October 24, 2007
It’s Not Microsoft’s FUD
Russ Nelson complains that Microsoft’s patent claims about the 235 patents that Linux allegedly infringes are just FUD.
Well, yes. That is how patents work. The value of a patent is in convincing people that what they are building may be interpreted by the court as infringing a patent. The benefit is that these people, if sufficiently convinced, will pay exorbitant amounts of money to the patent holder.
But in order to leverage this, patents - especially software patents - are made so deliberately indistinct that it takes many weeks of examination by experts to determine whether product A is likely to infringe on patent B. In the end, you still don’t know. The most critical parts of the equation are which product, which patent, which court, which lawyers, and which judge.
See, in the ninth circuit, Microsoft’s patent #178 may stand up in an infringement claim against some product - while in the fifth, it may only stand up when two of the seven judges are making the ruling, and even then one of them may only lend credence to an argument that only one specific Microsoft lawyer can productively make. So in the fifth circuit, Microsoft doesn’t want patent #178 tested against that product, because if they get the wrong judge or their lawyer gets sick on the wrong day, they lose. And once you win or lose a patent case, you’re pretty much done. Most judges won’t reverse a ruling without massive public outcry, which means Microsoft doesn’t get a second chance… but the open source world very well might.
There are no winners in patent cases. A patent has the greatest value when nobody is entirely sure how applicable it is. The practical reality is that FUD is the only way patents work at all. If I can make you worry about your product infringing my patent, you may pay me money - even if I know for a fact that no judge would ever take your product off the market. After all, if I want you to pay me $150,000 a year to sell your product, and the alternative is to spend ten times as much money hiring lawyers and fighting a court injunction against selling that product - win or lose - a product with a five to seven year life span is simply not worth that investment. Your business is better off just paying the licensing.
This doesn’t really work in the open source world, because the “business” has no revenue and sells no product and you can’t make people take it off the market. You can’t issue an injunction to put the genie back in the bottle. The legal system simply has no teeth against individuals on the internet. But if you have a massive business that makes millions of dollars distributing open source software… well, you’re a business, and you can be heavily damaged by a legal battle. So any patent holder can walk up to you and say what amounts to “Nice business you got here… be a shame if anything were to happen to it.”
The immediate response you should have is that this is a really shitty thing to do and nobody should be doing it. And you’re right. The problem is that as a patent holder, you have to do it, and as an innovator, you have to patent. If you don’t patent, someone will just file a patent of their own - $1,500 will do it - and come do that to you. And once you patent, if you don’t actively enforce your patent - “nice business you got here” - you can lose it. Once you’ve lost the patent, all the people who are paying you for licenses don’t have to pay you anymore. And when you do the math… $1,500 to get a patent or several million to fight one… the smart business decision is to get patents, because they’re effectively a license to print money. “Hey, I could ruin your business, or you could pay me 15% of your revenue.” What kind of decision is that? Who would choose to be ruined? So if you have a patent and thirty people each pay you $150,000 a year to license it, that’s $45 million a year. People are paying you $45 million annually to walk up to other people and say “nice business you got here”.
See, the problem isn’t Microsoft. It’s the patent system. We need to fix the patent system and put the FUD back where it belongs: on the patent holder. You need to fear the repercussions if your patent is retarded. It should cost you every dime you make from the licensing and more. All the problems Russ cites with the patent claims are not unique to Microsoft’s approach, they are inherent to any patent licensing pitch, because there is simply no downside. If Microsoft’s patent is overturned tomorrow, they don’t have to pay a single dime, and they don’t have to return any license fees they’ve already collected. There is honestly no liability involved in trying to collect more fees.
If they’re asking you to pay, you’re playing Russian roulette: Microsoft can at any time select an example to prove that they can prevail in this fight, and once they start that game, someone has to lose. Pay, and you’re guaranteed not to be the loser. You expose yourself to much more liability by refusing to pay than they do by asking you to pay. The deck is simply stacked against you.
It’s just how patents work. Blame Congress. Microsoft is just playing they game they have to play.
Filed under: Business, Economics, Intellectual Property, Microsoft, Open Source, Politics
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