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“Dear Bill, do you want to have your cake – or eat it?”

Recently, the European Commission brought down a half-billion-Euro fine on Microsoft for abusive monopolistic practices. Microsoft, have of course, responded with great indignation, complaining about being forced to licence their “proprietary technology and intellectual property” on RAND (Reasonable And Non Discriminatory) terms.

Obviously, half a billion Euros is not a big problem for Microsoft – they just spent about two billion US dollars calming Sun down. So why such shrill screams over this ruling? There are some deep reasons, and they can be painful to explore, but exploring them thoroughly is very worthwhile.

Where there’s smoke, there’s fire

Rumour has it that Microsoft was recently invited into a large hospital (nearly 1000 beds) to revamp their IT systems. During the presentation, the Microsoft representatives went on so much about how their TCO, ROI et al were “better than Linux’s”, and looked so worried when they did so, that the hospital (previously unaware of Linux at all) decided to investigate and wound up switching almost completely to the Open Source system.

Two major features of both the hospital incident and this were Microsoft objecting to their competition, and Microsoft telling little porkies about their relative merits. There’s more irony in it than that – about enough to roof a stadium – but not everyone will notice the misdirection in what they’re saying.

Our ... proprietary ... property

The three elements that Microsoft emphasise are “our” “proprietary technology” and “intellectual property”. The document takes it for granted that Microsoft own what they’re discussing, that “proprietary” has some mysterious benefit, and that it’s even possible to exclusively own the processes being discussed. Let’s tackle those in reverse order.

“Intellectual property” is a very nebulous term, but in a legal sense it covers patented material, copyrighted material, trade secrets and trademarks. Each of these terms relates to a very limited and specific range of items.

The items in question are APIs, Application Program Interfaces, the standards (more or less) for how programs talk to each other. APIs are not copyrightable (although you could write a program which used them and copyright that), none of them are restricted by trademark issues, the API itself cannot be patented (although a process which an API implements may be patented, and these few patents are implied in the EU ruling). This leaves trade secrets.

The core of and key to the EU’s complaint is not that Microsoft invents stuff, but that it has abused its dominant market position by keeping and preferentially distributing the secrets connected with their APIs.

It doesn’t really matter whether the inventions are novel or powerful; in practice the vast majority of them aren’t. What matters is that they’ve been abused. The EU has said of these “trade secrets”: you abuse them, you lose them.

I have children; when they misbehave, I do exactly the same thing. It works.

Is there a smoking gun?

How do we know that Microsoft abused the APIs? From the horse’s mouth, or at least that of Microsoft C++ General Manager (at the time) Aaron Contorer:

“The Windows API is so broad, so deep and so functional that most [independent software vendors] would be crazy not to use it. And it is so deeply embedded in the source code of many Windows apps that there is a huge switching cost to using a different operating system, instead.

“It is this switching cost that has given the customers the patience to stick with Windows through all our mistakes, our buggy drivers, our high [total cost of ownership], our lack of a sexy vision, at times, and many other difficulties.

“Customers constantly evaluate other desktop platforms, [...] it would be so much work to move over that they hope we just improve Windows rather than force them to move.”

How important is this effect? Microsoft Senior Vice President (at the time) Bob Muglia wrote “without this exclusive franchise, called the Windows API, we would have been dead a long time ago.”

So yes, the advantage is unfair and Microsoft say that they do know about this unfairness, even rely upon it.

Why not say “trade secrets?”

Microsoft would rather have you believe that some material thing which they own is being unfairly taken from them and given to others than that they’re simply being forced to sell (not give away) the rights to use some of their jealously hoarded secrets.

The patents involved are another story. Patent abuse is rife in Western countries, particularly the USA. The trick is to patent one shade of grey and then effectively claim ownership of all other shades of grey – and have enough legal resources to dissuade anyone else from challenging that claim. In this fashion, the most trivial, absurd and/or obvious things (like “one-click” shopping) are being patented, and nobody dare produce anything like them for fear of being sued.

It doesn’t even matter whether the fear is or can be shown to be realistic or not, the fear itself has a massive chilling effect on innovation, development and the seeding of new companies. Because Microsoft don’t innovate, and know that they don’t (see the “lack of vision” clause in Aaron’s statement above), it is in their immediate financial interest to chill genuine innovation, and to be seen by their competitors as a threat, something to be “negotiated” with (as a lamb “negotiates” with a lion) rather than worked around.

It would be in Microsoft’s long-term interest to foster IT innovation in general; this would among other things give them a wider selection of useful acquisition targets and more rapidly improve their own technology, but judging by their behaviour they don’t remember things like how much the acquisition of FoxPro improved their own “Jet” (MS-Access) database engine.

What exactly is “proprietary technology?”

The other reason for avoiding mention of “trade secrets” is that “proprietary” sounds so much more special. What it actually means is “owned”, or more particularly “exclusively owned; private”. In other words, it is technology that they won’t share.

Sharing technology is completely different to sharing something like pizza or your wife. If you share a pizza, you lose some of it (although you may well make a substantial profit in goodwill out of the transaction). When you share your wife, you erode the bonds of love between you and while you are sharing her with someone else, you don’t have as much access to her yourself.

If I have an idea, and I share it with you, I don’t lose that idea. Now we both have it; you are richer but I am not poorer.

What Microsoft have in mind is fencing off an idea and using their control of access to it to either make a profit or obtain yet more control. This is where the concept of “intellectual property” really begins to come apart from the idea of owning something.

If someone else independently comes up with the same idea as the fenced-in one, even if there was no possible way that they could know about the fenced-in idea “intellectual property” laws would allow them to be sued for compensation if they used their own idea. In this respect, it’s all too easy to “fence off the commons” and use laws intended for defence offensively.

One can’t speak of “intellectual property” being stolen as a pizza can be stolen. If I see you with a pizza which looks like mine, I can’t sue you for possession of it unless I can also show firstly that my pizza has gone missing and secondly that you had a reason to and the opportunity to steal it. Stealing involves the victim losing access to their property. If I “steal” an idea, the original owner still has his idea.

Microsoft are not being forced to give up their intellectual pizza, they’re simply being forced to allow others to make pizzas too, and allow them the “quiet enjoyment” of their own pizzas. They’re not even being forced to give away the recipe, they’re being forced to sell the recipe.

That presents another problem, too. While EUR50,000 for an API specification is not a significant amount for a company like IBM or Sony to pay, it’s pretty overwhelming, well out of reach for an individual or a fundless Open Source project. RAND terms mean that this situation is legally regarded as fair &emdash; or worse, that reverse-engineering freedoms will be curtailed by the “reasonable&rdquot; and “non-discriminatory” availability of APIs and documentation.

Kicking the dog out of the manger

Patents were originally intended to provide protection (particularly against large corporations, can you taste the irony?) to give an inventor a run-up on bringing their idea to market. This is a very good thing, since it provides motivation for an inventor to quickly develop and perfect their invention.

Patents are published specifically so that others can see how it was done and begin developing their own ideas, using the original as a springboard. This works against “dog in a manger” tactics and laziness, and allows development of an idea to continue if the inventor does not respond to the initial motivation.

Extending the domain of a patent to a lifetime or longer chills this secondary development, and society as a whole is the poorer for this loss. Using a patent to hobble derivatives instead of encouraging them flies directly in the face of the original reasons for which patents exist.

Originally, a working device had to be manufactured and demonstrated before a patent would be granted. This underscored the expectation that a patent would apply only to something material and concrete. Now Microsoft and others are trying to make intangibles patentable too. If this is ever allowed to happen, it will chill innovation as never before.

The EU courts have done well to identify Microsoft’s chilling effect on innovation, and to begin working to address it. The real worry for Microsoft is not the fine, but that if they continue to lean so hard on competitors the EU will shut them down.

With their unfair advantage partially removed, Microsoft will have to compete on more even ground, which terrifies them. However, they still retain much of what they consider to be a secret weapon, a farrago of patents and copyrights with which to smother other market players. The more they are able to hide ideas behind the smokescreen of “intellectual property”, the greater the influence this weapon will have.

If the EU enacts laws enshrining software patents, it will be surrendering much of the ground won here. Microsoft will be able to sell their APIs, sure in the knowledge that as their one hand giveth with trade secret APIs, their other hand taketh away with irrationally stronger “intellectual property” restraints. And also reasonably sure that the APIs in general will be too expensive for the typical Open Source project to afford.

How many other cases exist where [company] has included third party technology in it products, but has also taken the cheaper licensing option and left developers and even users exposed to the threat of lawsuit? Due to the closed nature of the proprietary business model, how can third party developers even check? — NZheretic on LWN

Last changed: 09-Sep-2008 18:29:45  Find out who links to this page. Verify for yourself that this page is pure, standard HTML, not Ruby.

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