Overall, the new legal provisions are part of an umbrella strategy at Microsoft to essentially be nice to the people who buy their products. CEO Steve Ballmer has warned that the company will start to lose customers through inattention and arrogance. To combat that, Microsoft has publicly attacked security issues and promoted Enterprise Agreement licensing, a type of sale that creates direct and fairly continual contacts between Microsoft and the ultimate end-user. "They are saying, 'We've got to take care of these smaller businesses... We can't get (every account) in a begrudging fashion,'" said Steven Edwards, vice president and IT director of Solomon Cordwell Buenz & Associates, an architectural firm in Chicago. For the past year and half, Microsoft has increased the contact it has with its customers, especially small ones. Edwards himself has sat through a couple of Microsoft focus groups. The indemnity provision, which was included in a document called the master business agreement and is part of volume licence agreements such as Select and Enterprise, had been a thorn for years because it seemed to allocate all the risk on the customer. At worst, Microsoft would come out of the transaction no worse for wear. If the claim related to Office, Microsoft's legal budget would be limited by how much Office you bought, Kremen said. Punitive damages, which can exceed the verdict for damages, were not addressed. "Customers said 'you are protecting Microsoft more than you should,'" Kremen said. "I had heard this in literally hundreds of negotiations for four to five years." A phantom menaceMicrosoft, however, was defending against a phantom menace. Kremen could recall only one case where a plaintiff brought a copyright infringement action against Microsoft's customers rather than the multi-billion dollar company. (In that case, IBM and Microsoft actually picked up the defence anyway and obtained a verdict in favour of their customers). Neither Kremen nor Mark Bolender, senior attorney at Microsoft, could recall any cases where customer sued a Microsoft customer for software security breaches or personal injury relating to a Microsoft product. Even if a suit were brought, the old indemnity provisions, which are similar to contractual provisions issued by other software companies, would probably have been adequate to protect licensees. "It is hard to imagine a royalty claim that is higher than the cost of the software," Kremen said. Some of the older provisions also could have been challenged in court. Under the old contract, Microsoft declared that customers had to bring any claim they had against Microsoft within two years. Courts can toss out such clauses under certain circumstances. The new contract states that the statutes of limitations used by the court where any lawsuit is filed will prevail. DiDio added that the explicitly remedy provisions in the contract will probably mollify customers. If it is determined that Microsoft infringed a third party's intellectual property, the new contract states that Microsoft will procure a licence so its customers can continue to use the infringing product, replace the existing product, modify the code so it no longer infringes, or refund that portion of the licence. The 15-day audit notification, meanwhile, was annoying to many large customers, both DiDio and Kremen said. Microsoft began to include the new provisions in licensing agreements signed on 1 March or later. However, any existing licensing customer will be given the opportunity to take advantage of them if they get sued, Kremen said. Although the indemnity provision raised hackles in the past, the reaction so far has been fairly positive, but muted. The licensing advisory council, a group of 45 to 50 large licensing customers, said it liked the changes, but also asked when further changes were coming, Kremen said. To date, Microsoft has soft-pedalled the changes, but the company could increase the volume as the SCO controversy continues. "It was kind of good timing for them," said Alvin Park, an analyst at Gartner. "It is a good thing for customers. It shows that Microsoft is willing to change some of the language in its contracts. But in legal terms "I don't know if it is anything monumental," he added.
See the Software News Section for the latest headlines on everything from peer to peer clients to Office software and beyond.
Let the editors know what you think in the Mailroom.
