posted by John O'Sullivan on Fri 12th Dec 2003 06:56 UTC
IconMicrosoft watchers have two interesting stories to follow this week. First is the new Intellectual Property (IP) licensing scheme. The second is a feverish round speculation (just a rumor) that Microsoft will buy AMD. Both tie into an older story about plans for the next generation Xbox.

Editorial Notice: All opinions are those of the author and not necessarily those of osnews.com

The IP story alone is quite interesting. The AMD story, while a long shot, is potentially huge. The older Xbox story has gained significance in light of the other two. Together, these stories suggest Microsoft may be about to launch a new hardware related business strategy.

Microsoft announced their new IP scheme with great fanfare last week. Read a more objective report here. They positioned this new scheme as a fit of generosity. On a side note, this is why MS is so disliked in the industry. They come up with a self-serving gambit, and solemnly tell you its entirely for your benefit. The infuriating thing is that they really believe it. That explains their petulance when these things are criticised.

Anyway, the two specific initiatives they announced were licensing regimes for Clear Type and the FAT file system. The FAT regime requires 25˘ payment to MS per formatted device. To a maximum of $250,000 per company. The main effect of this will be on digital storage devices for things like cameras. $250,000 will not break any manufacturer, and the 25˘ per device can be hidden easily in the price. Microsoft is well within their rights here. They hold patents on FAT and the fees are not excessive. However, hardware manufacturers won't like to pay for what used to be free. And they're not going to like paying Microsoft for using something that became the standard because it was free.

In a Register story , Andrew Orlowski reports Microsoft hired Marshall Phelps away from IBM in June. Phelps was the man that monetized IBM's patent portfolio. The story quotes Eben Moglen of the Free Software Foundation as saying, “from 1935 to 1984, IBM did not ever enforce a patent for license revenue." IBM's 2002 annual report states their patent revenue for that year was $1.1 billion. This was down from a peak of $1.6 billion in 2000. Phelps is widely credited with inventing this business.

We all know that Microsoft is desperate for new sources in income. Office and Windows are the only divisions making money. Microsoft has acknowledged that growth is flattening in these sectors as well. They have made big investments in cable TV, game consoles, an ISP, embedded operating systems, and phones. None of these have paid off so far. A new income stream based on Microsoft's patent portfolio is a no-brainer.

Orlowski observes that Microsoft is well positioned to push Linux and Linux distributors on patent issues. He writes

"Microsoft's actions so far don't constitute a full frontal attack on free software. It's often been rumored that Microsoft has a number of patents - the number varies - on the Linux kernel itself. But it has chosen not to pursue such an inflammatory tactic, just yet, and may not even need to at all in order to succeed."
He reckons by crippling the likes of RedHat and Novell with legal threat, MS may be able to manage the Linux contagion. Things may not be so simple anymore, however. SCO has radicalized the community and make it clear that while fractious, the open source community is no pushover.

Too much pressure could also bring unwelcome anti-trust attention. John Ashcroft will not run the Department of Justice forever. And the individual states have shown they are not shy about acting on their own. A convicted monopolist using patents to cripple technological development would be a tempting political target. Even a pro-business regime like the Bush administration needs to throw an occasional scrap to the hounds.

Table of contents
  1. "Toll Road, Page 1"
  2. "Toll Road, Page 2"
e p (0)    74 Comment(s)