when generalized) when working mostly independently. This is true even when the problem is difficult (just peek inside a university classroom). It is not true for everything, but it is true for a great many things.
Patents are wrong solution to real problem:
We want to limit cases where a great invention is copied by a larger business who manages to keep most of the pie from what many would call the "inventors". That is an unfortunate situation, but patents are overkill. It is gathering too much power belonging to all members of society and putting it in too few hands despite that these hands are a very small part of the invention society, of the business society, of the other skills society. As implied above, this might be tolerable if few other inventors and businesses can and want to contribute (and maybe were contributing) around this particular invention, but the patent solution is generally overkill.
for the truth about trolls please see http://truereform.piausa.org
You say:
?Phelps indicates that Microsoft cannot go it alone in the world...then points to statistics that claim 42 percent of the world's IT people depend upon Microsoft technology. Microsoft apparently has done quite well going it alone.?
What we say is that even the largest companies such as Microsoft, with the largest R&D budgets in the world, can NO LONGER go it alone anymore or hold all the pieces of their technological future in their own hands anymore because in today?s open innovation environment, technology innovation has become much more widely dispersed and heterogeneous.
Where?s the contradiction in that?
You say:
?Phelps berates patent trolls and others for forcing Microsoft to pay hundreds of millions of dollars in licensing fees...but then goes on to explain how Microsoft's new IP strategy has his team on the road constantly signing up new licensees for patent royalties and other agreements.?
Nice bait and switch there between "royalties" and "other agreements." As we have indicated multiple times in the book, Microsoft's licensing income is a pittance compared to that of other large companies -- and probably less than 1% of what it is at IBM. The real reason for these licensing deals is to generate tangible business value through IP collaboration in new product development, etc.
What's more, in the first part of your review, even you noted that "[Phelps's] goal at Microsoft wasn't to generate cash through licensing." Now, if you don't believe that, then please cite evidence. But don't pretend that it's a stated fact that MS is raking in big licensing bucks when it's just not the case.
You say:
?If Microsoft's IP were needed to build such cooperative bridges, presumably more of these "partners" would be approaching Microsoft, rather than waiting for Microsoft's heavy knock on the door.?
What makes you think they don?t? We?ve signed over 500 collaboration deals with other firms, many of whom approached us -- as clearly indicated in the book.
You say:
?Phelps declares that the key point of his book is the "role that intellectual property can play in liberating previously untapped value in a company and opening up powerful new business opportunities." Unfortunately, he never explains why this new "collaboration imperative" is necessary, given that Microsoft's pre-patent offensive strategy netted it billions of dollars each quarter in free cash flow and a hugely impressive partner ecosystem.?
See the response above about the NEW distributed environment for technology development that now requires companies to collaborate.
Just to illustrate, our patent cross license and collaboration agreement with Nortel enabled us to jointly enter the unified communications space -- something neither of us could have done as effectively alone, given that Microsoft lacked enough telecom experience and Nortel lacked enough next-generation software expertise.
You say:
"In other words, the old Microsoft seemed to be doing quite well before Phelps made it an active patent tax collector. Will his new Microsoft fare as well?"
There you go again. The facts, repeatedly stated, are that Microsoft makes far less in patent royalties that most large IP holders around the world. In fact, it pays out orders of magnitude more than it ever earns in licensing income to license the IP of other firms.
It seems to us that there are many issues about which reasonable people might take issue with Microsoft.
Why then resort to attacking straw men in your review?
Signed,
Marshall Phelps & David Kline
There's a spot for editorial reviews, clearly marked. Customer reviews are supposed to be written by just that -- ordinary customers -- not journalists. And since we sent you the book gratis for editorial review, you can hardly portray yourself as an ordinary customer, now can you?
Its going to take years of consistancy and not look what we have done today aren't we nice.
- by rickrowland June 27, 2009 8:00 PM PDT
- I might say in addition I use 2 netbooks - one unix and one xp - the major change in computing has come - in addition to apple and now Pre - rr
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