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Legal wrestling to stay ahead

ZDNet Asia looks back at some of the thrilling legal and verbal tussles exchanged between technology companies in 2008.
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Written by Sol E. Solomon on

The battle cries rang loud in 2008.

One of the highlights in 2008 centered on Yahoo's efforts to fight off Microsoft's hostile takeover bid for the Internet search company. The software giant itself was busy making a case for its OOXML (Office Open XML) to be accepted as an open document standard.

A Mac clone also surfaced, leading Apple to sue--and be countersued by the clone's maker, Psystar. Toward the year's end, the music and online video industries hit a bump when Warner music videos were taken off YouTube.

And an interesting debate ensued after the CEO of a software company said the SaaS (software-as-a-service) model will not be relevant in two years' time.

A bid that wasn't Yahoo!
On Feb. 1, Microsoft made a hostile bid of US$44.6 billion in cash and stocks for Yahoo. The US$31-a-share offer represented a 62 percent premium over Yahoo's closing price on the day before the offer.

The deal, which was set to be Microsoft's largest acquisition, came as both Microsoft and Yahoo were struggling to compete against rival Google.

Announcing the offer, Microsoft CEO Steve Ballmer said in a statement: "We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market."

In April, following Yahoo's rejection of its offer, Microsoft issued an ultimatum, giving the Internet search company three weeks to enter formal merger negotiations and conclude a deal.

But after talks broke down again, Microsoft indicated in June that it was no longer interested in Yahoo.

However, a few weeks later, intense shareholder pressure forced Yahoo CEO Jerry Yang and its board to make stronger overtures toward Microsoft about resuming negotiations, sources said. This time, though, it was Ballmer who walked away.

Finally, in November, Ballmer made it clear Microsoft would not return with a new bid for Yahoo. "We are done with all acquisition discussions with Yahoo. We did our best. We've moved on."

But the Microsoft executive reiterated that the idea of a search partnership remains "an interesting possibility". "There's no active discussion on that front, but we'd be very open to it," Ballmer said.

In November, Yahoo announced it would replace the company's co-founder Yang as chief executive.

Road to an open standard
In the first quarter of last year, Microsoft was also embroiled in another battle as it campaigned for its OOXML format to win support at a crucial International Organization for Standardization (ISO) ballot in February.

An initial ballot in September 2007 saw Microsoft failing to gain ISO approval for OOXML. Several countries that voted against OOXML did so with qualifications, giving Microsoft an opportunity to address concerns those members had before the final vote was due to be taken.

The software giant then left no stone unturned in its bid to ensure OOXML would get an ISO approval, carrying out a flurry of activities that included regular conference calls with national standards bodies, and attempts to debunk claims made against OOXML by supporters of rival document standard OpenDocument Format (ODF).

Ahead of the ISO vote, Microsoft announced in February it would make application programming interfaces (APIs) for Office and Windows Server available for free.

The software vendor also assured open source developers it would not sue those who create non-commercial software based on Microsoft's protocols.

But, lawyers for the Software Freedom Law Center (SFLC) said the legal terms covering OOXML document formats pose patent risks to free and open source software developers.

Specifically, the SFLC concluded that the patent protections only apply to current versions of the specifications; future versions could not be covered.

It added that Microsoft's Open Specification Promise (OSP), touted to protect projects from patent risk, was not compatible with the General Public License (GPL), which covers thousands of free and open source products.

Allaying these concerns, Microsoft in March assured coders that its OSP will apply to future versions of the company's document format.

Oliver Bell, Microsoft's Asia-Pacific regional technology officer, wrote in his blog: "As long as Microsoft participates in the revision process to completion, Microsoft irrevocably commits to apply the OSP to that future version of IS29500 [the OOXML specification]."

In April, Microsoft's efforts paid off when OOXML was ratified as an ISO standard.

More choice is good?
Psystar, a small IT consulting company in Florida serving small and midsize businesses, unveiled a computer in April that gives Mac users a cheaper alternative.

Its Mac clone, the Open Computer, features a 2.2GHz Intel Core 2 Duo CPU, 2GB of DDR 2 memory, 250GB hard disk drive, multi-format DVD writer and integrated graphics, and is priced at US$399. Buying a copy of the Leopard Mac OS adds US$150 to the price. In comparison, Mac Mini, Apple's lowest-cost model at the time of the Open Computer's release, comes with a price tag of US$599 and features less powerful hardware than the clone.

But in July, Apple sued Psystar for copyright infringement, breach of contract and trademark infringement, among other things.

In response, Psystar filed a countersuit that alleged anticompetitive business practices. The 54-page complaint charged Apple with restraint of trade, unfair competition and other violations of antitrust law.

Psystar argued that its Open Computer product is shipped with a fully licensed, unmodified copy of Mac OS X, and that the company had simply "leveraged open source-licensed code including Apple's OS" to enable a PC to run the Mac operating system.

Rudy Pedraza, Psystar's owner, said his company is "allowing more people to take advantage of a great operating system that Apple has created at a more accessible cost than the pricey Mac".

In November, a U.S. federal judge tossed out Psystar's antitrust lawsuit against Apple, according to court documents sighted by AppleInsider.

When the music video stops playing
It was just before Christmas when negotiations between Warner Music Group and YouTube, to renew the licensing agreement for the record label's music videos, broke down.

Warner, the third-largest record label in the United States, then removed related clips from the video site.

The impasse came at a time when all four major global labels, including Universal Music Group, Sony Music and EMI, were renegotiating their licensing deals with YouTube.

The vast majority of music clips viewed on YouTube come from the two largest recording companies: Universal and Sony BMG. Universal is the most-watched YouTube channel of all time with more than 3 billion views. Sony BMG is a distant second with 491 million views. Warner's 278 million views is good enough only for 11th place.

According to initial reports, Warner said: "We are working actively to find a resolution with YouTube that would enable the return of our artists' content to the site. Until then, we simply cannot accept terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide."

However, according to a subsequent report, two high-level sources with knowledge of the negotiations said it was YouTube that began removing videos from its site after Warner made an "11th-hour demand" for better financial terms.

Under two years left for SaaS?
The chief executive officer of software company Lawson, told ZDNet Asia earlier last year that software-as-a-service (SaaS) has a two-year expiry date. Harry Debes said people will realize that the hype over SaaS companies has been overblown within two years.

But others in the industry disagreed, noting that SaaS is as profitable to software providers as the traditional on-premise model.

Hewlett-Packard Asia-Pacific's SaaS director, Vinita Ananth, said the software component of the SaaS model provides HP with the same level of margins as software does through the traditional delivery model. The service component also brings in further profit on top of selling the software, Ananth said.

John Girard, CEO of Web content management provider Clickability, added: "As long as the business model has been engineered correctly, nothing stops a SaaS business from generating an operating profit from its customers within the first year of doing business with them."

One issue Lawson's Debes asserted was the lack of sophisticated SaaS products. However, HP Software's head of marketing for Asia-Pacific, Darryl Dickens, said SaaS is not for the simple, out-of-the-box software.

"[If it were so,] you wouldn't need SaaS," Dickens said, noting that customers see SaaS as a way to kick start a "complex" deployment.






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