November 10, 2004 6:55 AM PST

Microsoft to back customers in infringement cases

Borrowing a line from Allstate Insurance, Microsoft says it wants customers to know they are in good hands when they choose its software.

The software maker announced on Wednesday that it will indemnify nearly all its customers against any claims that their use of Microsoft software infringed on any intellectual-property claims. The company said the protection extends to current and older versions of its software, including its Windows operating system, Office desktop software and SQL Server database.

The company already offers unlimited protection to its volume license customers but is adding the indemnity for customers who buy its key products in other ways, such as from a computer maker or even off a retail shelf.

"When we looked at things, there was no reason not to provide that coverage to all those folks as well," said David Kaefer, director of intellectual-property licensing for Microsoft. The protection covers four main types of claims: patent, copyright, trade secret and trademark.

The protection extends to nearly all of Microsoft's products, with the main exception being embedded versions of Windows, largely because customers are able to modify the code.

Of course, it's not just altruism that motivates the software maker. The company plans to make indemnity a new plank in its "Get the Facts" campaign, which touts the advantages of Windows over Linux.

Chief Executive Steve Ballmer talked about indemnity as a key differentiator during Tuesday's shareholder meeting.

"We enhance the intellectual-property indemnifications we give our customers," Ballmer said at the meeting. "We can stand behind our products in a way that open source can't because they have no one standing behind them."

Kaefer said the argument is resonating with some customers who are concerned about liability. "More and more customers are realizing you don't get what you don?t pay for," he said.

Hewlett-Packard and Novell have offered liability protection to some Linux customers, but both Microsoft and analysts note that most of the protections from the Linux vendors are more limited.

Last year, Microsoft lifted a cap for its volume-licensing customers that had limited the dollar amount of protection Microsoft offered its customers against intellectual-property claims resulting from their use of Microsoft software.

Microsoft has been beefing up its own intellectual-property portfolio, a move that Kaefer said does make it easier for Microsoft to offer such protections.

"The reason we are able to do this at all is because we have done some of the things that you have to do earlier in the process," he said.

As part of the announcement, Microsoft highlighted two customers--Regal entertainment and ADC Telecommunications--that said that indemnity was key to their choice of Windows over Linux.

"We simply aren't interested in having to worry about potential legal risks of deploying Linux in this environment," ADC Telecommunications manager Jamey Anderson said in a statement.

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Smart Move
Smart move. Not only for marketing and sales, but to restore stability to the marketplace in the face of the patent wars. This helps the resellers who build over the MS core products and sell to the application markets. It is a show of maturity and good sense on the part of Microsoft.
Posted by (101 comments )
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The devils in the small print - LOOPHOLES
Even Microsoft's 2004 May 27th changes which apply only to customers under enterprise licensing contracts, which Microsoft claims grants greater immunity, contains many loop holes which greatly negate Microsoft's liability.

The section 6 clause contain exceptions:
[i] Our obligations will not apply to the extent that the claim or adverse final judgment is based on (i) specifications you provide to us for the service deliverables; (ii) code or materials provided by you as part of service deliverables; (iii) your running of the product, fix or service deliverables after we notify you to discontinue running due to such a claim; (iv) your combining the product, fix or service deliverables with a non-Microsoft product, data or business process; (v) damages attributable to the value of the use of a non-Microsoft product, data or business process; (vi) your altering the product, fix or service deliverables; (vii) your distribution of the product, fix or services deliverable to, or its use for the benefit of, any third party; (viii) your use of our trademark(s) without express written consent to do so; or (ix) for any trade secret claim, your acquiring a trade secret (a) through improper means; (b) under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (c) from a person (other than us or our affiliates) who owed to the party asserting the claim a duty to maintain the secrecy or limit the use of the trade secret. You will reimburse us for any costs or damages that result from these actions.[/i]

Loophole #1 "(ii) code or materials provided by you as part of service deliverables" This would effectively still indemnify Microsoft against most of the Timeline Inc patent claims, as it is the developer/end user's code ( even visual basic code ) which would be in violation of Timeline's patent claims.

Microsoft licensed Database/Datawarehouse technology from Timeline Inc, but unlike Oracle and other database vendors, Microsoft chose a license that did not grant Microsoft's customers the right to fully use that technology.
<a class="jive-link-external" href="http://www.theregister.co.uk/2003/02/20/sql_server_developers_face_huge/" target="_newWindow">http://www.theregister.co.uk/2003/02/20/sql_server_developers_face_huge/</a>
Timeline has extended it's patent claims to cover many featured widely used by developers, both ISV and in house.
<a class="jive-link-external" href="http://www.winnetmag.com/Article/ArticleID/41479/41479.html" target="_newWindow">http://www.winnetmag.com/Article/ArticleID/41479/41479.html</a>

Timeline Inc has won a US Washington Court of Appeal judgment against Microsoft for the right to sue Microsoft's customers, and subsequently sued Cognos. On February 13, 2004, Cognos settled at cost to Cognos totaling $1.75 million.
<a class="jive-link-external" href="http://www.timeline.com/021304PR1.htm" target="_newWindow">http://www.timeline.com/021304PR1.htm</a>

Microsoft has a history of licensing third party code and patents in such a manner that still leaves developers and users exposed to IP threats. Even going back to the LZH/GIF Unisys patents
<a class="jive-link-external" href="http://web.archive.org/web/20020806173115/http://www.unisys.com/about__unisys/lzw/" target="_newWindow">http://web.archive.org/web/20020806173115/http://www.unisys.com/about__unisys/lzw/</a>

[i] "Microsoft Corporation obtained a license under the above Unisys LZW patents in September, 1996. Microsoft's license does NOT extend to software developers or third parties who use Microsoft toolkit, language, development or operating system products to provide GIF read/write and/or any other LZW capabilities in their own products(e.g., by way of DLLs and APIs)."[/i]

Other Loopholes include (v) and (vii), but the killer is (iv), which disclaims any
indemnity for users who wish to input any data. (ix)(a), also since literally it excludes trade secret liability for improper action on
anyone's part, including MS.

Does Microsoft's new agreement include such loopholes? Anyone have a link handy?
Posted by David Mohring (22 comments )
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