Companies that manufacture or distribute devices with any Windows Embedded OS (including Windows CE, Windows XP Embedded, and Windows Embedded for Point of Service) or Windows Mobile software are now covered by Microsoft's intellectual property (IP) indemnification policy. If a manufacturer or distributor is sued over copyright, patent, trademark, or trade-secret violations within these products, Microsoft will assume their legal defense and pay all legal fees. Microsoft will also help cover the cost of any legal judgment stemming from such claims, but will cap this coverage at the amount the manufacturer or distributor has paid Microsoft to license the software during the prior two-year period.

There are some exceptions to the policy: most notably, if customers or resellers alter any Microsoft software, Microsoft may choose not to indemnify this software. This is important for Windows CE because Microsoft allows device makers to create and redistribute derivatives, which are not automatically covered. However, Microsoft encourages partners and customers to notify it of any IP claim involving Microsoft software—even if it falls outside the scope of the company's indemnification policy, Microsoft might choose to cover it anyway.

Microsoft's IP indemnification policy has been in place for large OEMs and volume license customers for many years, but in Nov. 2004 the company expanded it to end-user customers of Microsoft software, and in June 2005 extended it to system builders (small OEMs) and ISVs that repackage Microsoft software. The gradual expansion of this policy is meant to call attention to the murky IP pedigree of open-source software such as Linux, and the fact that Microsoft's indemnification policy is more extensive than that offered by open-source vendors.

Although most IP lawsuits target the creators of allegedly infringing products, IP holders have occasionally sued customers or distributors in hopes of obtaining quick settlements. By indemnifying customers and distributors of its software, Microsoft not only offers an advantage over open-source software but could also discourage such lawsuits from being filed in the first place.

Microsoft's IP indemnification policy is detailed at www.microsoft.com/windowsserversystem/facts/topics/partner_policy.mspx.

General issues associated with of IP indemnification and software are covered in "Indemnification Policy Expanded" on page 33 of the Dec. 2004 Update.

The program that allows customers to modify and redistribute Windows CE is detailed at www.microsoft.com/resources/sharedsource/Licensing/Windowsce_premium_rdst.mspx.