Why Not Just Make Better Products?

“Thorstein Veblen wrote that it is the essential task of the business executive to ever-advance sharp practice into the territory previously understood as crime.”

Wired writer David Mamet’s pithy summary seems to nicely capture whats going on in the executive suites of Microsoft lately. The company is becoming an increasingly problematic player in the tech industry, turning number of practices like patent trolling and astroturfing into actual lines of business while its product line flounders.

In 2011 US hardware and software companies were forced to spend $29.2 billion in 2011 to defend themselves from patent trolls, a cost that is, of course, simply passed on to the consumer. As Bloomberg points out Microsoft is using these “patent privateers” to attack Google and Apple:

To harry other nations without attacking them, monarchs like England’s Elizabeth I commissioned ship captains to plunder merchant vessels, creating a type of pirate known as a privateer.

The term is used today to describe businesses that obtain patents from technology companies and then file infringement lawsuits against the sellers’ competitors.

Tech companies use privateers to distract their adversaries or collect royalties on the patents without provoking retaliatory litigation, said Ron Laurie, managing director of Inflexion Point Strategy LLC in Palo Alto, California.

Nokia Oyj (NOK), Microsoft Corp. (MSFT) and Alcatel-Lucent are among companies connected with these licensing firms.

In addition, attacking rivals via patent trolls, Microsoft has taken to trolling directly, approaching Android handset manufacturers and threatening them with endless litigation unless they pay up. The similarity between patent trolling and business model of the mafia is hard not to notice and its one that was actually pioneered by Microsoft’s former CTO.
Now we have Microsoft itself engaging in it more and more. As noted in the Bloomberg article “Five years ago, any connections with patent-assertion companies reflected poorly, now that’s kind of history and everyone’s singing ‘How can I get in on this action?’”

Microsoft now makes more off of Android phones that it does off of Windows phones. This strange situation pretty much ensures that things will get worse as they look for ways of increasing that revenue stream.

When they are not feeding the patent trolls, or being one themselves, Microsoft seems to be spending millions astroturfing, trying to bait the government into suing Google. As Readwrite.com’s Dan Lyon puts it:

For years Microsoft has devoted massive resources and energy to waging a sneaky shadow war against Google, fielding an army of lobbyists and front groups that exist almost completely to spread anti-Google propaganda, including ICOMP.org, the Association for Competitive Technology, FairSearch and SafeGov.

They call themselves “industry groups,” and they have lots of members, but they’re basically Microsoft fronts devoted to hating on Google.

That article is a pretty eye-opening even if you were already aware of Microsoft past shady business practices. It also mentions that Mark Penn, the man behind the Facebook’s Google smear campaign and who is bringing political attack ads to the tech world (and who reports directly to Steve Ballmer) “has been going around Washington trying to recruit consultants, telling them that Microsoft has armed him with a $50 million budget to go after Google”.

Shockingly, none of this is shocking for those who follow the company closely. Asked about Microsoft’s new advertising efforts, Michael Cusumano, a professor at the MIT’s Sloan School of Management who has been writing about Microsoft since the 90s simply said “Nothing is below Microsoft. They have been playing dirty for a long time”.

So as good as Dan Lyon’s article is, its “Why Not Just Make Better Products?” conclusion sounds pretty naive. Gaming the system is increasingly common as a mainstream business strategy regardless of which industry you look at (look into “regulatory capture“). It’s how people get paid. The only apparent solution is to make the system harder to game.

Google has taken a step in that direction by creating a “prior art search tool”. StackExchange has also made a site to crowdsource the search for prior art. Both of these efforts aim to give patent examiners better tools in hopes that this will reduce the number of bad technology patents that are currently streaming out of the USPTO.

The astroturfing problem is a largely hidden epidemic and will probably need a browser functionality similar to Google’s Safe Browsing Techonology to even raise that issue into the public consciousness.

Fundamentally, the answer to the question “Why Not Just Make Better Products?” is because getting good products into peoples hands is hard. Sadly the current business environment makes it easier and potentially more profitable to focus on other strategies. Microsoft’s clearly chosen to spend their time and resources increase the risk of using competing products (via patent litigation and threats), expense involved in creating competing products (via Internet Explorer, patent licencing) and complexity (UEFI) of everything else so their own products (however risky, expensive and complex) seem like a bargain. They are doing this because it makes them money.

Until the incentives change we can expect Microsoft to keep advancing into territory previously understood as crime.


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