A Business Relationship Built At The End Of A Pointy Stick Isn't Much Of A Relationship

Say That Again

from the let's-do-business,-or-we-might-sue dept

Last week, Microsoft was kind enough to invite me to sit down, one-on-one with Horacio Gutierrez, the company’s VP and Deputy General Counsel in charge of intellectual property and licensing. As you might imagine, given my views on the patent system in general, and Microsoft’s gradual embrace of the patent system specifically, he and I disagreed on a fair amount. We agreed that the patent system should be focused on encouraging innovation. We agreed that there were abuses of the system. From there, our views pretty much diverged, though the conversation was fun and lively.

Gutierrez began the conversation by focusing on all of the “benefits” that Microsoft sees to the patent system, which focused on all of the licensing deals that the company has done. He positioned it by noting that the patent portfolio allows the Microsoft to get into deeper business relationships with other entities. Specifically, he noted that in many cases what began as a patent licensing discussion eventually leads to a much more complete business relationship that increases interoperability. He cited deals with both Sun and Novell as examples of this.

The problem, of course, is that this ignores how these deals actually began. Rather than approaching each other over mutually beneficial relationships, they really involve an implicit threat. That is, Microsoft shows up with its big patent portfolio (or, let’s say, a big pointy stick) and says “hey, let’s make a deal, or I’ll jab you with the pointy stick.” Yes, that can obviously lead to further business deals, but it’s not about two companies entering into a relationship willingly for mutual benefit. It’s all based on a rather clear threat.

The fallacy that Gutierrez laid out is that these sorts of relationships and interoperability are impossible to come by without the use of that pointy stick. That’s difficult to believe. If the relationships really are mutually beneficial, then they are likely to come about in a much more friendly manner anyway. When I pointed out (literally) that Microsoft coming to companies with a big stick didn’t seem like the friendliest of business negotiations, Gutierrez suggested that you “need” the stick to make the conversations work. On that we disagree, and there’s a pretty long history of companies entering into mutually beneficial relationships that don’t necessarily involve the threat of a lawsuit or government granted monopolies on processes.

Gutierrez also pointed out that any complex product these days, by its very nature, will violate numerous patents from numerous other companies and individuals. Thus, his argument is that we really should focus on mechanisms to avoid lawsuits to allow those products to move forward. Thus, licensing is preferable to lawsuits. That’s true, but misses the point. The fact that no complex product can be brought to market without violating numerous patents should be seen as the problem, rather than a truism that is solved through licensing. Let’s fix the problem that makes it so difficult for products to get to market without paying a “tax” to other companies, and figure out ways to let companies innovate freely and compete in the marketplace.

I was somewhat surprised to also hear Gutierrez claim that because of this “patent thicket” situation these days, you couldn’t innovate without patents. I interrupted him to point out that this was ridiculous on its face, as Microsoft’s own history showed. His response was that the situation had changed as the interpretation of both copyright and patent law over the past couple of decades had changed, such that protections that the company had thought it had in the early years didn’t really exist, and additional rulings made it clear that other protections would be useful. Needless to say, I find that unconvincing. There’s plenty of evidence that a ton of innovation occurred when software companies focused on the market, rather than on ownership of ideas.

Gutierrez also insisted on pointing out that Microsoft’s rather massive patent portfolio had been voted by some third party to be one of, if not the, best patent portfolios in terms of quality. He suggested that other firms, such as IBM, were more likely to file very questionable patents, but Microsoft was much more focused on quality. Perhaps that’s a subjective measure, but given how many questionable Microsoft patents we see around here all the time, some may beg to differ — or at least point out that some questionable patents are getting through.

In discussing all of this with Gutierrez, I brought up the company’s continual FUD campaign, where it goes to the press to wave that pointy stick around, in announcing that Linux violates over 200 Microsoft patents. Gutierrez noted that he was among the Microsoft execs who had made those statements, and he stood by them, claiming that Richard Stallman agrees, and falling back on his earlier claim of all complex products violating some patents, which is why he says they just want Linux vendors to work out some sort of patent licensing agreement. That, of course, doesn’t answer the question of why Microsoft keeps screaming about patent infringement, but never bothers to show what patents anyone infringes on.

Finally, we did have a fun conversation on the historical and macro level impacts of patent systems throughout history, where he asserted that perhaps the reason so many countries have found faster innovation in eras of fewer patents was because it makes sense to ignore patents during developmental phases, but after that to put protections in place. I pointed out that it seemed difficult to believe that there was some fundamental shift in economics that meant patents made sense at one time, but not at another — but by then we were running out of time to discuss things.

On the whole, however, I’ll say that we had a spirited discussion on the role of the patent system in encouraging innovation. More than once, we agreed that the conversation might have been more fun if we were having it around a couple of beers, rather than a Microsoft conference table. While I don’t think either of us changed each other’s minds, I did appreciate the chance to sit down and discuss these issues face to face on the record, and I hope to have a chance to continue the discussion in the future. I can understand where he is coming from and what Microsoft’s position on the matter is, but you have to admit, as the holder of a bigger pointy stick than most other participants, Microsoft may be more inclined than others to be a big supporter of being allowed to use the big pointy stick.

Filed Under: intellectual property, licensing, patents
Companies: microsoft