Mr Microsoft

Live-Blog: Software Piracy, Proprietary vs. Freesoftware

Driving Software Value In The New Innovation-driven Business Equation (Zaid Hamzah)

Zaid Hamzah works with intellectual property at Microsoft; his specific responsibility is for value creation, viewed with a holistic perspective. 

Central to understand the situation MS finds itself in is appreciating that there is a new economic model.  In industry, everyone is reaching for the centre of the OSS / Corporate spectrum; as a result the MS model of production is very similar to OSS.  Governments, for example, have access to source code.  The boundaries between the two approaches that have existed in the past are shifting. 

We are best understanding the new environment as being a software eco-system, with all the connotations and implications that has.  As a part of this, there is evolution occurring in MS – they are moving to patent driven situation, rather than IP. 

Five key points

  1. This is a hybrid environment.  MS accept the reality of OSS.  This is “The shift to the centre” (as an aside to this, it is important to appreciate that access and ownership are different concepts). 
  2. It is all about innovation.  An essential element of this is peaceful coexistence between corporate and OSS creators.  We will compete based on value and quality of product.  Governments should choose the model that best meets their requirements. 
  3. This neutral approach is beneficial to innovation.
  4. Under copyright law, you can protect code only; the idea is not protected.  Patents in contrast will protect the idea.  This is beneficial to innovation.   
  5. The protection of software with patents does raise other issues we have to consider.   

It is important to realise that software no longer just acts as an enabler.  It is now at the very heart of innovation that is occurring.  For that reason government’s cannot take a prescriptive approach.  The key thing that drives development is incentive.  It is also important to remember that OSS adopts the commercial source model, but they just have a different model. 

The challenges

There is no system for registration of copyright; it happens automatically.  Because it isn’t registarable, it becomes really hard to prove any kind of infringement.  In order for it to stand up in court, proof of ownership requires evidence.  A patent (which you do register) makes it considerably easier to prove. 

MS seeks to demonstrate that countries should adopt a neutral model of procurement, and not have a preconceived idea of what model (corporate or OSS) is best.  It can be argued that adopting OSS immediately deals with any issues of legality; this is a mistaken solution. 

[Clarification questions: What is a neutral procurement policy?]

Lets look at an example.  Malaysian government says, all other things being equal, we will prefer OSS software.  By neutral MS means they should adopt the solution that suits them best. 

[Hang on; OSS is free, and the code can be changed to make it specific to the end user.  Surely this makes it an ideal for government].

The distinction between company and country has broken down – large companies all have a government relation’s officer. 

[Do MS try to change the legislative framework in the countries it is doing business with?  Does this raise social justice issues?]. 

Yes, MS does try to influence the legislative environment.  MS also provides resource training, for example to judges. 

[In Nigeria, the work that MS is doing isn’t having an effect; they are training the wrong people.  For this reason OSS is an option for many people].

Different approaches are adopted in different countries – in Asia, MS has done lots of stuff, for all the different elements of society.  This is not just an elite thing.   

[It is possible to benefit from not having a strict IP system i.e. Singapore.  How will the patent system be better?]. 

A company that owns a patent get a higher premium than one that only has IP protection.  Generally IP is regarded as a weak level of protection.  Software patent encourages innovators to continue to invest, because the benefits of the investment are likely to be larger and the investment contains less risk. 

[Patenting does not lead to transparency in Europe, but the reverse]. 

MS does not have a global patenting strategy, but operates locally, dependent on the conditions it finds in different markets.

John Palfrey’s Response – in italics

The idea of a move to the centre is certainly true.  Ten years ago, the relationship between Microsoft and OSS would have been very different.   This is the logic for the change: Step One:  There is rampant piracy, especially in East Asia (in some countries as high as 90 per cent – that is 90 per cent of people using MS products, but did not pay for them).   Step Two:  US and other western countries start to argue for greater IP protection in other markets.   Step Three A: The China example; in order to comply with the American demands to cut the piracy of MS products, the government starts to favour Open Source.  MS respond to this by saying that this is a bad idea. Step Three B: It starts to be argued that copyright protection is insufficient.  In the US, you had to register copyright until 1976.  That system was abolished and it has become a more informal arrangement.  This is the same in most parts of the world. Step Four B: We should do software patents instead of copyright. There is a twin-track logical process occurring.  Why is their Open Source Software anyway?   [In order to change the software; you need access to the code.  Can also be linked to the desire / attractiveness for anarchy.  People’s negative reaction to MS]. It is important to remember that people hated MS.  This idea was closely linked to the hacker mentality.   From this desire, we can state it is important to have a legal regime that permits and facilitates the creation of free software.   Three versions of the law, seeking to do three different things:

  1. You can’t do this (you can’t drive faster than 70 mph);
  2. Levelling the playing field to enable the ecosystem;
  3. Enabling something i.e. voice skype (could also be grant based, as in offering financial support). 

MS has a huge advantage in the market place.  We might be less concerned about the 90 per cent piracy than the 90 per cent penetration.   Government needs to level the playing field.  Patents would prevent OSS innovation; and then we reach an argument against patenting.  Don’t give these monopolies to already very powerful people.   

[Is this about geopolitics?].

This is about geopolitics and people are fighting for different things in different regions.  The US has been very prominent in campaigning for its interests.  But there is also a localist element to the discussion. 

[We should not legislate].

This does not happen anywhere.  US pressure has been instrumental in making most countries create copyright protection to some level. 

JP: The US uses trade to threaten countries to fix their piracy issues.  Even though some governments have moved to OSS, it is not obvious that this solves the problem; after all does not impact business or private users who continue to use pirated MS products. 

[The Internet / Operating System are not the same as other technology forms.  MS’s success is based on their big market share, not innovation]. 

This is an incompletable argument.  MS invests lots of money, and the patent offers a protection of the investment.  This isn’t about MS, but the small company, who should get returns on their innovation. 

[A patent law suit in the $4-5 million.  Small companies will not be able to afford it]. 

A patent would be a major asset to a country and a company. 

[Normally a cease and desist letter will crush innovation.  No one wants to go to court.  Money speaks.  Also how diligent is the patent regime – average time in the US is eleven minutes].


One Response to “Mr Microsoft”

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