Microsoft agitates for open-source patent pacts

In an interview with Fortune magazine published this week, Microsoft's top lawyer, Brad Smith, provided a stark tally of 235 Microsoft patents the company believes are violated by free and open-source software, though he stopped short of detailing any. Specifically, he alleged that the Linux kernel violates 42 Microsoft patents; its user interface and other design elements infringe 65; OpenOffice.org infringes 45; and other packages infringe another 83 Microsoft patents.

Microsoft could have several motives for rattling its patent saber: slowing down open-source rivals, raising fears of open-source legal risks among customers, and winning payment for technology the company believes it deserves from a group that's generally been unwilling to pony up.

But according to Horacio Gutierrez, vice president of intellectual property and licensing at Microsoft, the company's move is designed to bring parties to the negotiating table that currently aren't there. "There is nothing specific about open-source software that warrants an exception of the intellectual property laws that apply to everyone else," Gutierrez said. He called the purported patent infringements "not accidental."

Microsoft is a major player in the existing legal and business establishment for handling intellectual property, which includes assets such as patents, trademarks and copyrights. That framework gives considerable power to incumbent companies with large patent portfolios and sufficient resources to pursue more.

"It's a game in which those who have a lot of resources to throw around have a lot of advantage," said Tom Carey, a partner in the Boston-based intellectual property law firm Bromberg & Sunstein.

As an example of what it would like to see, Microsoft points primarily to the Novell patent deal struck in November, in which Microsoft is selling coupons that permit use of Novell's Suse Linux Enterprise Server along with the assurance that Microsoft won't assert its patents against customers. It's unclear how high open-source patent protection is on most companies' priority list, but Microsoft has made a big deal out of the fact that Linux protections are included in two patent-swap deals this year made with Samsung and Fuji Xerox.

Raising the prospect of open-source patent risks might not be likely to make Red Hat, the top Linux seller, overcome its current unwillingness to pay Microsoft for patent rights. But it could pressure Red Hat and others indirectly, either through jittery customers or through big-business partners such as IBM. That's Microsoft's hope.

"We don't think that customers will want to continue on without a solution to the problem," Gutierrez said. Microsoft also pointed to the fact that AIG, Credit Suisse, HSBC, Nationwide and Wal-Mart all have bought the Linux Suse Linux coupons from Microsoft.

But does open-source infringe?
The only problem with Microsoft's plan: so far its actions have only rallied the open-source troops, and not everyone believes the open-source gang egregiously violates the intellectual property regime.

"I don't think open-source is not playing by existing intellectual property rules," said Mark Radcliffe, an intellectual property attorney with DLA Piper. "Currently, open-source (participants) use copyright for everything they do. A lot of open-source companies have patents."

Radcliffe also derided Microsoft's reasoning that the purported open-source patent violations aren't accentual because the company thinks hundreds of cases exist. "It's an illusion or deceptive to say merely because there apparently are potentially a lot of patents infringed, it's intentional. That's certainly not the legal standard," he said. "I would also be willing to bet, given the number of patent suits against Microsoft that they've lost, under their own theory, Microsoft itself is intentionally infringing."

The fact remains, though, that patents and open-source software can be anathema. Patents give exclusive, proprietary rights to those who hold them, but open-source software is built on a philosophy of free technology sharing. Many in the open-source realm deride software patents and have been lobbying to curtail their influence.

When Novell and Microsoft announced their patent deal, the Free Software Foundation was quick to say it would move to prohibit such arrangements in a future version of the General Public License (GPL), the most widely used open-source license. The most recent draft seeks to prohibit all future deals of that nature and potentially past ones, too.

The timing of Microsoft's pronouncement is telling, Radcliffe said, "particularly when you think that GPL version 3 is still in draft. I don't think that is a coincidence," he said.

Red Hat, which indemnifies its customers against legal risks and has promised to rewrite any software found to violate others' intellectual property, told its customers Monday they have nothing to fear. "The reality is that the community development approach of free and open-source code represents a healthy development paradigm, which, when viewed from the perspective of pending lawsuits related to intellectual property, is at least as safe as proprietary software," the company said in a statement.

Microsoft won't say how much farther out of the scabbard it will pull its saber if the current effort fails to bring forth more patent deals with open-source companies.

"I don't have the answer for that. I have the answer for those that want to be responsible," Guttierez said.

But Microsoft would prefer not to sue, according to Guttierez. "If we wanted to litigate we would have done that a long time ago. Litigation is not an effective way of going about solutions," he said, adding that the company released the tally of potentially infringing patents now only after three years of effort to come up with a "constructive" way of dealing with the situation.

Open-source allies are willing to call Microsoft's bluff.

"I can't see it as any more than a somewhat hollow anti-open-source charade," said Matt Asay, vice president of business development for open-source document management start-up Alfresco. "If they want to really get people buying into their patents, they've got to put forth some substance...They haven't shown what the patents are or what they cover."

Larry Augustin, a venture capitalist who grew wealthy off a Linux-related initial public offering, told Microsoft on his blog to "put up or shut up." "If Microsoft believes that free and open-source software violates any of their patents, let them put those patents forward now, in the light of day, where we can all evaluate them on their merits," Augustin said. "If not, then stop trying to bully customers into paying royalties to use open source."

Litigation is unlikely, said Brian Kelly, an intellectual property attorney with Manatt, Phelps & Phillips: "If the end game is a lawsuit, you probably lead with a lawsuit."

Of course, SCO Group did lead with litigation in 2003 when it took on IBM with claims that Big Blue violated its contract by bringing proprietary Unix technology to open-source Linux. But Linux continues to spread widely despite that case--even with SCO suing actual customers.

At the same time, open-source allies are accumulating more legal heft by banding together and signing up some of the computing industry's largest companies. Oracle now sells its own version of Linux, and Sony, Red Hat, IBM, Novell and Philips formed the Open Invention Network in 2005 to try to amass a patent counterweight. Patent holders who join the organization or license its patents agree not to sue over patents in the "Linux environment."

Even if Microsoft doesn't sign any more patent pacts, just slowing down the competition could be counted as a victory. Illuminata analyst Jonathan Eunice, in a blog posting Monday, likened Microsoft's patent threat to Iraq's use of Scud missiles in the Persian Gulf War.

"The point wasn't to actually use the weapon, but rather to require opposing forces to plan and take countermeasures against the possibility of use," he said. "While they were so occupied, they were less effective doing other things."

Amazon to offer DRM-free music downloads

The e-commerce giant announced Wednesday that it would offer songs from more than 12,000 record labels in the MP3 format, without the controversial digital rights management (DRM) software. Record labels are beginning to warm up to the concept of offering music downloads without DRM, after waging war with peer-to-peer companies over distributing their copyrighted music and over piracy issues.

"Our MP3-only strategy means all the music that customers buy on Amazon is always DRM-free and plays on any device," Jeff Bezos, Amazon's chief executive, said in a statement.

Users will be able to play their music on virtually any device, including PCs, iPods, Zunes and Zens, as well as burn the songs on CDs for personal use.

In making the announcement, Amazon also noted it has teamed up with EMI Music to offer songs from its digital catalog. As part of its digital music store, Amazon will offer EMI's new, premium DRM-free downloads.

Amazon said it would announce pricing details closer to the launch date.

This is the second deal EMI has struck since announcing it would begin offering DRM-free music downloads at a premium price.

Last month, EMI and Apple struck a similar deal with the computer maker's iTunes store. Apple is expected to offer the label's DRM-free music later this month at $1.29 per song, and DRM-protected music for 99 cents a song. The cost of a DRM-free album, however, will be the same price as one with DRM technology.

EMI also has signed similar agreements overseas. VirginMega in France will offer DRM-free EMI downloads, as will a number of Scandinavian online retailers and mobile carriers, such as Telenor, Musicbrigade and Aspiro.

Other record labels that have tested the concept of DRM-free downloads include Jessica Simpson's label, Sony BMG-owned Epic, which teamed up with Yahoo Music year last year to offer a single Jessica Simpson track.

Universal Music Group and Warner Music Group both declined to comment on the EMI announcement and their plans relating to DRM.

N.Y. attorney general accuses Dell of fraud

The court filing accuses Dell and Dell Financial Services of 10 counts of fraud, false advertising and deceptive business practices, including offering misleading financing, and failing to honor rebates and warranties.

The state of New York is asking for an injunction of Dell's allegedly bad business practices and an order that the world's second-largest PC maker pay an unspecified amount of damages to customers found to be affected, in addition to a $500 civil penalty payable to the state of New York for each violation.

"Dell's consumers were intentionally misled, and they had to pay for that privilege. I hope this lawsuit sends a message to companies large and small that delivering a product is simply not enough--the promises they make must be delivered as well," Cuomo said in a statement Wednesday. His office set up a Web site Wednesday for consumers wishing to be part of the suit.

The suit (PDF: Cuomo v. Dell), filed in Albany County, N.Y., accuses Dell of "bait and switch" tactics in which customers are encouraged to apply for zero-interest financing, only to be misled and offered credit lines with up to 20 percent interest rates when they do not qualify for the financing promotion.

In addition, the suit alleges that Dell Financial Services bills customers for canceled orders, as well as for returned or missing merchandise. As a result, DFS and other collection agencies harass consumers for "months on end" for payments they do not owe, according to the petition.

The PC maker's advertising campaign, which touts its award-winning tech support department, is also targeted in the suit. Promises made on television are not met, according to the suit. Customers who purchased warranties are instead met with "a nightmarish array of obstacles in their quest for service."

Dell spokesman Bob Pearson told CNET News.com that the company will contest the suit. "We are confident that our practices will be found to be fair and appropriate. While even one dissatisfied customer is too many, the allegations in the AG's filing are based upon a small fraction of Dell's consumer transactions in New York. We are committed to providing a positive experience to all of our customers every day," he said in an e-mailed statement.

Pearson said the suit is not related to the Securities and Exchange Commission's investigation into Dell's accounting practices. Dell's own internal investigation into the matter yielded what its audit committee called "evidence of misconduct." As a result of the SEC's investigation, Dell has filed only preliminary quarterly financial reports for the past three quarters.

In December, analyst firm Friedman Billings Ramsey criticized the way Dell accounted for warranties, saying the company used an "unusual" method for accounting for the money it takes in from warranty sales and the money it reserves to handle expected warranty claims.

Wi-Fi Alliance to begin certifying 802.11n gear

The industry group, which has certified products for all of the preceding 802.11 standards, including 802.11a, 802.11b and 802.11g, said last August that it would take a two-phased approach to the 802.11n certification process. The group will certify interoperability for products using the 802.11n Draft 2.0 version of the specification starting next month.

Once 802.11n becomes a full standard, the alliance will update its certification process to comply with the standard. The group said it hopes to make sure the standard products also interoperate with pre-standard products it certifies.

Products that are certified will display a new logo to let consumers know they have been certified. Products are expected to hit store shelves in July. The Wi-Fi Alliance has 11 testing labs in seven countries around the world. Testing will begin in the middle of June. All the 802.11n Draft 2.0 certified products will also interoperate with products certified for previous 802.11 standards, such as 802.11a, 802.11b, and 802.11g.

The standard, which has been batted around for more than two years, was supposed to be finalized by early 2007. But the process has been delayed, and a final standard won't likely be completed until 2008 at the earliest. Meanwhile, many companies have already begun selling prestandard 802.11n equipment.

The Wi-Fi Alliance doesn't typically certify products before a standard is adopted, but representatives for the group say that getting interoperable products out on the market is very important.

"802.11n will offer up to five times the throughput and twice the range of existing Wi-Fi technology, which will make it ideal for enabling multimedia applications throughout the home," said Karen Hanley, senior director of marketing for the Wi-Fi Alliance. "So it's important to get products on the market that will work together so that consumers can get the technology they need to extend their home networks."

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