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Microsoft yesterday announced an indemnification policy under which it promises its software licensees that:
For any covered software, we will:
defend you against any claims made by an unaffiliated third party that the covered software infringes its patent, copyright, or trademark or misappropriates its trade secret, and
pay the amount of any resulting adverse final judgment against you (after any appeals) or settlement to which we consent.. The promise is uncapped.
The most obvious motive is to stick a thumb in the eye of Linux and other open source programs. According to CNET:
"We enhance the intellectual-property indemnifications we give our customers," [Steve] Ballmer said at the [at the Microsoft annual] meeting. "We can stand behind our products in a way that open source can't because they have no one standing behind them."
[David] Kaefer [director of intellectual-property licensing] said the argument is resonating with some customers who are concerned about liability. "More and more customers are realizing you don't get what you don't pay for," he said. The problem for Linux is that it has an incredibly tangled history going back through 30 years of Unix development, and Solomon himself would have a hard time sorting out who did what and who owns what.
In fact, a company called Open Source Risk Management plans to make a living off the uncertainty by providing insurance against IP litigation risks concerning open source. OSRM reasons:
But the terrible vulnerability of this amorphous shared licensor/copyright holder structure is that the open source code base has no single unified owner who will assume liability, and coordinate a collective defense for the open source community, when end users get sued. And, although this came as a shock to many nonlawyers, both individual and enterprise end users of GPL software that violates a third party's patent rights or copyrights are directly liable (for up to $150,000 per instance of copying for copyright, and up to the lost profits for patent violations) and cannot get these exposures covered by the vendors who licensed them the software or recommended it to them. And if you are paying for legal defense yourself - which can easily cost $3 million in the case of a single patent defense, for instance - the rational course may well be to settle for the nuisance value of the suit rather than fight to the death. Plaintiffs know this, and they know they can extract monies from uninsured defendants even with unmeritorious claims. This is why OSRM looks not only for legitimate claims against Linux, but also superficially plausible ones - what lawyers like to call "colorable" claims. Since Microsoft takes pains to be sure that its programs do not get contaminated by other code, especially code that might covered by the dreaded GPL, it figures that offering the promise of indemnification will cost it exactly zero. Besides, why would anyone sue a user when they could sue Microsoft itself, a much juicier target? And a user, if sued, would surely come back at Microsoft, anyway, so again the cost of making the indemnity explicit is zero. (Open source is sold without warranty.)
In the context, putting the promise of indemnification in writing is actually a shrewd political and marketing move. It emphasizes that a purchaser of Microsoft products is buying a turn-key operation -- it need not buy code here, insurance there, and perhaps some special adaptations somewhere else. The action also reinforces Microsoft's oft-made point that the crucial factor is not whether the initial software is free, but the Total Cost of Ownership. By explicitly adding indemnification to the purchase package, Microsoft encourages customers considering Linux to factor in the cost of insurance, or at least to consider the possible costs of foregoing safe software.
posted by James DeLong @ 2:12 PM | General
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