Microsoft extends legal protection to most users

In a bid to further differentiate itself from its Linux rivals, Microsoft has said it will expand its indemnification programme...

In a bid to further differentiate itself from its Linux rivals, Microsoft has said it will expand its legal indemnification programme to cover almost all its customers.

For several years Microsoft has indemnified, or protected, its volume licence customers from possible legal threats stemming from their use of Microsoft software. Last year, it lifted the financial cap on that protection, and it has now offered to pick up the legal bills of virtually all users of its products.

"This expansion will cover several million more people," said David Kaefer, director of business development at Microsoft. "We performed a review of the indemnification we offer today and came to the conclusion that there really was no reason why we would not offer it to anybody."

Indemnification protects customers from legal costs and damage claims related to patent, copyright, trade secret and trademark claims.

Indemnification has emerged as part of users' risk mitigation strategies, especially in the US, which is widely seen as a litigious society. This is particularly true for users of Linux, who have been threatened with copyright infringement lawsuits by SCO.

"When we evaluate companies and software products, indemnification is one of the first things we look at," said Ken Meszaros, infrastructure manager at property company LandAmerica Financial.

"It is important that the vendor is willing to stand up for the integrity of its products," he said. "Microsoft offering indemnification for all its products, regardless of licensing strategy, is a positive change and helps to protect us from intellectual property issues."

But while free insurance is always nice, Microsoft's expansion of indemnification is principally a marketing move, according to David Elkins of law firm Squire, Sanders & Dempsey. He said that the only customers who would ever need protection, the largest corporations, were already covered.

"Microsoft is using its financial power to enhance its marketing advantage in this particular area," said Elkins. "Smaller Linux suppliers can't match Microsoft's blanket indemnification because they don't have the financial means."

Indeed, Microsoft plans to make indemnification a more visible part of its Get the Facts anti-Linux marketing campaign.

"Indemnification is one element in overall platform value, just like total cost of ownership, security or reliability," said Kaefer. "If you compare the leading Linux vendors to what we're offering, those vendors really have much narrower indemnification."
Some Linux suppliers including Hewlett-Packard, Novell and Red Hat offer indemnification with restrictions. IBM does not indemnify Linux customers at all.

IDC research director Al Gillen said that Microsoft's indemnification expansion wouldn't have little practical effect on software buyers. "If a customer was sued over intellectual property violations by Microsoft software there is a pretty good chance that Microsoft would have to step into the fray anyway," he said.

According to IDC research, medium-sized businesses are most worried about protecting themselves against potential legal threats. Large corporations protect themselves by putting lawyers on the payroll while small companies feel they are flying under the radar.

The degree of concern also depends on the line of business. Companies in risk-adverse industries, such as financial services, are more concerned about indemnification. 

Microsoft's indemnification programme covers all products except embedded software such as Windows CE and Windows XP Embedded. According to Kaefer, Microsoft has less control over those products because partners can modify the source code.

Joris Evers writes for IDG News Service

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