Microsoft has responded to our story yesterday about it threatening Asian governments that, if they choose Linux, they may get sued - possibly by one of the holders of the "more than 228 patents" that Linux allegedly contravenes.

The company's response is that we got it wrong: "This was not a Microsoft report nor is this a Microsoft 'warning'. I’ve attached an excerpt of the Q&A for your review of Steve’s actual comments and context," said spokesman Mark Martin.

Martin explained: "Steve [Ballmer] was referring to a study done by the Linux community group Open Source Risk Management (OSRM), a pro-Free and Open Source Software organisation. According to its August 2nd announcement, OSRM states that Linux could be in violation of 283 patents and, as such, could expose customers to undetermined licensing costs. (In the release, OSRM calls out that 'patents pose a financial risk to corporate Linux users,' noting that 'it costs $3 million dollars on average to defend a patent lawsuit'.)"

However, note that the OSRM - an insurance group that can indemnify business against the possibility of being sued for patent infringement - has a potential conflict of interest. That's because a long list of potential infringements (283 of them) raises fear, uncertainty and doubt in the minds of business managers, rendering them more pliable to OSRM's blandishments. And the OSRM has yet to make the long list of possible infringements public, so users must trust them on that statement.

Martin then says: "Microsoft recently announced that it is extending its software indemnification offering to include all licensed end users using a wide range of current and earlier versions of Microsoft software. We want end users of Microsoft software to have confidence that they are not unnecessarily exposing themselves to IP problems by using our software. Microsoft helps protect our end users from intellectual property risk by offering strong IP protection. We stand behind our customers and we stand behind our software."

This we gently ascribe as sheer opportunism. No one has ever suggested users of Microsoft software would be sued - Microsoft appears to be offering a benefit that is not needed and no-one has asked for.

So, did Ballmer warn users against general patent infringement, based on OSRM's information? Or was he threatening them aginst Microsoft's potential actions? You can make up your own mind, as here is a transcript of Ballmer's remarks [provided by Microsoft]. We have highlighted the relevant section in bold:

Q: In Asia we're seeing a lot of support from government for Open Source. (Off mike.) To deal with just Open Source software development, because they feel that, one, national security is at stake if they can't see the source code and, secondly, because of licensing costs.

Steve Ballmer: Let me talk a little bit about that. First, I think the most important -- if I was to leave you with one sort of top level, most important suggestion, is we recommend to all governments that they not get emotionally involved in preferring either software that comes from commercial companies or Open Source software. We think the most sensible policy for most governments to take is a policy of neutrality, picking the software for a given application that actually makes most sense relative to the government's needs.

On the particular issues that you highlighted, we have heard the concern, for example, on national security from a number of governments. We do license our source code to governments. Governments can look at that source code, see that source code. We actually think our software is far more secure than Open Source software. It is more secure because we stand behind it, because we fix it, because you actually know who builds it. Nobody ever knows who builds a piece of Open Source software, where it comes from, who did it.

So we understood the need by national governments and for any government represented in the room today, our people are happy to follow up and have a dialogue, if we haven't already entered into an agreement, to share our source code with you. We've done that in Russia, we've done that in a number of countries throughout Asia and I think it goes a long way to reassuring people that there is no way for Microsoft or for anybody else to have access to national secrets by using our software, so that's number one.

Number two, on licensing costs I would say two things. First of all, I don't know that it's clear to anybody what the licensing costs are for Open Source. Today, people say, well, isn't it just free, but we don't know in the long run. Open Source software does not today respect the intellectual property rights of any intellectual property holder. There was a report out this summer by an Open Source group that highlighted that Linux violates over 228 patents. Some day, for all countries that are entering WTO, somebody will come and look for money to pay for the patent rights for that intellectual property. So the licensing costs are less clear than people think today.

Second, for any piece of software, the overall cost of having it, the acquisition costs of the license is generally a very small percentage. You have to buy the software, you've got to install it, you've got to deploy it, you've got to develop for it, you've got to manage it, you've got to create and buy applications from it, and all of those costs are probably about 90 percent of the total cost, the acquisition price is probably about 10 percent of the overall cost. And on an overall cost basis, I think our products that compete with Open Source offer a lower total cost of ownership and I think the same is true of other commercial products versus their Open Source equivalents. Oracle has an Open Source equivalent competitor. Adobe has Open Source competitors. And I think that if you think of the total cost, it's often much cheaper to go ahead and pay the license cost because of all of the additional benefits in total cost of ownership that come with that.

So I think people get carried away on the issue that says, oh, it's free, free is wonderful. Certainly we have to offer you a good value. If we try to push our prices too high or we're not delivering enough innovation, our value equation won't look good. But I think the government policy we'd recommend is to be neutral and if, I don't know, Linux works best sometimes you should use it, if Windows or Office works best sometimes you should use it. Our sales people will be happy to tell you why we think most of the time Windows is a better solution but I think you ought to let there be - you shouldn't take - taking a position Open Source versus commercial software is almost like taking a position on which economic model for society is better. I don't think you want to do that. I don't think this issue is worth it. I think what you really want to do is run your government efficiently and effectively, you ought to be neutral and then take a look at the products from all communities on their merits.

Yeah, I'll come to this side of the room and be back to the other side in a minute. Yes, sir?