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<title>FSF Europe - Microsoft against free competition</title>
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<h1>
Software Patents Could Reduce The Microsoft Antitrust Suit To Absurdity
</h1>
<p>
Microsoft CEO Steven Ballmer is a wise man. In March, he spoke to a
business magazine about the Free Software movement and conceded, "I'm not
saying it's not real competition. Maybe the world has exactly what it
wants. It has us moving fast and hard, keeping our prices down." To
paraphrase: Competition from Free Software such as GNU/Linux helps keep
Microsoft innovative and prevents it from increasing prices arbitrarily.
</p>
<p>
At the same time, Ballmer was honest enough to admit that he would
litigate against Free Software if Microsoft weren't able to withstand the
competition. In the same interview he said: "There are experts who claim
Linux violates our intellectual property. I'm not going to comment. But
to the degree that that's the case, of course we owe it to our
shareholders to have a strategy." Reading between the lines, his message
seems to be that competition with Free Software has become inconvenient
to Microsoft, and that the company aims to regain control by whatever
means.
</p>
<p>
Unfortunately, Ballmer is not as precise in his language as he could be.
For one thing, "intellectual property" is not a legal term that exists,
as such, anywhere in the world. Rather, lawyers work with legal
structures such as copyrights, trademarks, and software patents. Given
the circumstances, it's unlikely Ballmer is referring to copyrights and
trademarks. So what he really means is software patents.
</p>
<p>
And Microsoft knows the problems which might be caused by software
patents very well. Here is a quote from Microsoft founder Bill Gates in
1991: "If people had understood how patents would be granted when most of
today's ideas were invented and had taken out patents, the industry would
be at a complete standstill today." Most interesting is Mr. Gates
conclusion: "The solution is patenting as much as we can. A future
startup with no patents of its own will be forced to pay whatever price
the giants choose to impose. That price might be high. Established
companies have an interest in excluding future competitors."
</p>
<p>
Following this strategy, Microsoft applied for and was granted thousands
of patents throughout the world, including in Europe. But since Europe
still lacks a legal basis for regional software patents, the software
giant has lobbied intensively in favor of such laws in recent years. The
attempts have failed so far, but in the meantime, Microsoft spreads FUD
-- fear, uncertainty, and doubt -- over Free Software by openly
speculating about possible "intellectual property" concerns. The aim is
simple: To prevent customers from exercising freedom of choice in
software.
</p>
<p>
The European Commission will try to defend users' freedom by defending
its 2004 antitrust decision against Microsoft before the Court of First
Instance on April 24. But in the meantime, businesses small and large are
choosing freedom by running a mixture of operating systems and
application on their networks -- GNU/Linux, Unix, and Apple-based systems
on one side, and Windows on the other. Communication works fine within
these two worlds, but not between. There, cooperation falls down, not due
to genuine technical constraints but simply because Microsoft has made it
artificially difficult for Windows to interoperate with other operating
systems.
</p>
<p>
In this way, the monopolist remains in control of individual machines as
well as the corporate network. In 2004, the European Commission ruled
that Microsoft had harmed competition in Europe, and ordered the company
to restore fair market conditions by publishing interoperability
information for Windows. This software "grammar" is akin to the rules
humans use to speak common languages. (The Free Software Foundation
Europe has been admitted as a third party to the trial and has supported
the European Commission since the lawsuit started in 2001.)
</p>
<p>
Microsoft's resistance to complying with the Commission's demands make
clear that the stakes in this battle are far greater than control of
software markets such as network servers. Rather, the company's entire
business model is at risk. Some 80% of Microsoft's revenues, and
essentially all of its profits, derive from Windows and the Office suite
of desktop applications. Can this possibly be because users are so happy
with Microsoft software? Or are they "locked-in" to technology they
acquired like crab lice in a careless moment?
</p>
<p>
Microsoft is clearly scared by the possibility of customer defections,
and so are shareholders. Every time the European Commission reasserts its
intention to force open secret Windows protocols, Microsoft's stock dips.
Overall, its shares have been flat since the EC's decision in 2004. But
management and investors obviously are counting on continued software
lock-in as the linchpin of Microsoft's future success.
</p>
<p>
The problem is, with growing competition from Free Software and other
alternatives, Windows and Office aren't likely to keep producing the
enormous returns that Microsoft and its shareholders are used to. That's
why the company is plunging into emerging opportunities such as security
software, desktop search, RFID, and voice over IP (VoIP). But in typical
fashion, the software giant aims to build those capabilities into Windows
-- the very practice the European Commission faulted in its 2004
decision. For now, Microsoft seems willing to risk fines from the
Commission amounting to at least $2.4 million per day to hold onto its
business model. After all, that's a pittance compared to what it makes
every day in profits from its twin software monopolies.
</p>
<p>
But here's the gotcha: Over the long term, Microsoft is counting on
software patents in Europe for its escape hatch. Even if the company is
forced to publish its secret software protocols or leave key features out
of Windows, a European software patent law might eventually let it stamp
out competition from Free Software. Though two previous attempts at
enacting a European software patent were defeated, Charlie McCreevy,
Europe's commissioner for Internal Markets and Services could well
resurrect the project this year.
</p>
<p>
That would be the ultimate irony. The same Commission that is pursuing
Microsoft on the one hand for antitrust violations is, on the other hand,
sanctioning new patent laws that could give Microsoft the power to crush
competition forever. If such rules go into effect across Europe,
entrepreneurs angling to compete against Microsoft could be blocked at
every turn by software patents that prevent them from innovating. For the
EC's pro-competition efforts are to have any teeth, Europe must resist
allowing software patents that would render its antitrust capacity moot.
</p>
<p>
Jonas Öberg<br />
Vice President<br />
FSFE,<br />
Trollhättan, Sweden
</p>
<p>
Carlo Piana<br />
Lawyer<br />
Studio Legale Tamos Piana &amp; Partners,<br />
Milano, Italy
</p>
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