When Hern�n Cort�s landed in Mexico in 1519, he was no less ambitious than Microsoft, but differences between the man and the monopolist were immediately apparent. Cort�s, for instance, burned his ships so that no retreat was possible, then marched through the interior of the country on an imperialistic orgy, massacred people in the marketplaces, overthrew an empire, and set himself up as the ruler. And Microsoft.... well, depending on who you ask, Microsoft did basically the same thing.

But in Burning the Ships, Microsoft's Marshall Phelps and writer David Kline argue that all the imperialistic stuff—the massacres, the hangings, the occupations and conquests—was a hallmark of the Old Microsoft. In the early 2000s, the company had an epiphany: technological progress was simply moving too fast and going on in too many places to control it all in-house.

If Microsoft hoped to compete in the New World of Mexico Collaboration, it had to get serious about partnerships, it had to patch up its relationships with governments around the world, and it needed to stress interoperability. Phelps was brought on board to make many of the changes, and he had support from the highest levels of the company, including Bill Gates.

Thus it was that "the most powerful technology company on earth" made a "radical 180-degree change" in its course. Or it "burned its ships." Or something. (One analogy suggests the company went back the way it came, the other that it destroyed any chance of going back the way it came. The lesson? Don't go to business books for well-thought-out analogies.)

The main point, however, is clear enough: Microsoft made a major corporate realignment, stressing collaboration, licensing, and interoperability—and it didn't do so to be a Mother Teresa "pulling lepers out of the gutter." It did so for "entirely business reasons."

The NAP clause

Phelps' continual talk about collaboration (the first chapter is called the "The Collaboration Imperative") and sharing intellectual property (IP) with others doesn't refer to some kind of hippie, "free culture," death-to-software-patents! approach. Phelps was the guy, after all, who turned IBM's huge patent portfolio into a $2 billion a year pure-profit enterprise before going to Microsoft. He also calls IP "the single greatest wealth-creating asset of the modern corporation."

Burning the Ships: Intellectual Property and the Transformation of Microsoft Wiley 186 pages $29.95 Shop.Ars

Phelps is open to just about everything—including collaboration with Linux vendors and reform of the US patent system—except for dealing with true radicals like Richard Stallman of the Free Software Foundation. Phelps goes out of his way to include a lengthy account—even though he admits it may be apocryphal—of a time when Stallman convinced Red Hat to buy him a plane ticket so that he could visit an estranged girlfriend. In return, Stallman gave a speech at Red Hat's campus "in his long white robe and foot-long beard" wearing "a halo made out of a large old disk-drive platter."

Stallman and his ilk are simply too radical to play the game with everyone else; by calling for "free everything," Stallman and company threaten the "single greatest wealth-creating asset of the modern corporation." Fortunately for the modern corporation, Stallman's complaints "are now beginning to take on the futile air of old-time utopian socialist entreaties."

Everyone else was welcome to partner with the new Microsoft, but Phelps quickly learned that many companies were wary of doing so. A big part of the reason was the "non-assertion of patents" clause that Bill Gates had dreamed up in 1993 and inserted into just about every Windows contract.

The clause didn't sound exceptionally hostile, and in fact it had helped to keep the "patent peace" in the PC world for over a decade. The NAP clause forced all the companies that licensed Windows to agree "not to sue Microsoft or each other for patent infringement after they had already begun shipping a new version of Microsoft's software."

Companies hated this. Although it kept IP lawsuits down in the whole industry, many companies felt forced to sign the NAP clause because they needed Windows. It also meant that many legitimate patent lawsuits, not just against Microsoft but also against competitors, could not be launched. Watching some other company violate your key patents while being unable to act just because some company in Redmond, Washington required it was galling—especially to Japanese firms.

Despite the clause, Microsoft in 2003 was facing $100 million a year in legal bills and a huge increase in patent lawsuits. Though these weren't brought by the PC makers (thanks to the NAP clause), plenty of other firms had patents and wanted a piece of the Microsoft war chest. And then the company lost a patent case to Eolas and had to pay $521 million in damages.

Let's collaborate



So Phelps pushed Microsoft to eliminate NAP and instead focus on cross-licensing agreements and collaboration, even with open source vendors. Microsoft, like many companies, had historically protected its intellectual property as something that only it could profit from; Phelps wanted to upend this attitude and license IP widely to others. Divisions like Microsoft Research were simply generating more patents than Microsoft itself could ever profitably use, and the collaborative agreements that patent cross-licensing allowed brought Microsoft into a web of partnerships with others. It was a far cry from the "go it alone," trust-no-one-outside-the-company days of yore.

This eventually produced the controversial deal with Novell, something that even Bill Gates had serious reservations about doing. According to Phelps, he began to receive "Sunday night e-mails from Bill" about the deal that worried about "killing the business!"

But the deal got done. A first meeting with Novell took place in June 2006 at the airport Hyatt in Chicago while a "convention of women bodybuilders was being held there at the same time." By November 1 of that same year, a collaborative deal was forged between two companies which had previously seen each other most often in court.

The move led to speculation that Microsoft and Red Hat would form some alliance as well. Phelps says only, "I wouldn't be surprised if we did," and in fact the two companies did announce a limited deal in February 2009.

Phelps' point throughout is that such deals were possible thanks to Microsoft's IP, which gave it something valuable to offer in cross-licensing agreements that brought companies together as partners, not just as totally independent rivals. That's the way it has to be for companies today; technology has grown so complex that a "fortress mentality culture and go-it-alone market strategy" simply won't work anymore. Collaboration and partnership are the new name of the game, and IP is the glue that seals such deals.

Good fences, good neighbors

As a window into Microsoft's corporate conversion, the book is fascinating. Phelps and Kline offer plenty of behind-the-scenes accounts of strategy decisions and negotiations, and they're honest about how Microsoft was perceived in the market and about how difficult it was to adopt a new approach to competition. The writing is admirably clear, the Cortez metaphor not belabored.

But this is first of all a business book—whether that's good or bad depends on how much you enjoy such things. The focus is on executives who deal with IP and need to think about the consequences of patent policies and strategic dealmaking. It takes plenty of potshots at people like Stallman, and the conclusion saves a few jabs for Google, but generally the book is descriptive and analytical when it comes to Microsoft, not apologetic or hagiographic.

Those who harbor more doubts about IP in general won't find much to like here. The basic approach to IP is summed up by citing Robert Frost's famous poem, "Mending Wall." "Just as good fences made good neighbors," writes Phelps, "strong IP rights would make for strong and successful collaborations."

But Frost's line in the poem is clearly ambiguous; while the saying is a bit of New England folk wisdom, it also illustrates the distance that keeps people apart from one another in negative ways.

The farmer who says those words in the poem "moves in darkness as it seems to me, / Not of woods only and the shade of trees. / He will not go behind his father's saying." Neither will Phelps and Kline "go behind" the IP consensus, even though they lament "patent trolls" and the many firms that have besieged Microsoft with lawsuits over the years.

Those looking for a defense or an analysis of IP and its proper social role won't find it here. Burning the Ships assumes the utility and worth of the current system even as it seeks ways to turn IP to more collaborative and less litigious ends. As such, it's a worthwhile read for those interested in such topics or those who want a peek at the inside of the kinder, gentler Microsoft of today.