Microsoft To Announce Major Changes To IP Policy

The changes, aimed at fending off increasing competition from Linux and open-source competitors, include handing over more APIs and protocols on a royalty-free basis to corporate customers and modifying licensing restrictions on a "broad array" of Microsoft technologies, including XML innovations and .Net technologies, sources familiar with the deal said.

The company will also introduce expanded usage rights on select software, a move that will significantly cut software costs for customers, which will be able to deploy Microsoft technologies more freely than before, sources added.

The new policies are the "handiwork" of Microsoft's newly appointed IP chief Marshall Phelps, who came to Microsoft in August after a 28-year career with IBM.

His job, sources said, is to help Microsoft rationalize the company's licensing restrictions on APIs and software and extend usage rights to make it more competitive with Linux on the server and, to a lesser extent, on the desktop.

One source familiar with the deal said Phelps is pushing Microsoft more aggressively into the pure standards arena. "If Microsoft wants the network effects to stick in XML, it's got to remove a cloud over the IP associated with standards like XML."

Microsoft recently said it would make its Office XML schemas available on a royalty-free basis, but that announcement was met with a collective yawn from the industry.

However, by detailing that and a number of other royalty-free IP gifts, Microsoft hopes to fend off tough Linux competition on the server, potential competition on the desktop and, at the same time, please European regulators and customers pushing for better interoperability between Microsoft's products and competitive offerings and file formats.

The Redmond, Wash., software company has been gradually opening up its highly coveted Windows IP through the company's shared source program and custom programs for ISVs.

However, the steps to be detailed on Wednesday are part of a bolder attempt to make once-secret code broadly available, cut costs and lift usage restrictions across the board, several sources said.

One observer, for instance, noted that the interoperability issues associated with XML nullify the value of it being a standard.

"If you look at Microsoft's strategic approach, they have always attempted to control APIs, communications protocols, tools, file formats and the channel of sales through which people acquire things. And if they control these things, they control customer accounts," said one source. "It's a software lock-in strategy. IBM used in in the '60s, '70s, '80s, and DEC used it in the '80s and '90s. People are now moving away from that lock-in strategy because lock-ins create anger, and when alternatives appear, you don't want people angry with you."

Late Tuesday, Microsoft sent out a sketchy alert about the conference call. The company will expand access to R&D and innovation and announce an "overarching policy designed to increase access to Microsoft technology," according to the alert.