Microsoft Intellectual Property Expansion

Nov. 10, 2004

Q: How has Microsoft changed its IP protection?

A: Microsoft Corp. has announced that it will extend its already strong intellectual property (IP) protection, commonly called IP indemnification, to cover all licensed end users using a wide range of current and earlier versions of Microsoft® software. This includes software such as the Windows Server System (TM) (including Microsoft SQL Server (TM) and Exchange Server), Microsoft Office System and the Windows®
client software.

Previously, indemnification was provided to volume licensees, and before 2003 Microsoft’s IP protection had a monetary cap. Now all licensed end-user customers — regardless of whether they have acquired their license through one of Microsoft’s volume licensing programs or through other means, such as a retail outlet or computer manufacturer — have IP protection from Microsoft with no monetary cap for covered claims.

While the protection some software vendors provide may limit the amount they will pay to help customers with covered claims or limit coverage to certain types of IP, Microsoft’s protection covers the four forms of intellectual property (patent, copyright, trademark and trade secret) and covers defense and damages for a covered claim, without a monetary cap. The bottom line is that Microsoft stands behind what it sells and wants customers to have the peace of mind they deserve.

Q: Why is IP protection important?

A: Unfortunately, we live in a world in which a dispute over property can result in a lawsuit. IP protection is a valuable offering that Microsoft extends to end users of its covered software. If someone alleges that the software you licensed from Microsoft infringes on their intellectual property rights, then Microsoft will help protect you from the legal costs and liability associated with the dispute.

The fact is technology is very complicated, and intellectual property issues are very real. One has only to look at the recent case of Kodak v. Sun. The jury initially awarded $1 billion before the case settled for $92 million. Microsoft, too, has been the recipient of litigation involving IP. A jury awarded $500 million against us in the case of Eolas v. Microsoft. We hope to win this ultimately on appeal, but it shows the level and degree of risk that is out there.

Given these examples, it is very important to know that not all software companies provide IP protection. And those that do may have less comprehensive coverage than you might otherwise assume. For example, Red Hat’s intellectual property warranty makes no promise to cover a customer’s legal expenses, which, according to a recent paper by Sidley, Austin, Brown & Wood LLP, “An Indemnity Primer for IT Consumers,” can be between $500,000 and $4 million alone — even before a finding of fault.

We want end users of Microsoft software to have confidence that they are not unnecessarily exposing themselves to IP problems by using our software. Microsoft helps protect our end users from intellectual property risk by offering strong IP protection.

Q: I see that other companies like Novell and HP also offer indemnification. What is special about Microsoft’s policy?

A: Microsoft recognizes that some people are comparing the indemnification or IP warranty offers that companies like IBM, HP, Novell and Red Hat are making for their Linux products, and we encourage them to do so. The level of protection offered by each company varies significantly.

In the case of HP, it only offers protection for Linux from claims brought by SCO and then only for certain types of licensees. Novell only offers protection for copyright disputes; it doesn’t protect against patents and trade secret claims. As for IBM, despite industry demand it has never indicated that it offers indemnification for Linux.

Microsoft feels it is important to stand behind our software and protect our end users from risk. We encourage non-Microsoft customers to ask their vendors if they protect against all forms of intellectual property claims — patent, copyright, trademark and trade secret — and whether those protections have a monetary cap. For more details about Microsoft’s thoughts about IP protection across the industry, please visit, http://microsoft.com/getthefacts.

Q: How do I take advantage of this?

A: End users licensing any covered Microsoft product are automatically covered by Microsoft’s IP protection. Customers shouldn’t have to jump through hoops to get coverage for their IT solutions, and we’re not going to make them.

Q: Why is Microsoft doing this?

A: Our customers need their software to work for them and they don’t have the time or the interest in worrying about whether their software has all the appropriate IP rights. Microsoft wants our end users to have confidence that they are not unnecessarily exposing themselves to IP problems by using Microsoft software. We believe that standing behind our customers and helping protect them from risk is a responsible thing to do. We feel comfortable making this stand because we carefully manage the IP rights needed to ship our products.

Q: Does the IP protection policy cover all my Windows products?

A: Microsoft offers end users the same level of IP protection for almost all Microsoft software licensed for a fee. There are only a few exceptions, specifically embedded industry or task-specific software. Because distributors of our embedded industry or task-specific software are allowed to modify the code in some circumstances, we don’t feel we can offer the same IP protections for that software that we do on our covered software offerings.

Q: How much does Microsoft charge for its IP protection?

A: There is no separate charge for the protection we offer our end users; it is included in the price they pay to license the software. Microsoft’s strong IP protection is part of the overall value we provide to end users of our software, and customers are seeing this as a key differentiator in their selection of Microsoft’s IP products.

Q: Will you protect me if I license software through OEM or retail channels?

A: The channel you license your software through doesn’t matter. Our commitment extends to all licensed end users of Microsoft’s covered software.

Q: How can I learn more about this?

A: Microsoft has established a Web site you can visit to learn more about its IP protection policy: http://microsoft.com/indemnification. You also can learn more about the importance of indemnification at http://www.microsoft.com/getthefacts .