HolidayBuyer's Guide

Week in review: Microsoft's patent offensive

Company identifies infringed-on patents, invites infringers to strike licensing deals. Not many takers, so far.

Microsoft is in another software patent fight, and this time, it's doing the saber rattling.

The software company is claiming that free and open-source software violates 235 of its patents. In an interview with Fortune, Microsoft top lawyer Brad Smith alleges that the Linux kernel violates 42 Microsoft patents, while its user interface and other design elements infringe on a further 65. OpenOffice.org is accused of infringing 45, along with 83 more in other free and open-source programs, according to Fortune.

It is not entirely clear how Microsoft might proceed in enforcing these patents, but the company has been encouraging large tech companies that depend on Linux to ink patent deals, starting with its controversial pact with Novell last November. Microsoft has also cited Linux protection playing a role in recent patent swap deals with Samsung Electronics and Fuji Xerox. It has also had discussions but not reached a deal with open-source company Red Hat.

Microsoft could have several motives for rattling its patent saber: slowing down open-source rivals, raising fears of open-source legal risks among customers and winning payment for technology the company believes it deserves from a group that's generally been unwilling to pony up.

But according to Horacio Gutierrez, vice president of intellectual property and licensing at Microsoft, the company's move is designed to bring parties to the negotiating table that currently aren't there.

The software maker's more aggressive attempt to persuade open-source software companies to license its know-how follows some frosty responses to Microsoft's controversial patent deal with Novell last year. As an example of what it would like to see, Microsoft points primarily to the Novell patent deal struck in November, in which Microsoft is selling coupons that permit use of Novell's Suse Linux Enterprise Server along with the assurance that Microsoft won't assert its patents against customers.

But industry experts said the declaration's implicit demand--that companies with open-source software should figure out what Microsoft patents they're infringing and come to the negotiating table--is unrealistic at best. In general, searching for potential software patent violations isn't practical, given the number, breadth and opacity of patents in the United States.

In fact, searching for potential patent problems can actually leave a company financially exposed: if a lawsuit concludes a patent was infringed, a company or individual who knew about the potential infringement must pay triple the financial damages that would be paid by an unknowing infringer.

The developments had CNET News.com readers railing against Microsoft, open-source software and even the current state of the U.S. patent system. But some readers echoed the frustration brought on by the accusations.

"If every software developer had to review every patent on which he/she might be infringing before writing or releasing code, it would no longer be possible to develop software in the U.S.," .

Meanwhile, the U.S. Congress took a small step toward revising what many large computer industry companies charge is a broken patent system. A House of Representatives subcommittee overseeing intellectual-property law approved by voice vote the so-called Patent Reform Act. The bill's sponsors and the Silicon Valley set have hailed the measure as an effective approach to reducing excessive litigation, improving patent quality and discouraging inflated licensing agreements.

Microsoft this week also raised its stake in the advertising industry. The company on Friday announced that it would pay $6 billion to acquire digital-marketing company Aquantive to help it support more advanced advertising products and technologies in media planning, video-on-demand and Internet television.

Earlier this week, ad giant WPP Group said it would spend $649 million to buy digital marketer 24/7 Real Media, in which Microsoft was rumored to be interested. Last month, Google announced plans to acquire digital-advertising company DoubleClick for $3.1 billion, and Yahoo followed that up with its own acquisition announcement--a $680 million deal for Right Media.

New vision on patents
If Microsoft is worried about taking a hit on software sales, you wouldn't know it by the way the company heralded the sales performance of its new operating system.

Microsoft has sold almost 40 million copies of Windows Vista so far, Bill Gates told a crowd of hardware developers. That's more than the total install base of Windows' largest competitors, Gates quipped as he began his keynote at the Windows Hardware and Engineering Conference (WinHEC).

Confirming news already leaked on its Web site, Microsoft also announced Windows Server 2008 as the official name of Windows Server "Longhorn," which is due to be finalized later this year. In announcing the Windows Server 2008 moniker, Gates poked a little fun at his company's penchant for less-than-dynamic product names.

Microsoft said the follow-on to its Windows Server 2008 operating system will be an interim release due to arrive in 2009. The software maker offered few details on Windows Server 2008 R2, other than to say the interim update will be offered only in a 64-bit version.

"We're thinking about what we'll do next," Windows Server general manager Bill Laing said. The plan sticks to one laid out by server and tools unit boss Bob Muglia some time ago that calls for the server unit to release a major version of its operating system every four years and a more minor release every two years.

The initial Windows Server 2008 release, due to be finalized late this year, will be offered in 32-bit and 64-bit versions, though Laing said it will be the last server operating system to come in a 32-bit version.

Although businesses will have the option to install only certain pieces of Windows Server 2008, Microsoft isn't likely to sell the operating system in a piecemeal fashion. The company has been touting the ability of the new server OS to be configured for certain functions, or "roles," such as Web server or directory server. Such an approach has a number of benefits, chief among them being a reduced footprint for potential attacks.

But limiting a server to a particular role isn't likely to result in a smaller bill from Microsoft. In an interview, Laing said Microsoft expects to sell Windows Server 2008 in much the same way it has previous releases, with the pricing varying mainly on the type of business use.

The song remains to blame
Amazon.com plans to launch a digital-music store later this year, featuring music downloads without copyright restrictions. The e-tailer plans to offer songs from more than 12,000 record labels in the MP3 format, without the controversial digital rights management (DRM) software. Users will be able to play their music on virtually any device, including PCs, iPods, Zunes and Zens, as well as burn the songs onto CDs for personal use.

In making the announcement, Amazon also noted that it has teamed up with EMI Music to offer songs from its digital catalog. As part of its digital-music store, Amazon will offer EMI's new, premium DRM-free downloads. Amazon said it would announce pricing details closer to the launch date.

The music industry--struggling with one of its worst-ever sales slumps--will be closely watching how Amazon and Apple, which also offers DRM-free downloads, fare. If they are successful in moving a lot of songs, then that might convince the other three major record companies to strip DRM from their music. If sales are lackluster, then that might spur the labels to wrap songs in even tighter copy protection, industry insiders say.

Sales of traditional CDs are in a free fall. The industry reported a 17 percent decline in album sales so far this year. Ipsos Insight, a Chicago-based market research firm, issued a report recently that showed a 15 percent drop from 2002 in the number of U.S. consumers who had bought a CD within the past six months.

Meanwhile, some of the staunchest advocates for stricter copyright laws have formed a new alliance designed to pressure Congress into preserving stronger intellectual-property rights. The Copyright Alliance consists of 29 national organizations and companies that purport to represent 11 million workers in copyright-related industries. Those members include the Recording Industry Association of America, the Association of American Publishers, the Motion Picture Association of America, Microsoft, Viacom and Walt Disney.

Also of note
Dell has been accused of making false promises to customers to drive sales, according to a lawsuit filed by New York Attorney General Andrew Cuomo...The filing comes as Dell to support a major push in commercial reseller and retail channels...In its biggest revamp ever to its home page, Google launched its version of universal search, a redesign that will list in one place search results from a variety of media...Apple has updated its MacBook laptops with faster processors, more memory and more hard-drive space...Motorola introduced the follow-up to the popular ultrathin Razr--an even thinner phone called the Razr2.

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