Microsoft Red Hat Deal Dispels The Myth of Mutually Assured Destruction for Business Collaboration

I can’t think of anyone I have sparred more with on issues of intellectual property management over the years than Horacio Gutierrez, Microsoft Vice President and Deputy General Counsel, IP and Licensing. Well actually Jason Matusow, another Microsoft IP maven, probably wins that prize, but that’s by the by.

The simple truth is that I take some pride in having helped Microsoft on its long path to more open business methods. The IP team have always shown RedMonk respect, and we have tried to return the favour, even though on many key issues (software patents for example) we have been pretty much diametrically opposed. When it comes to IP issues Microsoft has come a long long way.

So far in fact that Microsoft announced a deal with Red Hat this week to jointly support customers running virtualised production workloads on each others operating systems. You can parse the deal in many ways (the spectre of VMware, for example, looms large… “the enemy of my enemy is my friend”). I will say right now – the detente is extremely good news for enterprise customers. Red Hat and Windows are, quite simply, the default operating systems of choice for x86-based enterprise systems. Having both firms work together to support customers is all around goodness.

But where is the mutually assured destruction? You need that, right, or everyone is going to bomb the shit out of each other. Talk to IP lawyers at major firms and they will talk to the thicket of cross-licensing deals around patents and so on as if you couldn’t do business without it. Nokia needs to be able to sue IBM needs to be able to sue Ericcson needs to be able to sue Oracle. Its one big patent licensing La Ronde.

Microsoft has made much of its unilateral IP agreements and indemnification deals with Novell. Indeed the refusal to offer multilateral covenants has angered many others in the Linux space.

But the Red Hat deal? Imagine my surprise to read this:

The agreements establish coordinated technical support for Microsoft and Red Hat’s mutual customers using server virtualisation, and the activities included in these agreements do not require the sharing of IP. Therefore, the agreements do not include any patent or open source licensing rights, and additionally contain no financial clauses, other than industry-standard certification/validation testing fees.

What? A business deal without mutually assured destruction? Anyone would think we were thinking about customer value here. Seriously – this is a huge difference for Microsoft. Others will likely continue with FUD, claiming customers should not take advantage of these deals, but that seems absurd.

The Red Hat Microsoft deal is back to basics. Two companies make a contract to work together to jointly support customers, with no threats on either side… AWESOME.

Now I know that many of you will be thinking a similar approach wouldn’t work for smaller firms, but of course it could. We have created far too many jobs for lawyers in IT over the years. Facebook is the latest to fall foul of the Silicon Valley job creation scheme called Terms of Service. We need to simplify.

I clearly need to think about this some more, but what makes this Red Hat Microsoft deal truly, madly, different, is the lack of an IP covenant. Lets allow commercial agreements to drive revenues rather than threats. As Horatio posted this week:

A cornerstone of collaboration is the sharing of information, ideas, and technologies – intellectual assets – to drive innovation. Yet, this sharing must be balanced with incentives for companies to continue creating new technology and their own differentiated products so we can maintain a marketplace that is rich with competition, opportunity and value.  This is true no matter the origin or the source of the technological innovation.  All information technology solutions – regardless of software development or business models – benefit from a balance between collaboration and competition.

How can we strike this balance? How can we create a market environment where companies are encouraged to collaborate on behalf of their customers and compete for customer attention and mindshare?  One answer is a set of sensible business arrangements that fosters collaborative innovation while also rewarding breakthrough, value-added product differentiation.

Amen to “sensible business arrangements”.

Carefully crafted intellectual property licensing deals help all of our customers maximize their IT investments by making sure hardware and software work well together.

That may be true, but these agreements clearly aren’t necessary. That is this week’s lesson. The patent system is still in need of a complete overhaul. Copyright holders continue to abuse their customers. But contracts have value. How about that.