If your competitor beats you in the marketplace, then FUD, FUD, FUD

What do you do when a competitor encroaches upon your cash cows, starts usurping deals, demonstrates unbeatable TCO, infinitely better acquisition cost, better security and resilience to attacks? You FUD them of course. FUD being the act of creating Fear, Uncertainty, and Doubt about them. Say, for example, dangling the possibility of lawsuits against users of the competitors products. Scare your customers, scare their customers.

And how do you do this? Claim patent violations. And which patents one might quite justifiably ask? Well …


So Microsoft took the third choice, which was to begin licensing its patents to other companies in exchange for either royalties or access to their patents (a “cross-licensing” deal). In December 2003, Microsoft’s new licensing unit opened for business, and soon the company had signed cross-licensing pacts with such tech firms as Sun, Toshiba, SAP and Siemens.

At the same time, Smith was having Microsoft’s lawyers figure out how many of its patents were being infringed by free and open-source software. Gutierrez refuses to identify specific patents or explain how they’re being infringed, lest FOSS advocates start filing challenges to them.

Thats right folks. Microsoft will not tell anyone what the 235 or so (give or take a few) are. Of course, if they sued someone, or some company, they would be compelled to indicate what their property was that was being stolen from them.

Before I get into this, let me say unequivocally, that I am a strong believer in a good patent system. I am not convinced that is what we have now. Entrepreneurs need patents to establish themselves as being unique in some regard, and give them a fighting chance to secure market entry, capital, and other items relevant for business growth.

Now back to the strategy.

I am going to be blunt. This was not a bright move on their part.

The strategy works like this. If you have a patent that gives you a clear time frame for monopoly use of a particular technology, and someone violates that patent, you send them a cease and desist letter indicating what it is they are using, or you sue them. In either case you are compelled to explain what it is you own, and how they violate the ownership. Without this, if you cannot demonstrate that you are being injured, and that you are being damaged, your case is, well, weak at best. Quite likely to be tossed. Though I am not a lawyer, so ask one if you want details.

The problem is, once the specific “owned” item is identified, the defendant may work around the technology. They may also challenge the patent. The latter is generally harder. I would expect that if the “owned” technology is really in the defendants systems, that a workaround would be developed. This is quite common.

It also brings on the counterstrikes.


Counterstrike 1
: assailing the patent. As indicated, this is harder. Little would motivate the FOSS community more than the chance to take down a patent. Eric Raymond’s quip about “with many eyes, all bugs are shallow” may be paraphrased and re-interpreted in terms of the patent and prior art. With many eyes, prior art is more easily discovered. Enough of this, and demonstrating previous examples, or even non-uniqueness, and obviousness might weaken the patent to the point of being revoked. This is a very real possibility for weak patents.


Counterstrike 2
: quoting Tom Clancy, “you’d better not kick a tiger in the ass unless you have a plan for dealing with his teeth.” There are some serious tigers out there using Linux to win customer business whom have a vested interest in seeing this business continue. Attacking Linux in this manner might wind up with countersuits (this would almost be required, as were the Novell and RedHat suits against SCO, for the battle SCO is about to lose) that would point to patents that Microsoft likely has violated. Remember Alcatel? 1.5B$ last I heard. Now imagine that with some patent monsters like IBM, HP, … If they felt that they or their customers were going to be threatened, and they saw a risk in revenue from this threat, I would bet a lawsuit or 3 would show up about Microsoft infringements.

When pushing this issue, you don’t need 235 patents. You need 1 good patent and a clear cut case of violation, and damages as a result of that violation. Thats really it. Just one. Two or three more for good measure, but one good one, demostrating quite clearly how they were harmed. Loss of revenue ought to do it.

Of course, if your patents are, well, weak, at best, maybe you need 235. After all, if 234 of them fail to stick, maybe that last one about MSDOS file format can be shown to have caused billions in losses.

Alcatel’s patent issue was over the mp3 format among other things. Didn’t need 235 of them. Just one good one. Eolas’s patents were over embedded activation of specific technologies. Only needed 3 or so.

You use 235 when you don’t really have 1 that will work. It is megatonnage, sheer shock and awe, and says more about desperation of the FUDder, than actual infringement. Because if there was actual infringement, they would detail it. If there wasn’t, you would hear about 235, and see no details.


Counterstrike 3
: The work-arounds. If there was infringing technology (I don’t believe there is, as Microsoft appears to refuse to indicate what it is, where it is, and the damage it has caused them), in addition to the other strikes, there would be a highly concerted effort to remove the infringing technology. This means that the alleged damage to Microsoft would cease. And that is something Microsoft would hate to have happen. Think about it. They can go FUDding till the cows come home, and I assume they will, without ever having to tell anyone what the technology is. That is, this is marketing by threatening potential future lawsuits.

Like I said in a previous post, its like the “We Say So” corporation.

If there is an actual infringement (which I would hazard a guess that pretty much most people doubt), it will be rectified. Quickly. Which pretty much takes that item off the list as a FUDdable source. And prevents them from getting active marketing mileage out of it.

I am sure others will go into greater depth on these points.

Unfortunately, this FUD is likely to be the second shot fired across the bow. The first was with SCO as their proxy. Follow the money. Microsoft and Sun paid large upfront license fees to SCO very soon before SCO launched its tragic and soon to be ill fated lawsuit. Both Microsoft and Sun had been assailed by Linux, Sun almost doing the right thing and adopting it wholesale, Microsoft retaining its not-invented-here attitude. Their collective FUD worked on a few groups, including some not terribly pre-disposed to Linux in the first place. As the SCO onion was unpeeled (remember the massive misappropriation of intellectual property that was claimed? Notice the uncanny similarities with what we are hearing now? Wanna bet that the same “brains”, money, and ideologues are behind this?), notice how it sorta-kinda stopped being about misappropriation of IP, and became little more than a contract dispute?

SCO was goaded by its new masters to do something not very wise. We are seeing a nearly identical strategy playing out now, but not using copyrights. Simply substitute patents.

Lets ask SCO how it is working out for them.

Notice I haven’t said anything about the PR. Imagine for a moment, Microsoft pursuing any one of its customers. Any of them. Doesn’t matter which one. Imagine how that would play. Whether or not they would win in court would be immaterial. They would lose in the court of public opinion.

I am going to offer them free advice on this. They don’t have to take it of course. They can ignore it, I expect them to.

Walk away from this fight. There is no exit strategy that results in a win for Microsoft, or its shareholders. There is a huge downside to every conceivable scenario. There is little chance for this not to go pear-shaped on them. Do a simple cost-benefit analysis. Loss of goodwill in every conceivable case. No financial/market benefit to speak of. Loss of competitive traction. More rapid adoption of competitive technology so end users can escape the monopoly.

If someone can point out how this is a win for them, please let me know. I completely fail to see it.

Yes they should defend their property. Lay out the alleged infringements for the world to see. That is, if they exist. Because if we keep hearing about alleged infringements, some bright marketing person at a competitor might start doing some rather obvious marketing ju-jitsu. And Microsoft really doesn’t want that.

Update:

On this site, we see this

Why won’t he do the same thing in public? “There are a number of legal reasons why companies don’t do that. No company does that. IBM (IBM) doesn’t do that. HP (HPQ) doesn’t. Fujitsu (FJTSY.PK) doesn’t. For a number of practical reasons. Once you’ve made that statement from a public perspective, anybody in the world can go to court and ask for a declaratory judgment. That would spur potentially hundreds or thousands of lawsuits around the world, or reexaminations of patents around the world. Even if they’re perfectly good patents, it would create an administrative nightmare.”

Uh huh. I am not a lawyer. I thought only groups with standing could file a suit. If anyone can file, then we have a free-for-all … litigation-gone-wild.

In terms of their going deep, patents are by definition, disclosures. If the people claiming to be injured do not indicate where there is a misappropriation, then there is no misappropriation (e.g. they lack standing, as they are not injured). Get a lawyer and ask them. I can’t sue GM if they allegedly violate a Toyota patent. I have no standing. I am not injured. Likewise, if Toyota believes itself injured by GM, it has every right to make its case, prove standing, and move forward. But it has to prove cause before it can move on to proving a misappropriation.

Contrary to their lawyer saying they don’t talk about patents in public when licensing/litigating, have a look at the RIM situation as one counter example. HP talks about their patent litigation quite often. IBM goes even further, specifically noting which patents are being infringed upon.

So, well, he is a lawyer, and I am not. But then again, it appears that his point about all these companies not talking about the patent issues in public is, well, not quite correct.

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