Monopoly is as monopoly does

March 24, 2011 10:23 AM

Why Is Microsoft Seeking New State Laws That Allow it to Sue Competitors For Piracy by Overseas Suppliers?
posted by T.D. Strange (41 comments total)

Answer: money. Next question, please.
posted by Mister Fabulous at 10:25 AM on March 24, 2011 [5 favorites]

the answer
posted by finite at 10:26 AM on March 24, 2011 [2 favorites]

Why not? They've given up on the development and sale of products as a revenue stream. The money has to come from somewhere.
posted by fleetmouse at 10:38 AM on March 24, 2011 [5 favorites]

This article is a fantastic example of a) PJ's one-track mind and b) her terrible, terrible analysis of laws.

"Why? Why is Microsoft doing this? Does Microsoft need a new revenue stream, now that folks are switching to smartphones instead of PCs?"

This isn't about generating money through litigation. Litigation is virtually never a money-maker, by design. This is about addressing the problem of overseas piracy by putting pressure on companies that Microsoft actually has leverage against. Microsoft can't effectively go after, say, Chinese suppliers for pirating Microsoft's software. It can go after US companies that buy products from those suppliers. It's very straightforward.

"I ask that because I noticed two things, one, that Microsoft said that it came up with the laws because it is dissatisfied with patent law and two, something odd and frankly alarming in the Washington State version of this bill that leads me to suspect that this is Microsoft's Plan B in its litigation storm against Linux -- its Ace in the hole in case the Supreme Court decides that its software is unpatentable. "

This has nothing to do with "litigation against Linux" (there is no such thing, at least not by Microsoft; there's litigation against companies that don't take licenses for the FAT filesystem patents and litigation against Android, but no litigation against Linux as such). This is entirely about companies vicariously benefiting from pirating Microsoft software. Their suppliers can offer lower prices because they don't have to pay for software licenses.

"I'd like to show you how Open Source is deliberately excluded, though, a deliberate carve out."

The open source carve out is because of a presumption that there can't be any economic harm if a company's competitor's supplier violates an open source license because the supplier doesn't pay anything for the open source software in the first place. That's different from using unlicensed proprietary software that the supplier would ordinarily have to pay for. (Now I think that theory doesn't completely address the possible benefits of breaking the terms of an open source license, but you can see the logic).

"How can there be state copyright-related statutes without conflicting with US Copyright Law, which is federal?"

Because it's not a "copyright-related statute." It's an unfair competition statute, and unfair competition is both a state and federal issue.

"Like I told you before, this is SCO II."

Yes, given that covering the SCO non-story (no one seriously thought SCO had a case) made PJ famous, she's going to paint everything as "SCO II."
posted by jedicus at 10:46 AM on March 24, 2011 [15 favorites]

The fact that this excludes Open Source software is ridiculous. Other than that I don't really see the problem. The law presumably wouldn't be retroactive. After it is in effect, suppliers would have to promise US companies that they would not use pirated software, and if they broke the contract they would be liable to reimburse any costs caused by US Software Firm's litigation.
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 10:47 AM on March 24, 2011

How far deep does it go? Usually in China, you have several layers of suppliers. So if my direct suppliers is in compliance but other companies further down the supply chain aren't, then are the US companies still on the hook?

Also, who is the arbiter of what "compliance" is, Microsoft? What proof do they need to show the court to establish this?

On the plus side it could force some companies to move their suppliers back on-shore if they cant get compliance with their suppliers.
posted by SirOmega at 10:48 AM on March 24, 2011 [1 favorite]

Ooh, ooh, I know this one!

"What is 'death throws of a wounded giant,' Alex?"
posted by entropicamericana at 10:49 AM on March 24, 2011 [1 favorite]

Minority Report: That it be referred without recommendation.
-Link
posted by clavdivs at 10:51 AM on March 24, 2011

They're no Oracle.
posted by Artw at 10:55 AM on March 24, 2011

Netcraft confirms it: Microsoft is dying.
posted by monju_bosatsu at 11:04 AM on March 24, 2011

Is Microsoft including provisions that all labor be up to US standards? Oh they're not, that's right now one gives a shit about that stuff. Use cheap labor, force women to get abortions or face being fired, hey see no evil, right, but start pirating software and suddenly the ball gets moving.

Their suppliers can offer lower prices because they don't have to pay for software licenses.

This works in theory, but I really doubt that software piracy are large cost motivators in overseas manufacturing. In fact, I would not be surprised to see "software piracy insurance" or something similar (perhaps big firms doing "software piracy audits" which you can show in court as you doing due diligence).

In any case, I have a feeling this is going to once again hurt small vendors and businesses who don't have the resources to maintain compliance. Hey my company just imported large amounts of Italian marble. Do you think we have the resources to go to Italy and do a software audit on them? Do you think they'd laugh if I asked for proof of a software audit? What if down the line the EU fines the company for using pirated copies of Windows. How do we know if it was used in our order?

Sorry that Microsoft's business model relies so much on something that can easily be stolen. Here in the US we have strong incentives to keep companies from violating copyright law. In the 19th c. Britain was in a similar position and many patent holders still saw their rights violated overseas.

MS can't get any love with Asian countries, so might as well try having us pick up the tab at home. It'll mean higher prices for us, but I guarentee you it won't do anything to dent the piracy overseas.
posted by geoff. at 11:13 AM on March 24, 2011 [7 favorites]

"What is 'death throws of a wounded giant,' Alex?"

I'm picturing these death throws as some kind of knitted, grey blankets with, perhaps, a tasteful little grinning skull in each corner. The perfect leather couch accoutrement.
posted by empyrean at 11:15 AM on March 24, 2011 [11 favorites]

In any case, I have a feeling this is going to once again hurt small vendors and businesses who don't have the resources to maintain compliance.

The bill states (but the linked article does not) that a company has to have $50M in annual revenue to be a target of this bill. In other words, at least they keep it from being a shakedown of mom-and-pop businesses...

The bill would affect retailers that make $50 million or more in annual sales and that have a direct contract with the manufacturer. Retailers would have 18 months to change manufacturers or persuade their manufacturers to pay for software.

posted by SirOmega at 11:16 AM on March 24, 2011

It'll mean higher prices for us, but I guarentee you it won't do anything to dent the piracy overseas.

Meh. I wouldn't be so quick to blame piracy overseas, we get plenty of that here. The main reason DIY PCs are so cheap is because people copy and crack the OS, for example.
posted by Blazecock Pileon at 11:18 AM on March 24, 2011

The open source carve out is because of a presumption that there can't be any economic harm if a company's competitor's supplier violates an open source license because the supplier doesn't pay anything for the open source software in the first place. That's different from using unlicensed proprietary software that the supplier would ordinarily have to pay for. (Now I think that theory doesn't completely address the possible benefits of breaking the terms of an open source license, but you can see the logic).

The flaw in this logic (not yours jedicus, the lawmakers,) is that if you don't want to abide by an open source license then you have the option is to pay the copyright holder for the right to use the software. For example, if you don't like the MySQL open source license you can pay Oracle for a commercial license.

For a lot of open source software directly licensing the code is nearly impossible because the copyright to the code is owned by many different people or corporations (Linux is a perfect example of this,) but I don't see that as a good reason to allow Microsoft to sue a manufacture because of a license violation, but not Mr. Developer who has the code from his git repository ripped off.
posted by papercrane at 11:24 AM on March 24, 2011

Rent-seekers gotta seek rent.
posted by 1970s Antihero at 11:26 AM on March 24, 2011 [2 favorites]

Thanks for the clarification.

It almost sounds like MS is either really convinced of their superiority - "You can't compete if you don't use MS products" - or, that the psychological impact of these laws will convince people of the same.
posted by mmrtnt at 11:29 AM on March 24, 2011

The main reason DIY PCs are so cheap is because people copy and crack the OS, for example.

Hey now. I know plenty of people (myself included) who actually pay for Windows. OEM license on newegg is on special regularly for $90. Or we go with some Linux variant. The reason that DIY PCs are cheap is because DIYers don't take a 40% markup for building it.

The PC I made for myself would have been $3500-4000 had I ordered from any mainstream manufacturer (Dell, HP, etc), $2800 from CyberPowerPC. I spent $2200 including software.
posted by Mister Fabulous at 11:32 AM on March 24, 2011

Meh. I wouldn't be so quick to blame piracy overseas, we get plenty of that here. The main reason DIY PCs are so cheap is because people copy and crack the OS, for example.

I don't think that's the reason. The DIY aspect of the PC world is part and parcel of it's culture, and it's always been that way. People have been building PCs since before large OEM manufactures even got on the scene.

Besides, Microsoft's bread and butter for OS sales are the corporate and OEM markets, not boxed copy sales to individual users. The DIY PC builder market is a very, very small segment of their sales (and I'd wager that the majority of DIY PC makers pay for their OS software).
posted by SweetJesus at 11:33 AM on March 24, 2011

It almost sounds like MS is either really convinced of their superiority - "You can't compete if you don't use MS products" - or, that the psychological impact of these laws will convince people of the same.

Well, if company X puts pressure on supplier X to only use licensed or open source software, and supplier X decides to ditch it's MS stuff in favour of open source or paid software from a different company it's not like MS has lost anything, since supplier X wasn't giving them anything in the first place.

More likely scenario: supplier X just says yes to everything company X asks for and then basically ignores it, and nobody is ever the wiser.

Still, they've gone through the motions.
posted by Artw at 11:38 AM on March 24, 2011

jedicus (or other lawyers), how do they define "stolen" software?

What if Chinese copyright law conflicts with US copyright law? Hypothetically, let's assume that China has a really short time frame for copyright protection and Windows XP is now in the public domain. Can MS come to a company in Washington state and say, "Hey that doesn't matter, US law says you'd have to pay for it." Which seems ridiculous.
posted by geoff. at 11:42 AM on March 24, 2011

The fact that law explicitly denies the right to sue based on patent infringement allegations seems to undercut the claim that this law is targeting Linux somehow. There are currently no credible copyright infringement claims on Linux, only patent claims (like the FAT patent jedicus mentioned.)
posted by papercrane at 12:05 PM on March 24, 2011

This isn't about generating money through litigation. Litigation is virtually never a money-maker, by design.

I don't know, if Microsoft could bribe convince enough states to pass biased competition laws, then sue to enjoin sales of supposedly 'tainted by the stream of piracy' products (say maybe android handsets or a future google OS equiped laptop), that could be a drag on competing product sales. Granted it'd be a very convoluted process, but plausible.
posted by T.D. Strange at 12:11 PM on March 24, 2011

In related news, the music industry jumped on the bandwagon by suing Apple Computer for $1,000,000,000 because an iphone assembler at Foxconn in China was caught listening to a pirated song during breaktime.
posted by digsrus at 12:12 PM on March 24, 2011

Well, Apple would want a 30% cut of that back...
posted by Artw at 12:14 PM on March 24, 2011 [1 favorite]

geoff. What if Chinese copyright law conflicts with US copyright law?

That's very possible. China could just declare software (and other things) uncopyrightable in China, which it's to their great advantage to do even in the absence of this particular act of stupidity by Microsoft's pet legislators.

At which point Microsoft might try to get doing business with China made illegal, effectively starting a trade war, or the retail industry (the trillions of dollars on the other side of this issue) might send in their own pet legislators to undo the damage.
posted by aeschenkarnos at 12:21 PM on March 24, 2011

I don't know, if Microsoft could bribe convince enough states to pass biased competition laws, then sue to enjoin sales of supposedly 'tainted by the stream of piracy' products (say maybe android handsets or a future google OS equiped laptop), that could be a drag on competing product sales. Granted it'd be a very convoluted process, but plausible.

I think the simpler explanation is that they are trying to alter the economics of piracy.
posted by papercrane at 12:25 PM on March 24, 2011 [1 favorite]

Another alternative: They are trying to limit domestic producers from using foreign manufacturers. Perhaps by putting the extra legal research burden on domestic companies, they will stop the unsustainable practice of labor-shipping without the proper diligence.

If the law is a money grab, in which Microsoft arbitrarily sues companies, the sued company does not have the burden to prove their innocence. The legal and research expense paid by Microsoft to incriminate the defendant might be very costly. Add in the cost of defamation causes for wrongfully filed suits and this may not be as simple as it looks.
posted by mrmod at 12:33 PM on March 24, 2011

I'm picturing these death throws as some kind of knitted, grey blankets with, perhaps, a tasteful little grinning skull in each corner.
Much more attractive than the reality.
posted by MtDewd at 12:34 PM on March 24, 2011 [1 favorite]

...or even death throes...
posted by Chocolate Pickle at 12:42 PM on March 24, 2011

Death throws are the most illegal thing I've seen in wrestling.
posted by Artw at 12:52 PM on March 24, 2011 [1 favorite]

One odd thing is that all of those $50m+ companies are major Microsoft customers. Microsoft could, one assumes. just make its licences to those companies include a 'no use of products produced by suppliers pirating our code' clause and achieve the same end. Wouldn't go down well, but then how well is this going to play in the boardroom? So I wonder if this is a precursor intended to establish a principle, which will be extended afterwards.

Although where that extension would end... the principle, I guess, is that you're responsible for policing the integrity of your suppliers. This isn't one that's generally recognised in law: even when one's supplier is engaged in pretty terrible acts abroad (supply your own corporate bogeyman here), the recourse is basically to boycott, or to take some sort of legal or practical action in the state where the sins are being perpetrated. Even when you look at the drug laws, the crime prosecuted is possession of a dangerous substance, not supporting a criminal organisation.

Perhaps knowingly buying stolen or fake goods? But here, it's knowingly - the fact that MS want triple damages for knowing means that the basic principle holds even if the act is committed unknowingly - an idea imported from patent law, I think.

So - this is a major innovation, and not a good one. I don't understand the need for it - Microsoft can presumably prosecute the supplier directly, with the aim of recouping losses in the normal way - and I don't like the creation of new legal responsibilities at the request of a company which has such a poor record in observing the rights of others.
posted by Devonian at 12:57 PM on March 24, 2011

Microsoft could, one assumes. just make its licences to those companies include a 'no use of products produced by suppliers pirating our code' clause and achieve the same end.

Ah, but that would probably raise the specter of antitrust scrutiny as a contract in restraint of trade. No antitrust problems with getting a law passed that accomplishes the same thing.
posted by jedicus at 1:27 PM on March 24, 2011

"The main reason DIY PCs are so cheap is because people copy and crack the OS, for example."

Really? Everyone I know who's done DIY computing either buys a personal Windows license or runs Linux. Well, I guess I know a couple guys who do hackintoshes, but that's not really what you're talking about, is it?
posted by klangklangston at 1:31 PM on March 24, 2011

If no one else is going to say it, than I am...

This isn't just about squeezing the small guys here. In fact, I believe this is an end route into something bigger. Microsoft is looking to go after Apple and other big guys who have much of their manufacturing in the foreign markets.

How else are they going to get a cut of the market they are increasingly losing?

This was their first failed attempt.
posted by Bathtub Bobsled at 2:21 PM on March 24, 2011 [1 favorite]

I don't understand the need for it - Microsoft can presumably prosecute the supplier directly, with the aim of recouping losses in the normal way

The problem is they cant directly go after Chinese companies. The Chinese companies don't give a shit, and the Chinese government doesn't really give a shit. The reason why China is #1 in the world in running XP/IE6 is because > 99% of those copies are pirated, and XP works well enough (well, after 3 service packs). So MS only recourse is to hurt them financially through whatever means necessary - if that means cutting of their customers then thats what it'll take.
posted by SirOmega at 3:34 PM on March 24, 2011

I really like the bit that protects Microsoft and Disney from being sued. Basically, the company in Washington can't be sued if it is selling a "copyrightable work" (i.e., software); merchandise (i.e. computers or PDAs) that display the copyrightable works; or merchandise (i.e., a game) based on a theme park or attraction; and packaging for any of these things.
posted by Joe in Australia at 6:16 PM on March 24, 2011

Unbelievable. The extension of liability in the States is pretty absurd. It would be best if laws were enforced to make corporations liable for things they should be liable for rather than making them liable for the "crimes" of other corporations or individuals.

We have a mix of desktop Operating Systems in our operation, all paid for. But we run the business administration on Linux and Linux based SaaS. Production does have some Adobe software on Windows and Mac but that is paid for as well but when viable open source alternatives to applications and operating systems exist, we use them. No way are we going to run servers with OS X or Server 2008 these days when we don't have to, or run the business administration on Microsoft or other business software.

This legislation may push those companies who have influence over their suppliers to take a similar route.

Why not? They've given up on the development and sale of products as a revenue stream.

Evidence? They didn't make any revenue off of say Windows 7 or the latest office? All the reports were lies?

The main reason DIY PCs are so cheap is because people copy and crack the OS, for example.

My last DIY PC (built last month) was cheaper well before the OS came into the picture. There is no way I could have gotten a brand name system sans any OS for the price I paid for the parts. Maybe prices in Canada are cheaper?
posted by juiceCake at 7:57 AM on March 25, 2011

My last DIY PC (built last month) was cheaper well before the OS came into the picture. There is no way I could have gotten a brand name system sans any OS for the price I paid for the parts. Maybe prices in Canada are cheaper?

Not really, I just put together a new 3d Animation/Video Editing workstation for about $4,200 including windows 7 license. Similarly spec'd machines from name brand PC vendors and Apple were over $8k.
posted by the_artificer at 9:03 AM on March 25, 2011

The main reason DIY PCs are so cheap is because people copy and crack the OS, for example.

Why are people responding seriously to this? It's just thrown out there to provoke.
posted by kmz at 9:29 AM on March 25, 2011

Similarly spec'd machines from name brand PC vendors and Apple were over $8k.

So the cost ratio is similar to my own experience. Outside of laptops, I have never bought a brand name system (though I've used many at various locations for work) and likely never will. You could by the OS several times over before equaling the brand name cost.

Why are people responding seriously to this? It's just thrown out there to provoke.

I don't agree. Mr. Pileon, I know, welcomes alternate points of view gracefully and reasonably, as well as information about things that he may not be familiar with, as do we all no?

Provocation is not part of his MO. Clearly the fact you can put together a system yourself for much less money even before the OS comes into the picture is either something he was unaware of or is simply not the case in his area (since we are a global community I imagine things can be either a little or drastically different depending on where we are - see the insane U.S. Health Care system for example and contrast it with America's toupee, Canada).
posted by juiceCake at 10:16 AM on March 27, 2011