Agreements with Linux distributors Linspire and Xandros in June 2007, along with several recent patent cross-licensing deals with companies that use Linux in their products, might reduce liability for customers who purchase products from these companies. However, it seems unlikely that Microsoft would ever take legal action against Linux customers or distributors, despite Microsoft's recent statements about Linux violating its patents, because doing so carries huge risks for the company. The deals are more likely part of a campaign to draw attention to the uncertain intellectual property pedigree of open source software, although customers may benefit from improved interoperability.

Raising Doubts About Linux

Intellectual property (IP) is generally defined to include patents, trade secrets, trademarks, and copyrights. The IP status of open source software first became a business issue in Mar. 2003, when SCO sued several Linux distributors, including IBM and Novell, and at least one Linux customer, alleging that Linux infringed upon SCO's IP. (A judge threw out many of SCO's claims in June 2006, but the case is still winding its way through the courts.)

Seeing an opportunity to capitalize on customer concerns about the case, Microsoft soon began a subtle campaign to remind customers that open source software has a more questionable IP heritage than Microsoft software.

For example, in 2004 and 2006, Microsoft indemnified customers of its volume licensed software and embedded software (respectively) against any IP-related claims they might face over that software. Buried in this customer benefit was a none-too-subtle message: open source software is created by communities of largely independent programmers and therefore has an unclear IP pedigree, which could expose customers to legal risk.

Microsoft has recently made this threat more explicit. A Nov. 2006 deal with Novell specifically indemnified customers of Novell's SUSE Linux against IP lawsuits brought by Microsoft. In May 2007, Horacio Gutierrez, Microsoft's vice president of IP and licensing, asserted in a news interview that open source software infringes 235 Microsoft patents, with Linux (kernel and GUIs) allegedly responsible for more than 100 of these infringements. Microsoft has not identified the patents nor filed any legal claims about them, but the message was clear—buying open source software could land customers in court.

So far in 2007, Microsoft has signed—and equally importantly, publicized—several other deals that raise doubts about the IP status of Linux.

Linspire and Xandros

Like Microsoft's previous deal with Novell, IP appears to be at the core of Microsoft's June 2007 deals with Linspire, which distributes a desktop OS built on Linux, and Xandros, which distributes both server and desktop products built on Linux. As with the Novell deal, these latest deals could reduce the sales of other Linux distributors, particularly market leader Red Hat, which have not yet signed similar IP agreements with Microsoft.

Specifically, Microsoft will extend covenants to Linspire and Xandros customers protecting them from any Microsoft lawsuits over IP violations in Linux. Microsoft has excluded customers of Freespire, a free version of Linux distributed by Linspire, from these covenants. (Linspire charges US$30 and up for the Linspire OS and the bundled applications that come with it.)

Notably, none of these licensees have acknowledged that Linux violates any Microsoft IP, and Novell has denied it.

Like the Novell agreement, the new deals also include other pledges of cooperation.

Linspire will use Microsoft's Live Search site as the default search engine on Linspire Five-O (the current version of the Linspire OS), license Microsoft's TrueType fonts (used in productivity software) and RT Audio Codec (used in instant messaging voice applications such as Windows Live Messenger), and extend a current deal to ship Windows Media codecs (used for playing digital audio and video files in the Windows Media Format) with current and future versions of Linspire. The company also agreed to help develop software that translates between Microsoft's Office Open XML format, which is the default format for saving files in Office 2007, and the Open Document Format (ODF) used by the open source Open Office suite, which Linspire distributes.

Xandros will license Microsoft communications protocols to improve interoperability between Xandros's Linux Server and Windows Server. This is an important concession for Microsoft: the European Commission (EC), which oversees antitrust and competition law in the European Union (EU), ordered Microsoft to make some of these protocols available for license in 2004. Subsequently, the EC found that Microsoft had made the licensing terms too restrictive, particularly for open source companies, and fined the company more than US$350 million for the violation. The Xandros deal allows Microsoft to point to at least one open source vendor who has licensed these protocols. Xandros will also work to improve interoperability with Microsoft's systems management products, including using the WS-Management standard developed by Microsoft and other vendors (including Sun), and will contribute to the Office Open XML-ODF translation project.

The interoperability promises will need to be monitored to see if they actually bear fruit, although Microsoft recently hired former Linux Foundation Director of Engineering Tom Hanrahan to oversee its Linux interoperability programs, suggesting that the company is taking interoperability seriously.

Both deals stop short of the Novell agreement in one important aspect. Microsoft purchased coupons from Novell good for SUSE support, maintenance, and upgrades, and agreed to redistribute them to its customers. In contrast, Microsoft has agreed only to "endorse" Xandros products as "preferred Linux solutions," and has offered no sales or marketing consideration to Linspire.

Financial terms of the Linspire and Xandros deals were not disclosed.

Cross-Licensing Deals

Like most other companies with significant IP assets, Microsoft has signed IP cross-licensing agreements with other companies for many years. Until recently, Microsoft did not publicize most of these deals, except in cases where they were part of a legal settlement (such as the company's Apr. 2004 settlement with Sun Microsystems) or were with companies holding particularly large patent portfolios (such as a May 2004 agreement with Siemens, which held more than 45,000 patents at the time, compared with Microsoft's approximately 10,000).

Now, Microsoft appears to be using IP cross-licensing agreements as yet another way to cast doubt upon the IP status of Linux.

So far in 2007, Microsoft has announced IP cross-licensing deals with Fuji Xerox in March, Samsung in April, and LG Electronics (LGE) in June. All three announcements suggested that Microsoft would not sue these companies for selling products based on Linux, although the language grew more assertive with each announcement: the first release said merely that Fuji Xerox had access to Microsoft patents for current and future products, "including products that incorporate proprietary source and open source software, such as Linux," while the LGE announcement said that "LGE will be making ongoing payments to Microsoft for the value of Microsoft patents as they relate to Linux-based embedded devices that LGE produces." But the Samsung release sent the clearest message: "Samsung will also obtain coverage from Microsoft for its customers' use of certain Linux-based products."

Will Microsoft Pull the Trigger?

Given Microsoft's recent actions, it may appear that the company is preparing to take legal action against Linux distributors who are not protected by a Microsoft IP licensing agreement, and perhaps against customers who purchase these Linux products. However, moving down this path would carry significant risks for Microsoft, such as the following:

• If Microsoft names the patents allegedly violated by Linux and other open source software, it could spark a reinvestigation of those patents by the U.S. Patent and Trademark Office (USPTO), which might end with the patents being invalidated—for example, the USPTO reinvestigated Microsoft patents related to the File Allocation Table (FAT) after Microsoft instituted licensing fees for these patents (the USPTO eventually upheld the patents)
• Most open source customers use at least some Microsoft software, and many are large enterprises with significant Microsoft volume license agreements; suing these customers would engender bad will
• Suing Linux distributors might bring other large technology companies with deep resources and legal experience into the fight—particularly IBM, which redistributes Red Hat and is a participant in the SCO case
• A protracted court battle would distract the company and divert resources from more urgent tasks, including competing in new fast-growing businesses, such as online advertising
• Taking legal action against open source customers and distributors would cause irreparable damage to the company's image, which could drive the technology community (including developers and IT buyers) toward alternatives.

Legal action could also carry some benefits for the company: sales of open source software would probably drop as customers grew more concerned about liability, and Microsoft might eventually be able to earn a royalty on sales of certain open source software (although the GNU General Public License under which Linux is sold would make this legally complicated). But these uncertain benefits for Microsoft seem to be outweighed by the risks.

Consequently, Microsoft will probably take legal action only as a last resort—for example, if Microsoft's growth is stalled by the uptake of open source software. In the meantime, continuing down its current path of selective licensing deals carries minimal risks for the company, allows Microsoft to gain concessions from open source distributors while simultaneously reminding customers of legal risks associated with some open source software, and could eventually benefit customers by paving the way for better interoperability in multiplatform environments.

Resources

Linspire is at www.linspire.com.

Freespire is at www.freespire.org.

Xandros is at www.xandros.com.