Gates’ memo suggests that in 1991, Microsoft still considered itself a relatively small company challenging entrenched incumbents. It was locked in a legal battle with Apple over the legal rights to the graphical user interface. It was in the midst of the OS/2 wars with IBM. And it was fighting to break Novell’s dominance of the networking market. In short, Microsoft feared the incumbents they were trying to displace would use the patent system to fortify their dominant positions in their respective markets. They thought their chances in the marketplace were better than their chances in the courtroom.
Now, of course, the shoe is on the other foot. Microsoft is the incumbent, and their dominance is being challenged by smaller, more nimble companies. Probably the most threatening are companies like Red Hat and Novell that build their products atop free software. There is a real danger (from Microsoft’s perspective) that free software products will mature to the point where Microsoft’s customers will see little added value in Microsoft’s proprietary offerings.
Smith quotes free software guru Richard Stallman, who at a Tokyo conference discussed the claim that Linux violates 283 software patents. Smith chastises Stallman for “flaunting” Linux’s patent infringement. What he doesn’t mention is that there are now so many software patents on the books that every non-trivial software product infringes numerous patents. Smith’s position, if taken literally, would mean that any company that wanted to develop software would need to sign licensing agreements with Microsoft and other large companies with patent war chests.
Of course, that might be the whole point. If Microsoft can establish the precedent that anyone wanting to enter the software business needs to first negotiate patent agreements with incumbent firms, it would ensure that Microsoft will continue to collect royalties no matter who wins in the marketplace.