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If Microsoft can conquer Yahoo with its blustery takeover bid, there may still be another storm on the horizon over intellectual property. The two companies’ views about what should be shared and what should be kept proprietary have been as different as sunny Silicon Valley and dreary Seattle. Microsoft has historically guarded its software code, and company executives have eagerly criticized the open-source movement, which advocates for the free development and use of software. Yahoo, meanwhile, has embraced the movement, going as far as to purchase Zimbra, an open-source e-mail server software company, for $350 million last year. Some intellectual property lawyers say that means the companies are on course for a serious clash over IP attitude. “It would certainly be a war of policy,” said a Silicon Valley IP lawyer, who like many others couldn’t comment publicly because either one or both of the companies is a firm client. “Microsoft has one of the most conservative policies on open source in the industry.” The question is: Which IP culture would prevail? Lawyers in the open-source milieu, which continues to grow as more companies like Yahoo and Sun Microsystems adopt its principles, are watching the deal closely. “People are asking what will happen to all of this momentum that open source seems to have gained � now that Yahoo seems to have taken on so many open-source projects,” said Timothy McIntyre, general counsel at Terracotta, an open-source software company in San Francisco. “There’s a big question of whether all the momentum and the energy behind it will continue or whether a company like Microsoft can put the brakes on open source,” he added. The open-source process requires developers to make their improvements public, effectively turning the notion of charging for use of proprietary software on its head. McIntyre said he believes the overall trend in the industry will push Microsoft to be more open, allowing Yahoo to continue on its path if the deal goes through. “I think there’s a logical mix and probably a way for Microsoft to hang on to some of its proprietary stuff,” he said. Indeed, on Thursday, Microsoft announced it would open up some of its software products to developers. The company had previously required them to get trade secret licenses. The software giant made a “covenant” not to sue open-source developers for noncommercial distribution, but will still require companies engaged in commercial distribution to obtain patent licenses. While the announcement was viewed with skepticism by free-software advocates, it’s still a vastly different tack than Microsoft has taken in the past. In 2001, CEO Steve Ballmer famously called Linux, the open-source operating system, “a cancer that attaches itself in an intellectual property sense to everything it touches.” Last year, Microsoft GC Brad Smith told Fortune magazine that free and open-source software like Linux infringed on 235 Microsoft patents. Microsoft has tried seeking royalties from big companies that use the open-source software, Fortune reported last year. Yahoo has taken a far less vitriolic view of free and open-source software. At a meeting with media last fall, Joseph Siino, Yahoo’s vice president of IP, said that as long as patents are respected, his company is all for it. “Yahoo, as you know, is very, very supportive of openness, and there’s a lot of things we’re doing to open up software, to open up our platforms to the user community. It’s a really, really important thing to us,” said Siino at the time. “When we do that, we like to be clear and know what we’re giving away because we also have a responsibility to our shareholders not to throw things away,” added Siino, whose job is to make the most of Yahoo’s IP assets. When Yahoo bought Zimbra � the San Mateo startup whose open-source product competes with Microsoft Outlook � the founders said Yahoo would be a good match. “Yahoo is � a major proponent of open technologies, and this combination is a further testament to how serious they are about their intentions,” wrote Satish Dharmaraj, co-founder and CEO of Zimbra, on his blog. The divergent IP cultures at Yahoo and Microsoft don’t extend to IP litigation, lawyers outside the companies say. Though Microsoft’s pronouncements have sometimes been seen as veiled threats, neither company is aggressive about actually suing over intellectual property. Observers say that the two companies both treat their intellectual property as a valuable asset, though.

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“Probably of all the tech companies on the planet these are two of the most IP savvy of all,” said Ronald Laurie, an IP consultant who co-founded Inflexion Point Strategy with Siino in 2004. “Both companies view their IP positions as key assets.” It’s hard to tell what Microsoft and Yahoo’s in-house IP lawyers think of the other’s policies � Siino did not return phone calls and a Microsoft spokesman declined to comment � but it’s clear they’ll have some talking to do if the deal goes through.

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