Microsoft Lawyer Discusses Innovation, Interoperability, and IP


On Thursday, March 8, the Berkman Center for Internet and Society and the Journal of Law and Technology hosted Brad Smith, the General Counsel of Microsoft. Austin North filled up with students and area professionals to hear Smith’s talk on “Innovation, Interoperability, and IP.”

Smith began his talk by welcoming all the hard questions that were to follow his presentation and saying that he knows those questions will be asked at Harvard Law School. He then led a discussion about the transformation of information technology, especially the recent convergence of devices and uses of the computer. For example, 10 or 15 years ago the word “computer” usually referred to a laptop or desktop. Now, there are phones, music players, and gaming consoles that do the same things computers were known for.

Interoperability, Smith explained, means the consumer need to move data from one device to another as seamlessly as possible. It is up to the technology companies to allow users to move email, music, and video from computers to phones to other devices. In the business context, it is important for users to be able to access their files from any workstation and print to the nearest printer, regardless of where they are. This movement of content, Smith said, is here stay for the foreseeable future.

The evolution of business models is one of the most important aspects of technology innovation. Years ago, software was created for specific brands of hardware and included for free with the machine. Costs were recouped through the sale of the hardware. When the personal computer became popular, the “licensing business model” emerged where software could be used on a wide range of machines. Customers would purchase licenses for certain software and be free to use it on hardware they purchased elsewhere. The newest development is the “ad-sponsored business model,” which was tapped successfully by Google. The model uses ads to generate revenue while the software, such as a search engine, is provided to users free of charge.

To make interoperability a reality, Smith stated, companies need to make connections between the engineering level and the business model level. Neither can exist in a vacuum. Additionally, there needs to be a method to maintain intellectual property rights as data is transferred from one device to another. For example, colliding business models gave rise to the dispute over YouTube videos. The content creators operated on the licensing model whereas the posters operated on the ad-sponsored model. As a result, the content creators do not know how to recoup their costs of making the videos.

Looking at cases such as YouTube, there is a need to experiment with solutions and to develop new models to determine what will work in current situations. Many lawyers start with the proposition “maybe we should change the law.” One such change was the Digital Millennium Copyright Act (DMCA). It helped with some aspects of new technology and the transfer of data, but it is not always practical to change the law. Another way to manage change is to use technology to connect business models together. For example, when eBay started, it was a haven for sales of pirated software. To solve the problem, software companies used provisions of the DMCA in a new way to convince eBay to take down the pirated copies and used technology to search for these postings.

On the topic of creating new business models, Smith discussed how Microsoft tried to differentiate the Zune from the iPod. The major difference is that the Zune can share content directly with other Zunes. Users can freely share their own unprotected content. The important question was how to share copyright protected content. The solution Microsoft developed is that the recipient of a song can listen to it three times for free. After that, he has to purchase it.

The current question facing software companies is the rift between open source and proprietary software. Microsoft and others are looking for ways to make the two interact. One step towards linking the two is the agreement between Microsoft and Novell that uses the GNU General Public License (GPL). The agreement allows the “cathedral” and the “bazaar” to work together. Companies such as Microsoft are cathedrals that have licensing offices and a strict hierarchy. The open source bazaar, on the other hand, does not have a licensing office and involves a large number of people interacting in rather sporadic ways. As a result, it has been difficult for the two groups to work together, but the agreement may be a step in the right direction.

Smith wrapped up his presentation by taking questions from the audience. One involved the future of government regulation in the IT industry. Smith’s view was that government regulation is a vital part of the industry. First and foremost, it is needed to ensure public safety from the threats of cyberspace. Furthermore, intellectual property rights help people in the industry start their businesses or projects and enable them to rely on owning what they create. The government is also a key part in coming up with ways to protect property rights anywhere in the world.

Another audience member asked how Windows Vista treats intellectual property rights. Smith explained that as a technology provider, Microsoft has to come up with ways that let content creators distribute their content however they want, either for free or for a fee. In addition, the technology has to be able to transfer content from one device to another. It has to work seamlessly while limiting access to the individuals who have the proper license.

The talk ended with a question about privacy concerns in an age where large quantities of data are stored by companies and data can be easily transferred. Smith agreed that this is a serious concern of all technology companies, especially because this data is incredibly valuable. However, a question arises whether the general population is concerned who has certain data. There seems to be a generational gap where the younger generations are not as possessive of their information. For example, a viable business model is that a company will give out free computers if users agree to have each of their searches monitored and to receive targeted advertisements. If they choose to keep this information private, they will have to pay for their computer. In the area of privacy, as in other aspects of technology, there is always room for improvement and it is important to think of new business models to adjust to new circumstances.

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