Thursday, April 28, 2005

Mercury News interview with Microsoft's Brad Smith

from Mercury News, interview with Brad Smith of Microsoft:

Q How significant was your settlement with AOL Time Warner?

A The Time Warner agreement was very important. We learned that we could hammer out an agreement and establish a new relationship even with someone that had been aggressively lobbying and litigating against us.

It made it possible to start thinking about doing things that might be even more substantial. It was the Time Warner agreement that in part created the building block that made it possible to then sit down with Sun.

Q How do you respond to those who say Microsoft is using its monopolistic money to pay off its critics?

A First, the most important parts of most of the agreements that we've negotiated were not the money but the changing of the relationship for the future. (Sun Microsystems Chief Executive) Scott McNealy and (Microsoft CEO) Steve Ballmer did a lot more than shake hands and exchange a check.

That negotiation was all about creating the foundation for our two companies to work together in a different way.

Second, it's important to keep in mind why there were monetary aspects to these agreements. Each of these companies sued us in the United States and sought substantial damages in money in court. Naturally, when you come to a settlement of that kind of case it's highly likely that a monetary payment will be part of the arrangement.

Q Can you talk about why Microsoft thinks patent reform is important?

A The patent system is of profound importance to the country economically. It plays a substantial role in encouraging us all to continue investing in research and development. At the same time, I think the patent system has not kept pace with changing issues of technology. We see some weaknesses. . . . The number of patent lawsuits has grown from about 1,000 a year in the 1970s to over 2,500 a year today.

I think the law has tilted too heavily in favor of those who hold patents. They're able to sue for treble damages by proving what's called willfulness, which is applied as too low a standard today, in our view.

Q So what are you proposing?

A Improve the quality of patents in this country. That can be done by ensuring that the Patent and Trademark Office -- PTO, as it's called -- has the resources necessary to really scrutinize patent applications.

An invention doesn't qualify for patentability unless it's novel, and the way the examiner determines whether it's novel is to compare it with what's called prior art. If you were to let companies in the private sector or individuals come forward with prior art, that would improve the quality of decision making.

And then, third, there's what's called a post-grant opposition procedure. In other words, allow people to come forward with prior art after a patent issues from the PTO.

Q How much patent litigation is Microsoft involved with?

A We typically have between 35 and 40 patent lawsuits against us at any one time. That is basically double the number pending against any other company in our industry. Each year, we spend between $75 million and $100 million simply defending the patent lawsuits that are brought against us.

Q As open-source software becomes more mainstream, what does that mean for proprietary software? How has it changed the strategy of Microsoft?

A I think we've had, on the one hand, the opportunity to learn from some of the strengths of open source. We've focused on some community-oriented projects. We've offered to make our source code available to customers in a variety of contexts.

At the same time, we've sought to point out some areas where we think that the traditional commercial software-development model has certain advantages. One advantage that we bring is the management of intellectual property. We stand behind our products with our customers. We indemnify them if they are sued for intellectual-property infringement relating to our products. . . . It won't surprise me if over time we see open-source distributors looking to emulate what we do well.


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