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  5. <title>FSF Europe - Microsoft against free competition</title>
  6. </head>
  7. <body>
  8. <h1>
  9. Software Patents Could Reduce The Microsoft Antitrust Suit To Absurdity
  10. </h1>
  11. <p>
  12. Microsoft CEO Steven Ballmer is a wise man. In March, he spoke to a
  13. business magazine about the Free Software movement and conceded, "I'm not
  14. saying it's not real competition. Maybe the world has exactly what it
  15. wants. It has us moving fast and hard, keeping our prices down." To
  16. paraphrase: Competition from Free Software such as GNU/Linux helps keep
  17. Microsoft innovative and prevents it from increasing prices arbitrarily.
  18. </p>
  19. <p>
  20. At the same time, Ballmer was honest enough to admit that he would
  21. litigate against Free Software if Microsoft weren't able to withstand the
  22. competition. In the same interview he said: "There are experts who claim
  23. Linux violates our intellectual property. I'm not going to comment. But
  24. to the degree that that's the case, of course we owe it to our
  25. shareholders to have a strategy." Reading between the lines, his message
  26. seems to be that competition with Free Software has become inconvenient
  27. to Microsoft, and that the company aims to regain control by whatever
  28. means.
  29. </p>
  30. <p>
  31. Unfortunately, Ballmer is not as precise in his language as he could be.
  32. For one thing, "intellectual property" is not a legal term that exists,
  33. as such, anywhere in the world. Rather, lawyers work with legal
  34. structures such as copyrights, trademarks, and software patents. Given
  35. the circumstances, it's unlikely Ballmer is referring to copyrights and
  36. trademarks. So what he really means is software patents.
  37. </p>
  38. <p>
  39. And Microsoft knows the problems which might be caused by software
  40. patents very well. Here is a quote from Microsoft founder Bill Gates in
  41. 1991: "If people had understood how patents would be granted when most of
  42. today's ideas were invented and had taken out patents, the industry would
  43. be at a complete standstill today." Most interesting is Mr. Gates
  44. conclusion: "The solution is patenting as much as we can. A future
  45. startup with no patents of its own will be forced to pay whatever price
  46. the giants choose to impose. That price might be high. Established
  47. companies have an interest in excluding future competitors."
  48. </p>
  49. <p>
  50. Following this strategy, Microsoft applied for and was granted thousands
  51. of patents throughout the world, including in Europe. But since Europe
  52. still lacks a legal basis for regional software patents, the software
  53. giant has lobbied intensively in favor of such laws in recent years. The
  54. attempts have failed so far, but in the meantime, Microsoft spreads FUD
  55. -- fear, uncertainty, and doubt -- over Free Software by openly
  56. speculating about possible "intellectual property" concerns. The aim is
  57. simple: To prevent customers from exercising freedom of choice in
  58. software.
  59. </p>
  60. <p>
  61. The European Commission will try to defend users' freedom by defending
  62. its 2004 antitrust decision against Microsoft before the Court of First
  63. Instance on April 24. But in the meantime, businesses small and large are
  64. choosing freedom by running a mixture of operating systems and
  65. application on their networks -- GNU/Linux, Unix, and Apple-based systems
  66. on one side, and Windows on the other. Communication works fine within
  67. these two worlds, but not between. There, cooperation falls down, not due
  68. to genuine technical constraints but simply because Microsoft has made it
  69. artificially difficult for Windows to interoperate with other operating
  70. systems.
  71. </p>
  72. <p>
  73. In this way, the monopolist remains in control of individual machines as
  74. well as the corporate network. In 2004, the European Commission ruled
  75. that Microsoft had harmed competition in Europe, and ordered the company
  76. to restore fair market conditions by publishing interoperability
  77. information for Windows. This software "grammar" is akin to the rules
  78. humans use to speak common languages. (The Free Software Foundation
  79. Europe has been admitted as a third party to the trial and has supported
  80. the European Commission since the lawsuit started in 2001.)
  81. </p>
  82. <p>
  83. Microsoft's resistance to complying with the Commission's demands make
  84. clear that the stakes in this battle are far greater than control of
  85. software markets such as network servers. Rather, the company's entire
  86. business model is at risk. Some 80% of Microsoft's revenues, and
  87. essentially all of its profits, derive from Windows and the Office suite
  88. of desktop applications. Can this possibly be because users are so happy
  89. with Microsoft software? Or are they "locked-in" to technology they
  90. acquired like crab lice in a careless moment?
  91. </p>
  92. <p>
  93. Microsoft is clearly scared by the possibility of customer defections,
  94. and so are shareholders. Every time the European Commission reasserts its
  95. intention to force open secret Windows protocols, Microsoft's stock dips.
  96. Overall, its shares have been flat since the EC's decision in 2004. But
  97. management and investors obviously are counting on continued software
  98. lock-in as the linchpin of Microsoft's future success.
  99. </p>
  100. <p>
  101. The problem is, with growing competition from Free Software and other
  102. alternatives, Windows and Office aren't likely to keep producing the
  103. enormous returns that Microsoft and its shareholders are used to. That's
  104. why the company is plunging into emerging opportunities such as security
  105. software, desktop search, RFID, and voice over IP (VoIP). But in typical
  106. fashion, the software giant aims to build those capabilities into Windows
  107. -- the very practice the European Commission faulted in its 2004
  108. decision. For now, Microsoft seems willing to risk fines from the
  109. Commission amounting to at least $2.4 million per day to hold onto its
  110. business model. After all, that's a pittance compared to what it makes
  111. every day in profits from its twin software monopolies.
  112. </p>
  113. <p>
  114. But here's the gotcha: Over the long term, Microsoft is counting on
  115. software patents in Europe for its escape hatch. Even if the company is
  116. forced to publish its secret software protocols or leave key features out
  117. of Windows, a European software patent law might eventually let it stamp
  118. out competition from Free Software. Though two previous attempts at
  119. enacting a European software patent were defeated, Charlie McCreevy,
  120. Europe's commissioner for Internal Markets and Services could well
  121. resurrect the project this year.
  122. </p>
  123. <p>
  124. That would be the ultimate irony. The same Commission that is pursuing
  125. Microsoft on the one hand for antitrust violations is, on the other hand,
  126. sanctioning new patent laws that could give Microsoft the power to crush
  127. competition forever. If such rules go into effect across Europe,
  128. entrepreneurs angling to compete against Microsoft could be blocked at
  129. every turn by software patents that prevent them from innovating. For the
  130. EC's pro-competition efforts are to have any teeth, Europe must resist
  131. allowing software patents that would render its antitrust capacity moot.
  132. </p>
  133. <p>
  134. Jonas Öberg<br />
  135. Vice President<br />
  136. FSFE,<br />
  137. Trollhättan, Sweden
  138. </p>
  139. <p>
  140. Carlo Piana<br />
  141. Lawyer<br />
  142. Studio Legale Tamos Piana &amp; Partners,<br />
  143. Milano, Italy
  144. </p>
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