Article: Software Patents: Microsoft's Fatal Error

[Matthew Wheeler <wheeler () lanl gov>]

If he is right selling MSFT stock short might be a good bet.

Software Patents: Microsoft's Fatal Error
ARTICLE DATE:  04.06.05
By  John C. Dvorak
http://www.pcmag.com/article2/0,1759,1781195,00.asp

The debate over software patents is coming to a head as the European Union 
goes the way of the United States and knuckles under the pressure brought 
by large patent-holding interests led by Microsoft. The open-source folks 
are moaning about this as—on the surface—it looks like the software patent 
decision in favor of large corporations is ruining any hopes that small fry 
will succeed in the business. In fact, the opposite may be true, and 
Microsoft will eventually learn that software patents are going to ruin the 
company.

Secrecy Works Best. The three ways to protect intellectual invention are 
copyright, patents, and secrecy. In some environments secrecy—usually in 
the form of trade secrets—is the most secure and least troublesome. You 
invent a process and keep it a secret indefinitely. The formula for 
Coca-Cola and Mars's candy-making methodology are examples. If these had 
been patented, they'd be public knowledge, the patents would have expired 
by now, and the methods would have been copied.

Software code was traditionally kept secret by complex scrambling that made 
the process of disassembly difficult, if not impossible. Once code is 
patented, you don't have to disassemble the code; you merely have to look 
it up in a database.

Mistaken Belief. You have to ask yourself if software patents actually 
protect large vendors. In today's environment, patent litigation firms join 
forces with patent collectors looking for a quick buck, and experts pore 
over the most obscure patents to find justification for suing companies 
with deep pockets over infringement. The damages awarded can be enormous.

I'm already seeing more and more patent holders targeting Microsoft over 
one thing or another. Once the EU is involved and all those Russian and 
Bulgarian coders are cut loose, this will go international in ways that 
Microsoft never anticipated.

Blocking Patents. A blocking patent is a clever way of seeing the direction 
a company is headed insofar as innovation is concerned and creating 
patentable roadblocks to keep the company from its path. These are little 
land mines or "traps" to catch Mr. Deep Pockets. Even if the target company 
tries to get by these with a trade secret process, it gets sued anyway, 
since a good blocking patent will make a process impossible to implement 
without a violation of some sort.—Continue reading

The blocking-patent game has become a nightmare in hardware development, 
but nobody has seen much of it yet with software, where it should be easier 
and more lucrative.

Open Kimono. Another problem for Microsoft will be public scrutiny of its 
code. Microsoft will be inundated with patent lawsuits and time after time 
will have to appear in court and show its code, which it has spent decades 
hiding and scrambling. The worse part will be that every line will be 
scrutinized not only by the plaintiff but by other potential plaintiffs who 
will see something and say, "Hey, I invented that algorithm!" And more 
suits will be filed.

Unsympathetic Public. Perhaps after dozens of suits costing billions of 
dollars Microsoft will come to understand that the image it has cultivated 
will not be a benefit in court. I've been involved in patent suits and can 
tell you that judges and juries can be clueless and easily influenced by 
emotion. Microsoft's longstanding reputation as a company that steals other 
people's ideas puts it in the worst possible position in a litigious 
environment. I don't think Microsoft understands this. In any borderline 
situation, Microsoft will lose. And this will happen both in the U.S. and 
in Europe, where the company supposedly threatened to pull its products out 
of the EU if software patents were not legalized.

The IBM Portfolio. The big variable in all this is the IBM patent 
portfolio, which by all accounts is the world's largest. IBM can make 
anyone who wants to go to court over patents miserable. IBM owns all the 
core patents, and the company has been irked by Microsoft for years. The 
most recent Microsoft-sponsored battle between SCO Unix and Linux hasn't 
made this situation any better. IBM's legal team is the best, and the 
company knows how to use it. I can also assume that suit-happy Apple and 
its patent portfolio wouldn't mind taking a few shots at Microsoft, either.

So while Microsoft thinks that software patents are a good idea because it 
hopes it can stop the open-source folks by suing some small fry, it has 
unintentionally made itself a huge target. Everything the company does will 
be scrutinized by millions of eyeballs looking to score. This may be the 
stupidest thing the company has ever done to itself.


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