Businesses 'paying patent tax' to Microsoft

Businesses 'paying patent tax' to Microsoft

Summary: With Microsoft's legal bills amounting to £2bn over three years, this translates to £10 for every user of its software, says the Software Freedom Law Center

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Businesses are paying a "patent tax" to Microsoft of $21.50 (£10.74) per user, according to the Software Freedom Law Center.

The Software Freedom Law Center (SFLC), whose directors include the general counsels for the Free Software Foundation and the Open Source Development Labs, say users are in effect paying the sum to Microsoft because of its large legal bills.

In the last three years, Microsoft has paid out more than $4bn (£2bn) to plaintiffs claiming that Microsoft's Windows and Office products infringed their patents, says the SFLC. Between April 2004 and March 2007, Microsoft paid settlements and court awards of $1.25bn to Sun, $536m to Novell and $1.52bn to Alcatel-Lucent, among others.

Added to these patent payouts are legal fees Microsoft has racked up defending those cases. Brad Smith, Microsoft's general counsel, said in 2005 that the company typically spends close to $100m annually to defend against an average of 35 to 40 patent lawsuits simultaneously.

"You're paying a hidden tax of well over $20 that Microsoft has had to pay to other patent holders," said the SFLC in a paper entitled Windows vs Linux — The Patent Tax. "This is true whether you bought your copy of Windows on CD or pre-installed on a laptop, desktop, or server machine."

The paper says that to recoup these costs, Microsoft charges users a "patent tax". They calculated the figure of $21.50 by dividing $4bn by Microsoft's sales estimates for the period 2004-2010.

The SFLC said this number is probably higher for licensed Windows users in Europe, because they pay more for their Windows licences.

Topics: Apps, Software Development

Tom Espiner

About Tom Espiner

Tom is a technology reporter for ZDNet.com. He covers the security beat, writing about everything from hacking and cybercrime to threats and mitigation. He also focuses on open source and emerging technologies, all the while trying to cut through greenwash.

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  • just a small piece of the pie

    This 'patent tax' is nothing but passing on the bill (due to business practices) to ones own customers.

    Just as the, if you will, 'PR tax', which basically is about passing on the bill for making sure the brand name Microsoft is everywhere to be found. Somehow plenty of people think that the way something is presented tells something about the actual product presented. Plenty of US elections have proven them wrong already but they still stick to the idea nonetheless. Same principle as the washing soaps. You have the product that's on all the TV commercials and road shows and comes in a beautiful box. Or you can get the exact same product for less then half the price, just not in a flashy box.

    No, if you want to talk 'tax' then why not the famous 'Microsoft tax'. Or better worded, 'monopoly tax', because that's the only way someone could get away with it for so long without a single consumer organization or politician even raising a finger in a way that makes a difference.

    Mind you, 'monopoly tax', is not a Microsoft exclusive. 'monopoly tax' (or, more often, 'cartel tax') in reality is used wherever someone can. Or, better worded, is allowed to. Because, at least on paper, there should be organizations out there protecting the average consumer from such 'monopoly taxes'.
    arthur-b@...