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MS & Sun Settle Lawsuit, Create "Patent Regime"
Saturday, April 03 2004 @ 12:30 AM EST

Think we might have something to worry about in this pact between Microsoft and their new best friend, Sun Microsystems? They have buried the legal hatchet, settled out all claims Sun had against MS and also agreed on some "other matters":

"Part of the reason could be the accumulated weight of all the litigation it has faced. Even Microsoft gets tired of being portrayed publicly as a bullying monopolist, and so it's willing to settle--in deals greased by its huge wad of cash--and move on.

"'Microsoft seems to breed a lot of rhetoric from companies that it litigates against,' said Mike McNeely, an antitrust attorney with Gray Cary Ware & Freidenrich. 'But strategic considerations may lead both Microsoft and its opponents to say this is silly and maybe it's something we can fix with money.'"

Certainly, $1.95 billion is money to fix by, especially to those proprietary dudes who think nothing else matters, but there is obviously more to this story than money.

$1.95 billion is what MS is paying Sun in the settlement, who promptly laid off 3,300 employees in a cost-cutting restructuring move (what do you want to bet the Linux guys are the first to walk the plank?):

"Under the truce terms, Sun ended patent and antitrust suits against the Redmond, Wash., software giant. The companies also signed a 10-year technology sharing agreement.

"The pact will mean a cash windfall for Sun. Microsoft will pay Sun $700 million for antitrust issues, $900 million for patent issues and $350 million for up-front royalties in the technology deal. . . .

"'This creates a patent regime between the two companies so that we don't run afoul of each other,' Ballmer said. 'The specific technical collaboration is focused on talking to each other across the network. But as we looked at this we said, "Let's make sure we are clean on our patents."'. . .

"Santa Clara, Calif.-based Sun also released financial information and restructuring plans. Sun will eliminate 3,300 jobs to drive down costs. The cuts will be 'broad-based, geographically and functionally,' McNealy said.

"The company also promoted executive vice president Jonathan Schwartz to president and COO."

You remember Mr. Schwartz, don't you? Mr. Jonathan "We have no Linux strategy" Schwartz? Maybe Rob Enderle finally got one thing right:

"'Sun and Microsoft have a common enemy: Linux,' said Rob Enderle, principal analyst at Enderle Group in San Jose, California. 'They are seeing each other as less of a threat and, together, facing a common threat.'"

Let's not forget David Berlind's article on Sun and SCO, either. The joint MS-Sun press release is here. The Register has a list of what the pact contains, including more details on setting up the "patent regime":

"The parties have agreed to a broad covenant not to sue with respect to all past patent infringement claims they may have against each other. The agreement also provides for potential future extensions of this type of covenant. The two companies have also agreed to embark on negotiations for a patent cross-license agreement between them."

Sun is also stating, and no doubt this is for the eyes and ears of the EU Commission and whatever court MS will be appealing their judgment to, that Sun is satisfied that this pact solves all issues it brought against MS in the EU. In addition, CRN says MS got them to agree to sign up for a license it can show to the judge in the US antitrust monitoring program. You'll remember SCO got one of those just before a recent hearing:

"Sun has agreed to sign a license for the Windows desktop operating system communications protocols under Microsoft's Communications Protocol Program, established pursuant to Microsoft's consent decree and final judgment with the U.S. Department of Justice and 18 state attorneys general."

There is also an agreement about Java support for those using Microsoft products and an agreement to allow servers to interoperate, as well as email, database and authentication software, and to improve collaboration between Java and .NET.

So, they plan to play nice together. Think GNU/Linux will get to play in their sandbox? I can't help but remember that after MS and then-AOL now Time Warner settled their legal dispute back in May of 2003, they also mentioned certains public terms and some "other matters" they had privately agreed to in that settlement:

"As part of the broad settlement announced Thursday, Microsoft will pay $750 million to AOL and grant it a royalty-free, seven-year license for its Internet Explorer browser, ensuring that it will continue to be used by millions of America Online customers. The companies also agreed to work toward making their fast-growing instant-messaging products compatible.

"The agreement could give Microsoft even greater influence over the future of the Internet, as well as the distribution of online music and video entertainment. The Redmond, Wash., company already commands monopoly power in personal-computer software, and its Internet Explorer browser has become the primary on-ramp to the Internet for hundreds of millions of people world-wide. AOL, which owns the rights to the rival Netscape browser, was one of the last remaining counterweights to Microsoft.

"The two companies Thursday said they would remain competitors but would work together to bring new digital content and services to customers, as well as a common approach to protecting copyrighted material online.

"Microsoft Chairman Bill Gates said the agreement could accelerate the adoption of digital media. 'While our companies will continue to compete, I'm pleased that we've been able to resolve our prior dispute, and I'm excited about the opportunity to work together collaboratively.'

"AOL's chief executive, Richard Parsons, added that he welcomed 'a more productive relationship with Microsoft,' and that the agreement to collaborate on digital media 'marks an important step forward in better serving consumers and protecting the interests of all content businesses.'"

As if this had one thing to do with "better serving consumers". He told the truth about it being about "protecting the interests of all content businesses."

Around that same time, Darl started telling us that he wanted to be like the RIAA and then Warner Bros. became a SCO customer in September, and the rest, as they say, is history. They started talking about suing the pants off Linux users using the DMCA next. Remember this story from eWeek?

"On Tuesday McBride said that SCO and its attorneys, led by David Boies, managing partner of Boies, Schiller & Flexner LLP of Armonk, N.Y., will be basing at least part of any case on provisions of the Digital Millennium Copyright Act that covers software copyrights.

"'Now we're going to the other side of the playing field and opening it up the part that has to do with copyright inside of Linux,' McBride said. 'We're not going to go out and sue a thousand companies on day one. We'll start off, we'll get a domino and we'll go from there.'"

The RIAA's Grammy.com reported the SCO story. They liked Darl's "Greed is good and it's Constitutional too" open letter, as I call it, while the rest of the world laughed:

"The ongoing legal challenge posed by SCO to the world Linux community (link) continued to make headlines SCO maintains that Linux versions infringe its copyright on Unix. SCO CEO Darl McBride posted a Dec. 4 letter on his company's Web site praising the DMCA while attacking open source licensing as unconstitutional. McBride said, 'In the past 20 years, the Free Software Foundation and others in the open source software movement have set out to actively and intentionally undermine the U.S. and European systems of copyrights and patents.'"

So the attack on the GPL fits into a context. And it is becoming more and more clear what that context is and who the players really are. It just gives me the willies to hear about the "other matters" in this new pact, because when the two companies that paid SCO the "license" money that ended up funding the IBM lawsuit, not to mention Microsoft's drumming up BayStar money for SCO, get together, it's not a good sign for GNU/Linux. I hope the Public Patent Foundation is getting plenty of donations. I was about to tell you that WalMart's online store is now shipping computers with Sun's Java Desktop Linux preinstalled for about $300, and in fact, I was going to buy one, but I just changed my mind.

More and more, it seems that the entertainment content businesses, including Microsoft, want to make sure no culture can be offered anywhere in the world by anyone except them and only by means of their one-way paid pipeline. They can't achieve that goal without killing free/open software. Of course, they also would have to shut down the openness of the internet. I begin to suspect they may hypocritically use "security" concerns to do so, and the Wall Street Journal [sub req'd] reports they are already asking the goverment to establish standards for security in software:

"In a surprise shift, leading software companies acknowledge in a report to the Bush administration that government might need to force the U.S. technology industry to improve the security of America's computer networks.

"The companies, including Microsoft Corp. (MSFT) and Computer Associates International Inc. (CA), said the Homeland Security Department 'should examine whether tailored government action is necessary' to compel improvements in the design of computer software.

"The 250-page report containing that recommendation and dozens more was being released Thursday. . . .

"The report was put together by experts who included representatives from the Defense Department, National Security Agency, technology companies and universities. The group was organized by executives at Microsoft and Computer Associates."

The Business Software Alliance is the secretariat for the task force, according to the Executive Summary [PDF], and you know how much *they* love GNU/Linux. One of the report's suggestions for what they call a National Strategy to Secure Cyberspace is a certification process for programmers:

"Create Software Security Certification Accreditation Program. Support the creation of a certification and accreditation program for increasing security in software development."

You can get the full report from this page. You might also like to take a look at this story, also in the Register, which seems apropos in the context of the settlement, about testimony before the FCC on revisions being considered to the 1996 Telecommunications Act and FCC regulations. FCC Commissioner Michael Copps is quoted saying that entrenched interests are trying to close off the internet for their own advantage, and I personally suspect that the SCO attack on Linux is part of that bigger picture:

"'Entrenched interests are already jockeying to constrain the openness that has been the Internet's defining hallmark, and they are lobbying the FCC to aid and abet them,' Copps declared.

"'They claim all they are advocating is a deregulated environment where the market can reign supreme. But in reality, they are seeking government help to allow a few companies to turn the Internet from a place of completion and innovation, into an oligopoly. Power over the Internet would then reside with the network owners, who could use choke-point power to constrain consumer choices, limit sources of news and information and entertainment, undermine competitors, and quash disruptive new technologies.'"

Ballmer says that the Sun settlement first began to be discussed a year ago. Let's see. What was happening a year ago? Well, if we reread SCO's quarterly SEC filing for the quarter ending April 2003, we find that a year ago is when Sun and MS bought licenses from SCO and SCO filed its lawsuit against IBM. And in March a year ago, SCO sued IBM, while Ballmer and McNealy had a round of golf and discussed how to work together. What a coincidence.


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