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Businesses 'paying patent tax' to Microsoft

Tom Espiner ZDNet.co.uk

Published: 20 Apr 2007 16:00 BST

Businesses are paying a "patent tax" to Microsoft of $21.50 (£10.74) per user, according to the Software Freedom Law Center.

The Software Freedom Law Center (SFLC), whose directors include the general counsels for the Free Software Foundation and the Open Source Development Labs, say users are in effect paying the sum to Microsoft because of its large legal bills.

In the last three years, Microsoft has paid out more than $4bn (£2bn) to plaintiffs claiming that Microsoft's Windows and Office products infringed their patents, says the SFLC. Between April 2004 and March 2007, Microsoft paid settlements and court awards of $1.25bn to Sun, $536m to Novell and $1.52bn to Alcatel-Lucent, among others.

Added to these patent payouts are legal fees Microsoft has racked up defending those cases. Brad Smith, Microsoft's general counsel, said in 2005 that the company typically spends close to $100m annually to defend against an average of 35 to 40 patent lawsuits simultaneously.

"You're paying a hidden tax of well over $20 that Microsoft has had to pay to other patent holders," said the SFLC in a paper entitled Windows vs Linux — The Patent Tax. "This is true whether you bought your copy of Windows on CD or pre-installed on a laptop, desktop, or server machine."

The paper says that to recoup these costs, Microsoft charges users a "patent tax". They calculated the figure of $21.50 by dividing $4bn by Microsoft's sales estimates for the period 2004-2010.

The SFLC said this number is probably higher for licensed Windows users in Europe, because they pay more for their Windows licences.