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Pro or Anti? MSFT, SCO, and Linux

I poked my nose into Randy Morin’s iBLOGthere4iM and saw that he had posted on Microsoft’s SCO licensing deal again.  He states “the justification that Microsoft is licensing SCO LINUX to protect themselves against some liability is great misdirection”. 

The thing that most people don’t take into account is the size of the Windows business.  That makes it a very tempting target.  As an example, about a year after we shipped Internet Explorer, we got sued by a gentleman (and I use the word loosely) in Illinois, claiming a prior registration on the trademark.

As it happened, I had searched Internet Explorer federally before we proceeded, and the federal PTO had stated that Internet Explorer was a generic term, and not protectable by trademark.  The Illinois PTO saw it differently.  This man’s claim was that two weeks before we shipped IE he was shipping a floppy disk of components for accessing the internet (tcp/ip stack and such) and had named his floppy disk product Internet Explorer.

I went through several months of legal proceedings, and ended up in Chicago where this case was to be tried.  In the end, we settled with the man for millions of dollars before the case went to trial and I didn’t have to testify.

We had a solid case in law.  So, why did we do this?

Risk management.  If a judge were to decide, even in a pre-trial setting,  in this man’s favor, the judge might choose to enjoin Microsoft from shipping any product including IE.  That would mean all of Windows, Office, and several other products at that time.  A 90 day delay while the offending code was removed could cost the company billions.  If a judge, post-trial, were to decide that Microsoft had wilfully infringed this man’s trademark, the company would be liable for triple damages, based on the revenues to the company and lost revenues to this individual.  It could easily run into hundreds of millions, or even billions of dollars.

The millions we paid this man were insurance, and nothing more.  We knew we were in the right, and had a healthy chance of winning.  But the downside was so large that it didn’t make sense to fight.  So, we licensed his trademark and made him go away.

Microsoft doesn’t tend to pay hefty fees to muddy the waters, or create confusion.  Make no mistake — FUD is a tactic they use, but they don’t pay hefty licensing fees to execute it.  They execute it cheaply, and much more effectively, via press and analyst relations.  But they will buy insurance.  A licensing fee paid to SCO is a small price to insure $2BB/quarter in Windows business.  And that’s smart business, as Randy points out.


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