Microsoft to Offer Indemnification Protection to Millions of Users

By | November 11, 2004

Microsoft announced today that they would be extending their indemnification protection which is currently available to volume license customers to nearly all users. The move comes after several weeks of back and forth jabs between Microsoft and the Open Source community, particularly Novell.

Several weeks ago, Microsoft CEO Steve Ballmer tried to draw a line between Microsoft’s software and typical Open Source software by stating that Open Source software didn’t have sufficient indemnification protection – meaning that users could be sued if software they used or made, based on open source technologies, was found to be infringing on patents, copyrights or intellectual property.

Ballmer stated that Microsoft offered such protection and Open Source software did not. Novell then reminded Microsoft that it has been offering limited indemnification protection to its users for more than 2 years and recently extended that protection to include “lots” of different open source software products.

Until recently, most industry watchers weren’t aware of what exactly Microsoft was offering. This move, then, comes at a critical juncture in the back and forth dual happening between Microsoft and Novell, as Microsoft now offers full, not partial, indemnification protection for nearly all of its users. This is in contrast to Open Source users who must trust that either Novell will stand up on their behalf, as Novell hasn’t yet published a comprehensive list of software they are covering, or that the handful of “Open Source Protection Funds” – accounts intended to assist in the legal fees of Open Source Software users – will help them. To date neither Novell’s nor the various OSPF have really been put into practical use.

That said, most industry watchers, and certainly most Open Source advocates, are claiming this is merely a marketing move. “Microsoft is using its financial power to enhance its marketing advantage in this particular area,” claims David Elkins, a partner in the intellectual property practice of Squire, Sanders & Dempsey. Smaller Linux vendors can´t match Microsoft´s blanket indemnification because they don´t have the financial means, he says.

According to IDC research, medium-sized businesses are most worried about protecting themselves against potential legal threats. The degree of concern depends on the line of business, says Al Gillen, a research director at IDC. Risk-adverse companies, such as financial services firms, are more concerned about indemnification than companies in other industries, he says.

Ultimately neither of the approaches being pursued have truly been tested, and the party you choose to believe in will likely depend largely on your beliefs and experience in this area. Large companies, though, are still more likely to take the word of an established player like Microsoft – with its blanket indemnification coverage – than a smaller player like Novell or the Protection Funds.

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