Ballmer Announced that Microsoft Could Acquire Companies based on Open Source Products: Don't Break Out the Champagne

Yesterday, during an onstage interview at the San Francisco Web 2.0 Summit, Ballmer stated: "Microsoft will continue to invest in buying technology, products and market share. We'll buy 20 companies a year consistently for the next five years for anywhere between 50 million and 1 billion bucks. We will buy smaller companies. We will buy smaller companies that make some use of open source software. We don't want to discourage people who would talk with us just because they do some open source." This statement is change from Ballmer's long held hostility and dismissive attitude towards FOSS companies. Based on my experience in selling companies to Microsoft, it is a big change. The last time I sold a company to Microsoft (several years ago now), they initially wanted to remove all open source components in the product although they eventually settled for leaving in some open source components because of the difficulty of rewriting them. However, the FOSS community should not break out the champagne: Ballmer is simply acknowledging the reality that virtually all companies, certainly Web 2.0 companies, are built on FOSS. The statement is the business equivalent of stating that Microsoft will buy companies that are subject to the law of gravity.

Yet in an odd way it is consistant with Ballmer's recent demands that Linux users pay Microsoft royalties. I was discussing these statements with Karen Copenhaver, counsel for the Linux Foundation and one of the most thoughtful lawyers in the open source market, at the SFLC seminar last week and she made the point that Ballmer's statements about Linux are an acknowledgement that Linux is a real competitor to Microsoft. This acknowledgement is also consistant with Microsoft's other moves to engage more broadly with the FOSS community such as their recent successful application to the OSI to approve some of their licenses.

However, the FOSS community should celebrate Microsoft's acknowledgement, however indirect, that FOSS is a real competitor.

Patent Troll Fires First Volley at Open Source

The recent lawsuit in the Eastern District of Texas by IP Innovation LLC (and Technology Licensing Corporation) against Red Hat and Novell may be the first volley in a patent war against open source software. Acacia is a well known patent troll which has been buying patents for some time and works through multiple subsidiaries. http://trolltracker.blogspot.com/2007/10/acacia-targets-linux-in-new-lawsuit.html. Acacia describes itself as follows: The Acacia Technologies group develops, acquires, and licenses patented technologies. Acacia controls 81 patent portfolios covering technologies used in a wide variety of industries including audio/video enhancement & synchronization, broadcast data retrieval, computer memory cache coherency, credit card fraud protection, database management, data encryption & product activation, digital media transmission (DMT®), digital video production, dynamic manufacturing modeling, enhanced Internet navigation, image resolution enhancement, interactive data sharing, interactive television, laptop docking station connectivity, microprocessor enhancement, multi-dimensional bar codes, resource scheduling, spreadsheet automation, and user activated Internet advertising.

Although I and many attorneys in the open source industry have long been concerned about patent challenges to open source companies, this case appears to be the first by patent trolls against an open source licensor. The open source industry provides a tempting target because of its rapid growth. This morning, Eben Moglen at the Software Freedow Law Center Seminar on FOSS issues noted that Brad Bunnell of Microsoft joined Acacia on October 1 . According to news reports, Brad spent sixteen years at Microsoft at a number of positions which included General Manager, Intellectual Property Licensing. http://biz.yahoo.com/bw/071001/20071001005590.html?.v=1

Eben raises the intriguing question about whether these incidents are related. Given the time that it takes to prepare a patent lawsuit, Brad's hiring probably did not effect the filing of this lawsuit. However the hiring may indicate the addition of a new business line for Acacia: suits against open source companies. Steve Ballmer's recent comments about Red Hat's obligation to pay Microsoft for alleged use of its patents makes this lawsuit and the timing of the move interesting.

The seminar was a very helpful overview of the FOSS industry and the next set of legal challenges now that GPLv3 has been published and SCO has been defeated. In the afternoon, the Software Freedom Law Center provided an overview of the legal issues facing FOSS development from establishing contribution policies to entities for projects to patent issues for FOSS projects. The Software Freedom Law Center will be making some final edits and be posting it on their website in the next ten days. You should check their website: http://www.softwarefreedom.org/.