Microsoft's patent boilover would hit startups

Microsoft's patent boilover would hit startups

Microsoft's threat to sue open source software users who violate its patents could be hardest on startups and smaller companies unable to take on the software giant, business and legal observers say.

Startup companies with business models based on open source software, or other small businesses, would least be able to afford the legal costs of defending against a patent infringement claim by Microsoft, said Matt Asay, vice president of business development for Alfresco Software, a maker of open source enterprise content management software.

Asay and others in the industry are reacting to a Fortune Magazine article in which Microsoft executives claim open source software violates as many as 235 Microsoft patents and that the company will pursue patent violators for payment of royalties.

Microsoft in a published report said free software, including Linux, violates 235 Microsoft patents and that the company wants compensation.

Asked to elaborate Microsoft would only release a statement attributed to Horacio Gutierrez, vice president of intellectual property (IP) and licencing.

"Even the founder of the Free Software Foundation, Richard Stallman, noted last year that Linux infringes well over 200 patents from multiple companies," Gutierrez claims. "The real question is not whether there exists substantial patent infringement issues, but what to do about them."

"Microsoft and Novell already developed a solution that meets the needs of customers, furthers interoperability, and advances the interests of the industry as a whole. Any customer that is concerned about Linux IP issues needs only to obtain their open source subscriptions from Novell," said Gutierrez.

When asked to cite specific patents being infringed, Microsoft provided only the following list:

• 65 patents in Linux GUIs

• 15 patents in e-mail

• 42 patents in Linux kernel

• 45 patents in Openoffice

• 68 other patents that read on open source

"For context, the typical patent lawsuit involves only about two patents," Microsoft said.

While a software company like Alfresco's legal liability may be minimal, others may face greater jeopardy. If, for example, Microsoft was to sue the carmaker Ford, an acknowledged user of Linux software, Ford can probably defend itself, Asay said. Also, larger software companies such as SAP and Oracle can settle a dispute with Microsoft with a cross-licencing agreement with their own patented software. But not so with the little guy.

But Microsoft may have more difficulty defending its patents because of an April 30 US Supreme Court ruling. In the case of KSR International vs. Teleflex the court ruled that if the innovation being protected is "obvious," the patent can be challenged. The standard of obviousness could be applied to Microsoft's claim, said David Olson, a resident fellow at the Stanford Law School's Centre for Internet and Society.

"If it's proved to be obvious, the patent has less value," he said.

Software patents are granted on the innovative function being patented, not any specific software code, so many software products could have similar functionality, Olson said.

Small businesses would be most vulnerable to a Microsoft patent suit because they probably have no pre-existing relationship with Microsoft and would have trouble fighting a claim, he said. The potential litigation also could make venture capitalists or other financial backers reluctant to invest in a startup.

Chris Lyman, CEO and cofounder of Fonality, a provider of open source-based business telephone systems, agrees that the recent Supreme Court ruling could weaken Microsoft's position.

The infringement claims are an indication of Microsoft's declining position in the software industry, Lyman said. "It tells me that Redmond is now officially afraid of open source and the negative revenue impact it is having upon Microsoft as a corporation," he said.

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