Sometime between 2003 and 2006, Microsoft Chief Executive Officer Steve Ballmer and Co-founder and chairman Bill Gates visited Sun Microsystems. It wasn’t a courtesy visit, according to Jonathan Ian Schwartz, Former CEO of Sun Microsystems. The Microsoft duo were on a mission to convince Scott McNealy, Sun’s then CEO, to enter into a patent licensing agreement with the Redmond company. Moreover, Gates wanted compensation for the patents that Sun Microsystems was allegedly violating with OpenOffice, a rival product of Microsoft’s own Office productivity suite. Sun resisted.
Gates and Ballmer met with McNealy, Greg Papadopoulos (Sun’s CTO) and Schwartz. On March 9th, 2010, Schwartz, who is no longer Chief Executive Officer after Sun Microsystems was acquired by Oracle, recalled the meeting.
“As we sat down in our Menlo Park conference room, Bill skipped the small talk, and went straight to the point, ‘Microsoft owns the office productivity market, and our patents read all over OpenOffice.’ OpenOffice is a free office productivity suite found on tens of millions of desktops worldwide. It’s a tremendous brand ambassador for its owner – it also limits the appeal of Microsoft Office to businesses and those forced to pirate it. Bill was delivering a slightly more sophisticated variant of the threat Steve had made, but he had a different solution in mind. ‘We’re happy to get you under license.’ That was code for ‘We’ll go away if you pay us a royalty for every download’ – the digital version of a protection racket,” he stated.
Sun Microsystems did not ink a patent covenant agreement with Microsoft. According to Schwartz, Sun used its own patent portfolio as leverage in convincing Gates and Ballmer to back away. The former Sun CEO noted that they were expecting the Microsoft duo to put a patent agreement on the table, and that they were prepared to reject it. Schwartz notes that Microsoft found inspiration in Java when it built .NET.
“‘We’ve looked at .NET, and you’re trampling all over a huge number of Java patents. So what will you pay us for every copy of Windows?’ Bill explained the software business was all about building variable revenue streams from a fixed engineering cost base, so royalties didn’t fit with their model… which is to say, it was a short meeting,” Schwartz added.
In 2007, Microsoft indicated that open-source software violated no less than 235 of its patents, with the Linux kernel infringing on 42, the Linux UI and design on an additional 65, and OpenOffice on 45, with open source programs violating a further 83 patents. Microsoft has never mentioned the exact patents it was referring to, and also never started legal action against companies that ran Linux and open source software. However, the Redmond company did sign a vast and increasing number of patent covenant deals, one of the most prominent of the latest with Amazon.com over its use of Linux.
Gates Asked for IP Royalties for OpenOffice from Sun Microsystems
But got turned down