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08.08.10

Microsoft’s Patent Offensive “a Sign They’re Not Making Enough Money With Their Old Business.”

Posted in Finance, Microsoft, Patents at 5:03 am by Dr. Roy Schestowitz

“Microsoft, the world’s most valuable company, declared a profit of $4.5 billion in 1998; when the cost of options awarded that year, plus the change in the value of outstanding options, is deducted, the firm made a loss of $18 billion, according to Smithers.”

The Economist, 1999

Summary: Analysis of Microsoft’s transition into a bully that sues companies using software patents in order to make money; further evidence of software patents disdain, even from patent holders (monopoly owners)

UNDERNEATH the coat of hype, Microsoft is a fragile company with persistent layoffs and increasing debt. Nowadays, as we repeatedly show, Microsoft is attacking those who share Windows and claiming money from them. In essence, it is suing and extorting its very own distributors.

“What this really ought to be called is, extortion as a business model.”But Microsoft is not just suing and extorting its partners; its competitors too receive similar treatment. “A sign they’re bleeding money” is how Rui Seabra explains it and he adds: “When a company starts using it’s [software patents] portfolio regularly, it’s a sign they’re not making enough money with their old business.”

Watch this gory metaphor from the headline of the ‘Microsoft press’ (about the Salesforce extortion): “Microsoft Draws Blood in Salesforce.com Patent Suit”

Glyn Moody asks: “old patents to block new ideas?”

What this really ought to be called is, extortion as a business model. Here is the article Moody was referring to:

Microsoft and Salesforce.com Patent Dispute – a Sign of Battles to Come?

[...]

It’s also a sign that Microsoft is starting to cash in on its patent portfolio.

So, that leads to the next question:

What company is Microsoft targeting next?

Microsoft has resorted to patent racketeering [1, 2, 3, 4, 5, 6, 7]. How shameful. Apologists of Microsoft rarely defend this strategy, either. Here is Microsoft’s booster Alexander Wolfe writing about the rush for patents. The Financial Times is producing similar patent propaganda by equating patents with progress (rather than hindering of one’s progress). From the opening paragraph:

The north-east, birthplace of the steam train and Newcastle Brown Ale, is once again a hub for new ideas, generating more patents per person per pound invested in R&D than any other region of the UK over the past decade.

It is articles like this one which brainwash the public and have the public believe that patents are beneficial to the public rather than the biggest corporations (which use them to marginalise emerging businesses and artificially elevate prices).

Watch this good new article from Vivek Wadhwa, a co-author of several software patents. He is calling for such patents to be abolished in his new piece “Why We Need To Abolish Software Patents” (we mentioned his criticisms of patents last week as well [1, 2]):

During my tech days, I co-authored four software patents. Each cost my startup about $15,000—which seemed like a fortune in those days. I didn’t really expect these to give me any advantage; after all if my competitors had half a brain, they would simply learn all they could from my patent filing and do things better. But I needed to raise financing, and VCs wouldn’t give me the time of day unless I could tell a convincing story about how we, alone, owned the intellectual property for our secret sauce. We got the financing, and the plaques of the patents looked great in our reception area, so the expense was worth it. But there was definitely no competitive advantage.

[...]

New research by Berkeley professors Stuart J.H. Graham, Robert P. Merges, Pam Samuelson, and Ted Sichelman highlights the extent of this problem. They surveyed 1332 early-stage technology companies founded since 1998, of which 700 were in the software/internet space. Here is what they found:

* In software, only 24% of startups even bothered to file a patent. In medical devices, this proportion was 76%; and in biotech, 75%. Far more venture-backed companies file patents: in software, 67%; in medical devices, 94%; and in biotech, 97%.
* Venture-backed companies also file more patents than others that file patents. They file, on average, 5.9 patents as against the all-company average of 1.7. In medical devices and biotech, this is 25.2 vs. 15.0 and 34.6 vs. 9.7, respectively.

Actually, VCs don’t want software patents (at least those who have blogs) and they too — like Wadhwa — are enthusiastically citing the new study from Stuart Graham, Robert Merges, Pam Samuelson, and Ted Sichelman [1, 2, 3].

The world does not want software patents, but Microsoft does want software patents. What does that say about Microsoft’s meaning to the world?

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