Do Windows users have an "undisclosed balance-sheet liability" too?

Do Windows users have an "undisclosed balance-sheet liability" too?

Summary: Back in November, Steve Balmer claimed Linux users had an "undisclosed balance-sheet liability" because, he said, Linux was taking advantage of Microsoft innovations and patents. Perhaps Mr. Balmer should be more worried about Windows users. Could they face the same kind of liability, only on a much grander scale?

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TOPICS: Patents
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Back in November, Steve Ballmer claimed that "every Linux customer has an undisclosed balance-sheet liability" because, he said, Linux was taking advantage of Microsoft innovations and patents. Perhaps Mr. Ballmer should be more worried about Windows users, who might face the same kind of liability under this logic.

Ballmer's unspoken threat was that if Microsoft so chose, it could sue Linux users or distributors like Novell and RedHat for patent infringement, and if it prevailed in court, could be awarded a possibly large amount of money (hence the "balance-sheet liability" part). As you know, MS believes that Novell paid it for the right to tell its customers that SUSE Linux was appropriately covered, i.e., that Novell had licensed those patents (whatever they might be) and thus was not subject to being sued. Novell may have other ideas about what they were paying for, but that's beside the point.

In a blog today, John Carroll says we should all stop bashing the Microsoft/Novell agreement because "Microsoft probably does own a few patents that intersect with technology found in Linux". Despite many calls from the community, Microsoft has not come forward with a list of claimed infringements (does this remind anybody of SCO?). So does John have insider information about these patents? No, his argument is:

What are the odds that a company that spends billions of dollars writing an operating system used by most computer users in the world does NOT own patents that are relevant to Linux? Remember that study back in 2004 that claimed to find 283 potential patent risks in the Linux kernel? That list was hardly definitive, as who knows how a judge will choose to interpret the text of a patent, and besides, that's just the kernel. Add on the entire stack of software that makes up a typical Linux distribution, and you get potential risk galore.

It's hard to argue with this, given the size of a modern operating system and the thousands of vague software patents that could, with a good lawyer, be interpreted to cover everything from cascading menus to french toast. But look at this next part. John continues, (my emphasis added)

The odds are high that most software potentially trips over a patent somewhere... Microsoft products included. I doubt Microsoft could have predicted the risk posed by the EOLAS patent, a patent that governed the ability to automatically use binary extensions in a web page.

John goes on to ask "What is Linux going to do about it?". I think the real question is, "What is Microsoft going to do about it?". Applying the logic of Ballmer and Carroll to Microsoft Vista one could say:

"What are the odds that companies like IBM, HP, and Oracle (just to name a few) that spend billions of dollars writing operating systems and other software do NOT own patents that are relevant to Vista? Add on the entire stack of software that makes up a typical Windows distribution, and you get potential risk galore."

So who is going to indemnify Windows users against all those infringements which, according to the statistics, must exist in Vista? Since Microsoft believes that that folks like Novell and Red Hat owe it money for using its innovations, then it stands to reason that Microsoft should owe others like IBM, HP, Bell Labs, Apple, and many many others for the innovations it has made its billions from. The potential "balance-sheet liability" for users of Microsoft Windows would be unprecedented! What is Microsoft going to do about it?

I'm making this point not because I seriously think Windows users are at risk of getting sued, any more than I think Linux users are at risk of getting sued. I'm making it because I think we're painting ourselves into a corner here. Who can tell what infringes what any more? Also, I wonder if we should even care. Patents were originally created to protect the little guy who invents a gizmo, tries to sell it, but sees another company come along, copy the gizmo, and make all the money selling their version. But today's application of patents to software is completely warped and twisted from that noble idea of fairness and reward for hard work.

John says that "getting rid of [software] patents is not a solution". In my opinion, that is pretty sad. I believe we're wasting our time and talents on paper problems that we invented ourselves. It's like all the obscure tax rules we have to deal with every year - a whole industry of tax accountants and lawyers and preparation software and books and classes has grown up around addressing a problem that doesn't have to exist. Billions of hours of productivity could be regained by going to a simple tax code, possibly an automatic flat tax. Likewise, billions could be saved by dumping this self-induced group nightmare of a patent system.

Countries that see what we're doing and avoid it will be at a competitive advantage. While we sit around gazing at our navels, they will be free to let developers develop, collaborate, and innovate in peace like God and Richard Stallman intended. Think about that during your next "IP due diligence" meeting. Or next year when tax time rolls around.

Topic: Patents

Ed Burnette

About Ed Burnette

Ed Burnette is a software industry veteran with more than 25 years of experience as a programmer, author, and speaker. He has written numerous technical articles and books, most recently "Hello, Android: Introducing Google's Mobile Development Platform" from the Pragmatic Programmers.

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118 comments
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  • I agree

    When I say "getting rid of software patents is not an option," I'm speaking from a pragmatic standpoint. I'm no fan of software patents, and I've held that belief for quite awhile (http://news.zdnet.com/2100-9595_22-5076320.html). Reform MAY be possible, but I doubt that we can put the software patent genie back in the bottle given the vested interests that will spend LOTS of money to prevent that from happening.

    Oracle and Sun probably have patents of relevance to Microsoft, but they know that Microsoft would roll over them with a patent-armed legal steamroller should they start to get aggressive with their patent library. Further, Microsoft has signed agreements with Sun relating to IP issues.

    The problem for open source - and Linux - is that the open source community is not a single group that has exclusive rights to distribute Linux. If so, Microsoft could sign an agreement with them and be done with it. Since they aren't, Microsoft has to deal with multiple companies each of which may have some patents that could affect Microsoft's business.
    John Carroll
    • Signing agreements with multiple company is business as usual

      "The problem for open source - and Linux - is that the open source community is not a single group that has exclusive rights to distribute Linux. If so, Microsoft could sign an agreement with them and be done with it. Since they aren't, Microsoft has to deal with multiple companies each of which may have some patents that could affect Microsoft's business."

      John, lets for a moment concentrate on Windows. As far as I know, Microsoft is (or was) paying Apple for mouse technology, MPEG4 group for MPEG4 technology etc etc and etc. My point is Microsoft <b>is</b> already paying multiple companies for patents right already. So why is paying different companies involved in Linux for IP rights different?
      sinleeh9
    • Making a deal with the OS community

      That's what patent promises are for John. For example, the Open Specification Promise (http://www.microsoft.com/interop/osp/default.mspx) is a nice model. It says that MS will not assert any claims on the covered specifications *except* for parties that try to assert claims against Microsoft. We won't sue if you don't. Microsoft didn't have to track down all possible implementors, it just made a blanket statement that offers everyone the same deal. And this without giving up any tools it might need to defend itself against claims by people that don't want to play by these rules.

      Why couldn't MS do the same for all patents that open source software might be infringing? If worded the right way then MS could even gain some protection from patents that Vista might be infringing.
      Ed Burnette
      • How?

        How would signing an agreement with the open source community prevent, say, Novell from suing them once the risk to their Linux business is removed by the promise not to sue?

        Novell, Redhat, etc. aren't bound by that. Maybe the right solution is get them all on board in a mutual "promise not to sue," but given that anyone can distribute Linux, that's a rather leaky compact.

        Reserving the right to use patents related to Linux is defense against those who aren't part of the compact.
        John Carroll
    • Well, yeah

      [i]The problem for open source - and Linux - is that the open source community is not a single group that has exclusive rights to distribute Linux. If so, Microsoft could sign an agreement with them and be done with it.[/i]

      On the other hand, that lack of a defined target is the only reason they're still around.
      Yagotta B. Kidding
  • The difference is ... Microsoft is rich and Linux is poor

    I do not think it is about "balance-sheet liability" but we have to read between the lines. It is all who is the richer cousin. Read between the lines will tell you what Microsoft, or big companies for that matter, is saying is that they have the financial means to shield you, their customers, from expensive lawsuit which other, smaller or poorer entity cannot.

    This is part of the "unintended" consequences of IP laws which only distinguish between IP holders and others. IP holder can choose to sue whoever they like, although so far, with a few exception, they are suing other vendors. The option of suing customers of other vendors is open.
    sinleeh9
    • That's what SCO thought too

      when it acepted funds arranged by Microsoft to assalt Linux.

      What they (and you apparently) fail to grasp, is by attacking Linux they end up attacking the FOSS community.

      Do you really think Corporations with invested interest in Linux like IBM, and Novel will sit on the side lines?

      Microsoft has a very shady past when it comes to imapproprately used IP (unless you've been sleeping under a rock) everybody knows this. "IF" it gets to the point where Microsoft does attack Linux (or Linux users). It's not going to be good thing for users of either camp. It will be bloody, and I do think that Microsoft (as it is now) would be severly wounded.
      bitfuzzy
    • Major Linux vendors shield their customers too

      Supposing I believed there was any real risk, what's the difference between the protection you say Microsoft provides its Windows users, and, say, Red Hat and Oracle provide RHEL users?
      Ed Burnette
    • Yes Microsoft is rich

      but that doesnt help them. Who would you rather sue, Sombody that can't pay you if you win, or sombody with deep pockets?
      The best way to get money from Microsoft would most likely be by suing their customers, the custormers will not be able to pay, but having their customers sued would be a PR nightmare for Microsoft. After all if you can get sued using windows you paid hard earned money for, why not use Linux instead.

      This means that Microsoft most likely would try to make some kind of agreement to protect their customers. If I remember correctly, this have allready been tested in the Timeline case where SQL Server developers were sued.
      uno9
      • And get sued again

        when Microsoft decides to sue Linux users in response, a week after your entire network has been switched...

        I understand patents are there to protect innovative ideas, but some people seem to take it too far. Fair go Microsoft, there's enough money in your war chest!! surely you don't need to start suing Linux users??
        Sparhawk_z
  • Who dares taking advantage of Microsoft?

    Taking advantage of Microsoft's innovations...?

    We forget who took advantage of the innovations of WordPerfect

    We forget who took advantage of the innovations of NetScape

    We forget who took advantage of the innovations of Lotus

    etc, etc, etc....
    databaseben
    • Taking advantage of Microsoft

      ... the question is: who does not, if they have a change ? remember that Microsoft was victim to a couple of patent suits ...
      emilper
  • Software patents like nuclear warheads

    Countries spend billions developing them and millions maintaining them. Their only real value is mutually assured destruction.

    Our whole patent system is broken and software patents are only the most obvious symptom of a system that is rotten to the core. It doesn't serve anyone well...except maybe patent trolls. Companies looking to make something for nothing and dirt bags like SCO. Nice company.
    Chad_z
    • Sometimes

      The MAD concept worked as long as all the players were large and had a lot to lose. However once small states, or stateless entities get these weapons it falls apart. An analogy could be made with patent holding firms.
      Ed Burnette
      • Excellent Analogy!

        I hadn't thought of it before, like that. Once companies thought of patents as property, and be able to gain them without any real effort. ie Patent companies, loosely worded patents that aren't checked [only can be disputed in a court]. The system has gone downhill.
        I can't see it changing, because a lot of the US international asset register is patents.
        I never cease to be amazed that if a US company has a patent then it's a good business move, however when a foreign company has a patent that affects the US, then they are demons from Hades!
        I am Gorby
  • Excellent point here...

    "[B]It's like all the obscure tax rules we have to deal with every year - a whole industry of tax accountants and lawyers and preparation software and books and classes has grown up around addressing a problem that doesn't have to exist. Billions of hours of productivity could be regained by going to a simple tax code, possibly an automatic flat tax. Likewise, billions could be saved by dumping this self-induced group nightmare of a patent system.[/B]"

    And pretty much on target. Many of the laws in this nation are made not soley for the benefit of the greater numbers of society, but more for the financial gain of the lawyers that draft them and push them into the political arena for ratification.

    I see software patents as pretty much the same thing. They really serve no benefit to the masses and in fact make the ability of competing companies to get fresh ideas or better solutions out the door at a reasonable price more difficult. And end users, they don't give a backside of a southbound pachyderm about patents. They have a solution they want and that's it.

    I said it once and I will say it again. If Microsoft were stupid enough to start a patent war, they and every other major player in the industry would be annhiliated. The only winners would be the lawyers. Open source would still be around and probably the only real survivor, because all the code and the fact there really is no financial base to sue. And I don't care who you are, you cannot sue the world and expect to win or get everyone.

    There are nations around the world that do not recognize our patent system. And why should they? They have their own systems in place. And they are not the United States.

    No, the losers would be the American people and business. All Microsoft is doing is trying to pull another "Cuban missile crisis". I read a book a few years back, written by a retired Soviet general. And in this book he covered just how much of the Soviet threat was slight of hand and all show. Amazingly if I remember correctly, of the displayed forces only 30-40% were combat effective or even functional. And this was borne out in Afghanistan where they were soundly beaten.

    Bottom line, the individual users really don't have much to worry about. And should Microsoft go international to attempt to enforce these stupid patents, well you can kiss our overseas economy goodbye as well. Don't be a illusioned to think they could possibly win. The rest of the world is already ticked off at us as it is. This would just be one more reason to implement financial sanctions on us.

    When you are the biggest, you fall the hardest. ]:)
    Linux User 147560
    • In an IP economy...

      ... the "greater numbers of society" receive an essential benefit from patents.

      IP is the largest class of assets in the US and provides 40% of each year's GDP. When you think about patents and copyrights, think about employment and the attendant benefits.

      So protecting IP is not the result of vested interest or some kind of lawyers' game. It's the real economy.

      Internationally, that means IP must be recognized in other countries.

      And on patent reform, any effort made will be to make the system more effective. This isn't ideology; it's the way people make money.
      Anton Philidor
      • Diminishing returns

        [i]In an IP economy the "greater numbers of society" receive an essential benefit from patents.[/i]

        So more patents and longer copyrights are better for everyone, no limit? A lot of Nobel laureate economists (and we're talking Chicago School here, no socialists allowed) rather vehemently disagree, to the extent of filing [i]amicus curia[/i] briefs in recent patent cases.

        [i]Internationally, that means IP must be recognized in other countries.[/i]

        Or what? We'll nuke them into agreeing?

        The USA has a broken patent system -- even the biggest patentholders (think IBM) agree on that much. It makes sense for us to [i]try[/i] to cripple other countries by exporting our handicaps, but what does it say about us that we actually think they're [b]all[/b] going to be stupid enough to kneecap their own economies that way?
        Yagotta B. Kidding
      • 40% of GDP?

        How did you arrive at that number?
        Ed Burnette
        • Or 50% or 70% of GDP from IP.

          The percentage varies with the definition and interests of the writer. Here, for instance, is the first sentence of a book by authors who encourage turning IP into cash:


          Today, intellectual property (IP) underpins between 50 and 70 per cent of a country's private sector gross domestic product (GDP), so it is often the difference between commercial success and failure.

          from

          A Handbook Of Intellectual Property Management: Protecting, developing and exploiting your IP assets
          by Adam Jolly (Editor), Jeremy Philpott (Editor)


          I believe my 40% came from a ZDNet article.


          Whatever the definition, that IP is a substantial part of the US economy is, I think, undeniable.
          Anton Philidor