Tuesday, May 15, 2007

Steve? Darl? All of the Above?

Which of the software CEO's below expressed the following general sentiments, either directly or via their counsel:

“Linux clearly violates our intellectual property rights”

“We choose not to disclose the exact nature of the violations at this time”

“Someone is going to pay us for using our intellectual property without our permission”

a. Steve Ballmer of Microsoft?

b. Darl McBride of SCO?

c. All of the above?

If you chose option c, you would be right. Albert Einstein supposedly defined insanity as repeating the same procedure over and over again and expecting a different result. Perhaps the folks in Redmond have temporarily lost their marbles, because this tactic of claiming intellectual property violations without disclosing the nature of the violations is doomed to fail. It failed miserably for SCO, and it will likewise fail for Microsoft.

My best guess on the rationale behind this strategy is that it is so very similar to a strategy that has worked very well for Microsoft in the past. When faced with a competitive product that poses a threat, Microsoft will pre-announce a new product that addresses the threat in order to slow adoption of the competing product while they scramble to catch up. The market, faced with uncertainty, freezes for a time, thereby allowing Microsoft an opportunity to respond. Microsoft is using this same tactic with allegations of intellectual property abuse directed at the competitive threat of Linux and open source. The weakness with this approach as it relates to Linux and open source is that the timescale and the nature of the competitive forces are dramatically different. Microsoft may achieve a short reprieve in a few accounts, but the fuse has now been lit on the bomb that will change the industry.

The timescale and competitive forces for Linux and open source are very different than the timescale and competitive forces for a proprietary threat to Microsoft because the popularity of the open source works are not achieved through corporate profit motive. Given that profit motive did not drive adoption, Microsoft cannot easily "cut off the oxygen supply" by attacking issues that are related to corporate profit motive (i.e. the expense of a lawsuit).

The timescale of the corporate world is a fiscal quarter or two (perhaps a fiscal year at most), and the nature of competition is measured in revenue, bookings, gross margin, and net earnings. The timescale of a piece of community property is a function of the utility that the collective users of the property receive relative to the utility they receive from alternate property. The only way to “choke” a community property is to provide a more useful alternative (note that I did not say “free” alternative, as the value relative to the payment must simply be in the correct proportion). For many application workloads and for many types of users, Microsoft has failed to respond to the utility challenge presented by many open source alternatives. I do not believe that the current intellectual property threats will stem the tide of that failure to innovate.

By throwing down the gauntlet with allegations of IP violations, Microsoft will now be hounded by all interested parties to disclose the nature of the alleged violations in order to “clear the air.” I suspect that Microsoft might even be compelled to disclose the nature of their complaints if an interested party (such as the Free Software Foundation or Sun or IBM or Red Hat) determines to sue Microsoft under the Lanham Act and under other deceptive trade practices acts. Or Microsoft might be compelled to disclose the nature of the alleged violations to avoid losing their rights to collect rents through non-enforcement (i.e. thereby granting some sort of implicit license). In any case, the fuse has been lit and the bomb will blow. I do not believe Microsoft will like the nature of the collateral damage.


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