Microsoft exec touts mixed source ventures

Interview: Microsoft's Horacio Gutierrez talks about IP issues, piracy

Microsoft has been making moves on the licensing front and accommodations with open source, such as its controversial 2006 agreement with Novell pertaining to Suse Linux. Looking to elaborate on Microsoft's activities, Horacio Gutierrez, Microsoft vice president and deputy general counsel for Intellectual Property and Licensing, met last week with InfoWorld Editor at Large Paul Krill at InfoWorld offices in San Francisco. Companies today, Gutierrez said, have become "mixed source" ventures rather than the world being divided up between open source and proprietary.

InfoWorld: What's happening as far as licensing at Microsoft?
Gutierrez: A lot is happening. This December we will celebrate the fifth anniversary of a significant shift in Microsoft's approach to licensing. In December of 2003 we changed our patent licensing policy to declare that Microsoft was open for business. That is, Microsoft would be willing to license any of its patents to any third party, including competitors, on commercially reasonable terms. That was a significant shift at that time, but over the last five years we've actually been able to see in practice the benefits of that shift. For example, we've signed over 500 licensing agreements in the last five years, from very broad patent cross-license agreements with some of the biggest companies in the technology world to very focused outbound technology licenses to startup companies in China or Europe or the U.S., taking advantage of some of the innovations coming out of the research labs. So [we have] quite a significant track record of licensing, especially if you take into account the kinds of relationships and collaborations that weve been able to do on the basis of those IP licensing deals.

InfoWorld: So it was a shift in licensing. What was the before and after?
Gutierrez: The before I think was and continues to be that most companies look at their IP portfolio as an asset that they want to hoard. That plays a very protective role or that springs into action for defensive purposes when they get sued. We choose to look at our portfolio as a tool that we use in order to help bring about the business objectives that the company has. We've learned over the last five years that using the portfolio to enable deep interoperability collaboration discussions, for example, is one of the clearest ways in which we can bring value and we've had a whole range of successes in that area. I think the most significant one, and perhaps the most surprising one to most people, is the track record in our collaboration with Novell where we've created an interoperability laboratory in Cambridge, Mass. We've expanded even our collaboration beyond what the original scope of the collaboration was by adding collaborations in accessibility, interoperability technologies, document format, interoperability, the Moonlight plug-in [for] Silverlight for the Linux platform, and a number of other collaborations.

InfoWorld: There has been a lot of criticism and discontent with that agreement in the open source community. One of the expressions I heard was it was a tax on Linux by Microsoft. How do you respond to that?
Gutierrez: Well, it is hard to envision that an agreement in which two industry leaders agree to set their differences aside and collaborate could be viewed as divisive, but be that as it may, it's been almost two years to the day since we signed that agreement and I think the world has significantly changed since then. In part, because of that and other collaborations that Microsoft has undertaken, but I think fundamentally because the market realities continue to change. For example, it is harder and harder to continue to define the world of software as a world divided between open source companies and proprietary companies. The truth is that today we're all mixed source companies. Every company that traditionally comes from an open source background has over time moved to the middle after realizing that in addition to the open source foundation, they also need proprietary offerings that will differentiate their services from others and therefore will enable them to build a viable business.

InfoWorld: Who are you referring to there?  Novell?
Gutierrez: No, I'm referring to all of them. If you look at Red Hat, it certainly has a very credible Linux offering.  At the same time, they admittedly are counting on JBoss and a number of other technologies in order to build a differentiating value proposition and each and every one of them would be that. So at the same time, companies that you could have associated traditionally with a pure proprietary software development model, including Microsoft, you see them today cooperating with open source development projects, even shipping open source code as part of their breadth of their offerings. Over time this distinction, which was mostly an ideological and very emotional distinction, the reality of business is causing all companies to converge to the point where, as I said, in a few years this distinction will be without meaning and we will all be mixed source companies.

InfoWorld: It was a couple of years ago that Steve Ballmer said Linux infringed on Microsoft patents. Has Microsoft ever divulged those patents and does it plan to do that?
Gutierrez: We start by saying that the fact that certain products might infringe on Microsoft patents is not really that interesting. Any company that has a significant portfolio would be able to say that about many products, whether they're open source or proprietary.  What is significant here is that these are issues that can and are being solved through the mechanism of licensing. That is when my work and the work of the IP licensing team at Microsoft comes in, by turning those situations into potential collaborations that really answer what customers want. Customers don't want to have to deal with these issues of interoperability and IP assurance concerns. They want their vendors to come together and solve it and that is the solution that we feel has worked and will continue to work in the future.

InfoWorld: So you're not going to tell me what those patents were today?
Gutierrez: No, I will say this: Microsoft publishes every patent that Microsoft gets issued and we have had deeper, detailed discussions in the context of private licensing conversations, which by the way is the practice that every technology company follows. So to answer your question, yes, we have divulged them. We have talked about them with a number of companies that have shown interest in having a good faith licensing discussion with Microsoft.

InfoWorld: Can you tell me what one or two of them were?
Gutierrez: I can tell you that there have been a number of them and no, those conversations are business conversations that we tend not to divulge.

InfoWorld: I think it was early this year that Microsoft released documentation on multiple technologies. What's been the impact of that?
Gutierrez: Well I think it's been very significant. So far over 44,000 pages of detailed technical specifications have been made available over the Internet for anybody who wants to use them. I think that is an unprecedented step that no other company in the industry has really taken. In addition to that, there are a number of the patents on those technologies that are part of patent maps that we've made public and Microsoft has committed to make those patents available for licensing at very low royalty rates.  So that was one of the commitments that Microsoft made back in January in the context of the interoperability principle, but there were also a number of other principles included in there.  For example, [that] deal with data portability, that deal with Microsoft support of industry standards, and that deal with the kind of industry consultation mechanisms that are really necessary to be able to advance the ball in that area.

InfoWorld: I was speaking with the executive director of the Eclipse Foundation the other day, Mike Milinkovich, and we talked a little bit about whether Microsoft was ever going to join Eclipse. Is Microsoft going to do that?
Gutierrez: Well actually, I think it must have been 48 hours ago that they actually commended Microsoft for having explicitly agreed to contribute in a number of areas. I am really not the right person to talk technically about the scope of the collaboration. 

InfoWorld: But is Microsoft going to join the foundation?
Gutierrez: I really wouldn't be able to answer. I'll tell you, we have now a breadth and depth of engagement with the open source community and a number of key development projects that is really unprecedented in the history of the company.

InfoWorld: So you're working with Eclipse and Apache and I think there might have been another organization?
Gutierrez: That's right, a number of them.  And I think you would find, in this area, that [Microsoft executive] Sam Ramji would be a much more adequate spokesperson.

InfoWorld: Is Microsoft going to offer any more products under open source? Has Microsoft looked at the GNU license or anything like that?
Gutierrez: I am sure that you're going to see a lot more from us, both in terms of the kinds of licensing programs that we create as well as the kinds of things that we're going to be able to do in our collaboration with open source. So in general I would say the answer to your question is yes. I think the most significant part of this is that we've learned over the last five years, having done over 500 licensing deals, that it is possible to develop a licensing program that really enhances the collaboration opportunities for companies where you get the benefit of the innovation that other companies do and at the same time you're able to share yours.  And this open innovation paradigm is one that we see growing and consolidating over the years and we feel that there is a very important role for the licensing work that we do in order to make that possible.

InfoWorld: What do you see as the major issue that end user enterprise customers are facing in terms of licensing?
Gutierrez: The major issue they're facing is ensuring that they can continue to have a heterogeneous network that has products that have been designed to work well with each other. The reality is that most customers do have a combination of technologies in their installations and they do not wish to rely on a single vendor.  What that reality poses is the challenge of designing and developing products that work well with each other. IP licensing plays a role in enabling that interoperability work being done.  The feedback that we received in our collaboration with Novell has been, first of all, very supportive of the deep collaboration that we're doing, and that has been resulting in tremendous commercial success on the part of Novell in that particular instance.  For example, they grew over 38 percent between 2006 and 2007 in the Linux market.  They were the commercial vendor that grew the fastest in that segment.  Their market share grew almost 10 percent year over year. And this is the result of the appreciation that customers in the enterprise give to the efforts that Microsoft and Novell have put in solving real life, customer-centric, interoperability challenges and providing them with peace of mind from the point of view of intellectual property.  So there is a model by which these customer objectives can be met.

InfoWorld: Novell is working on a couple of different projects to put the Microsoft technologies on Linux and other platforms. One is the Mono project to put the .Net Framework on Linux and other platforms and the other is Moonlight, offering Silverlight for Linux. Is there anything else coming down the pike from either Novell or other companies that are going to take high-profile Microsoft technologies and enable them to work on Linux or other platforms?
Gutierrez: Yes, the Novell and Microsoft joint interoperability lab, in addition to the areas that you mentioned, are already delivering results in terms of document format interoperability, interoperability between the ODF format and the Microsoft file formats.  They're working on a number of accessibility, interoperability solutions.  They're working on identity and directory services interoperability.  They're working on systems management solution and virtualization. So there's a whole range of things, the results of which are already apparent in some cases and in other cases you will see become apparent over the next couple of years.

InfoWorld: What about the issue of piracy?  Is that still a problem?
Gutierrez: Piracy is a global problem and I think to be able to assess how we're doing you would have to really separate by region or even by country. I think there are a number of countries in which we've had some encouraging progress and we've seen, for example, some positive steps being taken by some of the key governments in the largest jurisdictions. In other countries, piracy continues to be rampant with rates that exceed 90 percent in some cases.  This is the kind of problem that you're not going to solve with a uni-dimensional approach. Piracy is a problem that needs to be solved by a combination of things, by enhancing the legal system in order to create the tools that are necessary from a legal perspective to protect intellectual property. Once the laws are in the books then you need to have an enforcement mechanism that focuses on the piracy problem and is technically equipped to detect it and to fight piracy, which in many countries is associated with organized crime. It is really significant business in many countries. You need education from the point of view of the consumer. And then you need a judicial system that understands the IP issues and is prepared to enforce them. So it's really the whole spectrum of activities that will bring the results and it's certainly a long-term battle.

InfoWorld: Can you name a country or two where things have gotten better and one or two countries where things are still pretty bad?  And how much money does Microsoft lose through piracy each year?
Gutierrez: We can send you the information from a software industry perspective. I don't think we've put a number specifically on the impact on Microsoft, but it is very clear that piracy costs industry billions of dollars every year and it certainly costs governments significant amounts of money in tax revenue that it doesn't collect because the piracy is conducted through informal commercial channels.  I would point out that we've been encouraged by some of the steps that the Chinese government has taken in working with industry to try to collaborate. This is clearly not the end of the road and there's a tremendous amount of work that continues to be done, but certainly we've seen over the last two years that this is an issue that's been taken more seriously.

InfoWorld: What places are still a problem?
Gutierrez: There are a number of countries in Latin America.  And sadly enough, I would say although the piracy rate is not as high [here] as in other countries, we felt that we could have made a lot more progress in the U.S. itself in dealing with the piracy issue.  But as I said, it's a process and it's a process that will take many years to get to the end.

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