CyberTech Rambler

April 5, 2007

Innovation Nightmare

Filed under: Uncategorized — ctrambler @ 12:37 pm

Most people cannot even agree on what constitute innovation. Take for example, the argument over rewarding innovation by grant of patents monopoly. Most efforts falls into the large grey area between definitely innovative and definitely non-innovative. In the case of patent, at least it is reduced into the adjusting the threshold to make a binary yes/no decision, albeit the fact the threshold is an arbitrary one and possibly varies in a case-by-case basis (worse).

Imagine, however, you are asked to look into grey area and set a value based on the shade of grey. This is going to be extremely difficult and the EU had set themselves this task in the ongoing antitrust litigation with Microsoft. As part of the remedy for Microsoft’s anti-competitive behaviour in the workgroup services, Microsoft is required to license the networking protocol used. The royalty it can claim will be based on the innovativeness of the protocol. The cost to the licensee will be anything from zero for non-innovative protocols, to the maximum the market will bear before throwing in the towel for truly innovative protocols. Sounds simple, but in practice, how are you going to determine how innovative the protocol is?

Take the much contested Microsoft modification of keberos protocol for example. From the viewpoint of keberos protocol information transfer, it is only extremely minor, i.e., a few bytes here and there. Hence the protocol should be non-innovative. Not so fast! One can argue innovation could be in how these few bytes enhanced the protocol itself. Most will however, agree that if the only innovation is to obfuscate the protocol to shut out non-Microsoft system, then it is non-innovative and can be said to be anti-competition as far as the EU antitrust action is concerned.

As such, a tussle between EU and Microsoft is the only expected outcome. According to MSNBC, EU is of the view that Microsoft’s requested royalties is too high. Industry players interested in creating rival to Microsoft’s workgroup servers will want as low royalties as possible. In fact they can get away with it, who will object to Microsoft paying him to use the protocols? Microsoft will of course wants as much royalty as possible. EU is there to be the independent and neutral body to arbitrate this. Stuck right in the middle is Prof Neil Barrett, an expert nominated by Microsoft and appointed by EU to look in to the matter, who have the unenviable task of sorting this out.

Until we can see the truth picture, i.e., having the protocols laid out side-by-side for comparison, we cannot tell who is closest to the truth. This, however, is not going to happen for a variety of legitimate reasons. We will therefore have to pick who we want to believe and trust. My money is on EU and Prof Barrett.

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