Pirates manage to crack Windows 7 activation

Pirates manage to crack Windows 7 activation

Jul 30, 2009 01:45 pm | Computerworld

Leaked Lenovo disk image provides master product activation key
by Gregg Keizer

Pirates have cracked Windows 7's product activation just a week after the operating system made RTM and a week before it's slated to reach users, Microsoft confirmed today.

The product key posted on the Web purportedly comes from Lenovo, one of Microsoft's major OEM partners, and allows users to activate downloaded copies of Windows 7 Ultimate RTM (release to manufacturing), which leaked to the Internet last week, shortly after Microsoft announced it had finished the operating system.

According to Windows enthusiast site Neowin, one of the first to report the crack, a Lenovo disk image of Windows 7 leaked to a Chinese Web site, then moved to English-language domains. Pirates proceeded to retrieve the master OEM key and the OEM activation certificate from the .iso file. Microsoft lets major computer makers like Lenovo, Dell and Hewlett-Packard pre-activate new PCs at the factory to save customers the hassle, and provides OEM master keys for that purpose.

Windows 7 uses an updated activation scheme, dubbed OEM Activation 2.1, which is an updated version of the activation software that first appeared in Windows Vista. The technology, ironically, has been the focus of a Microsoft lawsuit filed last January against a former employee charged withstealing company documents related to the anti-piracy software that computer makers use to lock Windows to their PCs.

The crack is not for the faint of heart, as it also requires a hack of the PC's BIOS; Activation 2.1 demands a BIOS that supports the new technology. In fact, forums on sites such as My Digital Life were full of questions from users unfamiliar with hacking a BIOS.

But scores of users on My Digital Life's forum have reported that the leaked key -- and the process that others laid out to use it -- activated their pirated copies of Windows 7 Ultimate. "Activated 3 computers with SLIC 2.1 (DELL) modified BIOS + DELL certificate for Vista + this key," said a user identified only as "thavmym."

This isn't the first time that Microsoft's copy protection technology has been cracked. Vista's activation has been hacked several times, and in volume sufficient to prompt Microsoft to issue updates that busted the most popular cracks. When it delivered Vista Service Pack 1 (SP1), for example, it cracked down on a pair of cracks that pirates had been using to activate downloaded copies of the OS.

Microsoft acknowledged the crack today, but its reaction was in line with past takes on the topic. "We are aware of reports of activation exploits that attempt to circumvent activation and validation in Windows 7," said a company spokeswoman in an e-mail. "[But] Microsoft strongly advises customers not to download Windows 7 from unauthorized sources," she added, then reminded users that "peer-to-peer Web sites exposes users to increased risks, such as viruses, Trojans, and other malware and malicious code

In May, a leaked copy of Windows 7 Release Candidate (RC) posted on file-sharing sites turned out to be infected with a Trojan horse.

Windows 7 is slated for public release Oct. 22, but subscribers to the for-pay TechNet and MSDN services will be able to download the final code, along with legitimate product activation keys, starting next Thursday.

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Ericsson wins auction to buy Nortel wireless business

Ericsson wins auction to buy Nortel wireless business

Jul 25, 2009 01:37 pm | IDG News Service

Bid for $1.13 billion tops offers from Nokia Siemens Networks and MatlinPatterson 
by Marc Ferranti

Sweden's LM Ericsson has won the bidding war over the wireless assets of Nortel Networks, agreeing to pay US$1.13 billion for the financially beleaguered Canadian company's CDMA business and LTE Access technology.

The deal, subject to court approval in the U.S. and Canada, will greatly expand Ericsson's foothold in North America, bringing customer relationships with large operators such as Verizon and Sprint.

Nortel had been operating under court bankruptcy protection since January. In June, the company accepted a $650 million offer from Nokia Siemens Networks for its CDMA and LTE assets. That offer set the stage for Private equity firm MatlinPatterson to jump in with a counter offer of $725 million for the wireless assets.

Research in Motion also made an offer for the assets but was barred from the sale after a bidding procedure dispute with Nortel.

Ericsson was a late entrant to the bidding process, with its interest publicly declared just Thursday. As part of deal, announced early Saturday, Ericsson will offer employment to a minimum of 2,500 Nortel employees supporting the CDMA and LTE Access business.

"This is one of those gifts from heaven for Ericsson in the otherwise very competitive world these companies operate in. Rather than competing with Nortel, Ericsson has won," said telecom industry analyst Jeff Kagan in e-mail. The consolidation of the industry, however, is not necessarily a good thing for customers, he noted.

"There are other competitors today, however Nortel posed a large competitive threat to Ericsson, and without that dynamic, what will the affect be on pricing and innovation and customer responsiveness?"

Ericsson and Nortel officials sought to reassure customers.

"The anticipated sale of our CDMA business and LTE Access assets to Ericsson for $1.13 billion represents a very positive prospect for our customers who will be able to continue their relationships with a long term partner; for employees who will have new opportunities at Ericsson and for many of our other stakeholders," said Nortel President and Chief Executive Officer Mike Zafirovski, in a statement announcing the deal.

Ericcson CEO Carl-Henric Svanberg added, "Ericsson is committed to meeting the needs of our new CDMA customers today and bringing the next generation of mobile broadband to the world with LTE."

Nortel said it will seek Canadian and U.S. court approvals of the proposed sale agreement at a joint hearing on Tuesday, and that it expects to close the deal by the end of the year.

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Microsoft to rush out emergency IE patch

Microsoft to rush out emergency IE patch.

Jul 25, 2009 11:13 am IDG News Service
by Robert McMillan


Microsoft is taking the unusual step of rushing out two emergency security patches ahead of its regularly scheduled updates on Aug. 11.
The patches will include a critical fix for Internet Explorer as well as a related Visual Studio patch rated "moderate" urgency by Microsoft.
"The Internet Explorer bulletin will provide defense-in-depth changes to Internet Explorer to help provide additional protections for the issues addressed by the Visual Studio bulletin," Microsoft said in a blog posting late Friday.
The patches are set to be released on Tuesday at 10:00 a.m. West coast time.
Microsoft didn't say exactly what it was fixing. The company typically doesn't rush out these "out-of-band" emergency updates unless the bug is being exploited by cyber criminals; however, in this case the flaws being patched are not being leveraged in attacks, according to Microsoft.
The problem appears to lie in a widely used Windows component called the Active Template Library (ATL). According to security researcher Halvar Flake, this flaw is also to blame for an ActiveX bug that Microsoft identified earlier this month. Microsoft issued a kill-bit patch for the problem on July 14, but after looking into the bug, Flake determined that the patch didn't fix the underlying vulnerability, so new attacks are possible.
Whatever the issue, the new patch should be a top priority for IT staff next week. "When Microsoft goes to an out-of-band patch, I think it's sensible for people to apply it," said Roger Thompson, chief research officer with AVG Technologies.
Microsoft didn't give a reason for the rushed update but it may be trying to stay ahead of any public disclosure at next week's Black Hat security conference in Las Vegas. The emergency updates are set to be released the day before the Black Hat Briefings, where researchers Mark Dowd, Ryan Smith and David Dewey will talk about browser security issues.
According to security experts, thousands of Web sites have been used to launch on-line attacks that exploit the ActiveX vulnerability patched in July. The flaw was first reported to Microsoft more than a year ago.

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Security certificate warnings don't work, researchers say

Security certificate warnings don't work, researchers say.

Jul 25, 2009 07:59 am IDG News Service
Most users click through after they're warned of an "invalid certificate"
by Robert McMillan

Every Web surfer has seen them. Those "invalid certificate" warnings you sometimes get when you're trying to visit a secure Web site.
They say things like "There is a problem with this Web site's security certificate." If you're like most people, you may feel vaguely uneasy, and -- according to a new paper from researchers at Carnegie Mellon University -- there's a good chance you'll ignore the warning and click through anyway.
In a laboratory experiment, researchers found that between 55 percent and 100 percent of participants ignored certificate security warnings, depending on which browser they were using (different browsers use different language to warn their users).
"Everyone knew that there was a problem with these warnings," said Joshua Sunshine, a Carnegie Mellon graduate student and one of the paper's co-authors. "Our study showed dramatically how big the problem was."
That's not great news. Often the warnings pop up because of a technical problem on the Web site, but they can also mean that the Web surfer is being redirected somehow to a fake Web site. URLs for secure Web sites begin with "https."
The researchers first conducted an online survey of more than 400 Web surfers, to learn what they thought about certificate warnings. They then brought 100 people into a lab and studied how they surf the Web.
They found that people often had a mixed-up understanding of certificate warnings. For example, many thought they could ignore the messages when visiting a site they trust, but that they should be more wary at less-trustworthy sites.
"That's sort of a backwards understanding of what these messages mean," Sunshine said. "The message is validating that you're visiting the site you think you're visiting, not that the site is trustworthy."
If a banking Web site shows a message that its security certificate is invalid, that's a very bad sign, security experts say. It could mean the Web surfer is being subjected to a so-called man-in-the-middle attack. In this type of attack, the criminal inserts himself between the Web surfer and the site he's visiting, in the hopes of stealing information.
Security experts have long known that these security warnings are ineffective, said Jeremiah Grossman, chief technology officer with Web security consultancy White Hat Security. That's because users "really don't know what the security risks mean," he said via instant message. "So they take the gamble."
In the Firefox 3 browser, Mozilla tried to use simpler language and better warnings for bad certificates. And the browser makes it harder to ignore a bad certificate warning. In the Carnegie Mellon lab, Firefox 3 users were the least likely to click through after being shown a warning.
The researchers experimented with several redesigned security warnings they'd written themselves, which appeared to be even more effective. They plan to report their findings Aug. 14th at the Usenix Security Symposium in Montreal.
Still, Sunshine believes that better warnings will help only so much. Instead of warnings, browsers should use systems that can analyze the error messages. "If those systems decide this is likely to be an attack, they should just block the user altogether," he said.
Even when visiting important Web sites like banks, "people are still dramatically ignoring the warnings," he said

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Linux exec: Personal computers will be free like phones

Linux exec: Personal computers will be free like phones.

Jul 25, 2009 07:18 am InfoWorld
The executive director of Linux Foundation sees parallels between wireless phones and computer hardware
by Paul Krill

Look for personal computer users to soon get their hardware in the same way that they get their cell phones: for free as part of telecommunications service subscriptions, the executive director of the Linux Foundation said on Friday afternoon.
In a presentation at the O'Reilly OSCON (Open Source Convention), Linux Foundation Executive Director Jim Zemlin said a trend will emerge in which users would select a wireless or network service provider and get a free PC with a data plan. AT&T, he said, already is offering netbooks as part of a service plan, with the user getting the netbook for $50.
[ Earlier this year, Intel said it would turn Moblin over to the Linux Foundation. ]
In an interview on Thursday, Zemlin elaborated on his free PC vision, enabled by the rise of netbooks running Linux. "What made the cell phone industry in the U.S. in particular take off in the mid-90s was the free phone," he said.
Carriers, he predicted, can provide Linux-based devices and develop their own app stores. Device makers also can provide these store, like Apple has, Zemlin said.
During his keynote, Zemlin emphasized the use of Linux in multiple types of systems and how Linux was changing the game in operating systems even on the client. "Today, everybody in the modern world uses Linux multiple times a day," he said, citing examples such as laptops, Google searches, and other systems.
Meanwhile, phones and PC devices are starting to converge, offering a lot of the same functionality, he explained. A PC can be cheaper than a phone, he said.
"If you look at what the iPhone has, it looks pretty similar to that PC," said Zemlin, comparing the iPhone to a $1,000 ThinkPad PC.
Linux also is benefitting from the down economy, with customers looking to save costs, Zemlin said. It also is overcoming potential legal hurdles with developments such as Microsoft now embracing the GPL, Zemlin said.

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Dell settles discrimination suit for $9.1 million

Dell settles discrimination suit for $9.1 million.

Jul 25, 2009 07:01 am IDG News Service
Dell admits to no wrongdoing as part of the settlement
by Agam Shah


Dell will pay US$9.1 million to settle a class-action lawsuit in which former employees accused the company of sex discrimination, the computer maker said Friday.
Of the total, $4.5 million will be paid out to the plaintiffs and $1.1 million will pay their lawyers and other legal costs. The other $3.5 million will go into a fund for base pay adjustments for current female employees who were part of the suit, subject to an equity review and salary analysis, Dell said.
Under terms of the settlement, Dell admitted no wrongdoing and the parties have agreed to dismiss any pending legal actions, according to a joint statement from Dell and the plaintiffs.
The case was filed in October by former employee Jill Hubley in the U.S. District Court for the Western District of Texas. It accused Dell of "systemic company-wide discriminatory treatment of its female employees," according to court documents. Another employee, Laura Guenther, joined the case as a plaintiff.
Hubley was a senior strategist in the learning and development division of human resources between June 2005 and September 2007. She alleged that Dell engaged in gender discrimination over salaries, career opportunities and promotions.
Hubley sought class-action status to cover women who became Dell employees worldwide after Feb. 1, 2003. She sought punitive damages as well as back-pay, front-pay and related benefits for members of the class.
"We’re pleased to have settled the issue," David Frink, a Dell spokesman, said via e-mail. "Settling the issue enables Dell to continue to build on strong diversity and equal-opportunity foundation and programs."
Last year Dell was recognized in Diversity’s 25 Noteworthy Companies list and Working Mother's 100 Best Companies list, he said.

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Storage vendors take lumps in recession, but see signs of hope

Storage vendors take lumps in recession, but see signs of hope.

Jul 25, 2009 06:14 am Network World
by Jon Brodkin

EMC’s latest earnings report illustrates the trouble experienced in the storage market this year, but some analysts are hopeful data storage vendors will make a comeback by the end of 2009.
10 data storage companies to watch
EMC’s second-quarter net income fell 43% year-over-year, and revenue fell 11%, the company reported this week. Seagate Technology on Tuesday, meanwhile, reported a net loss of $81 million in its most recent quarter.
A year ago, the storage market seemed to be thriving in a down economy, with analysts saying the pressing need for disk space was overriding IT spending concerns. But times have changed for the storage market, just as they have for the rest of the IT industry.
“When we went into the year, we probably couldn’t have and wouldn’t have predicted the first half to be as negative as it has been,” IDC analyst Benjamin Woo says.
IDC reported in June that worldwide factory revenue for disk storage systems has dropped 18.2% in a year, even though the total capacity of shipped disk storage systems grew 14.8%.
"The disk storage system vendors are really seeing the impact of the global economic downturn in the first quarter revenues," Steve Scully, IDC’s enterprise storage research manager said at the time.
Storage could actually be seen as a bright spot compared to the server market, in which first quarter revenues were 24.5% lower than the previous year.
“When you compare storage to the rest of the ICT [information and communication technology] area, I think you’ll find that storage weathered the whole downturn better than many other sectors,” Woo says. There is still pent-up demand for storage technologies among IT shops, says Woo, who predicted that revenue will bounce back later in 2009. Further down the road, Woo expects the emergence of Fibre Channel over Ethernet to fuel new purchases in 2010 and 2011.
EMC remains confident because IT spending seems to be stabilizing, and its acquisition of Data Domain could help the company win more customers in the de-duplication and backup markets. While EMC suffered large year-over-year declines, its second quarter numbers were slightly better than its first quarter revenue and income. EMC rival NetApp’s next earnings announcement is scheduled for Aug. 19.
Enterprise Strategy Group analyst Steve Duplessie expressed concern over Seagate’s numbers but said EMC’s earnings were “pretty strong” considering the circumstances.
“In general it’s a down global economy right now and it’s impossible to think any one industry is not going to suffer,” Duplessie says. “There’s always a worse side. We could be the automotive industry, or housing.”
In a way, the storage industry is plagued by its own success. The cost of disk capacity on a per-terabyte basis is dropping quickly, which is good for customers but can tear into vendor profits.
“Capacity demand hasn’t abated,” Duplessie notes. “The capital cost associated to capacity is dropping faster than the industry is able to make up for shipment wise.”
All the top storage vendors - including EMC, HP, IBM, Dell, Hitachi and Netapp – are posting lower revenue numbers this year than they did in 2008. But the companies’ respective market shares have remained relatively stable.
Obviously, these vendors are competing for a smaller pool of dollars than they were last year, Duplessie notes. “When the whole pie is smaller you need a bigger piece to stay neutral or grow,” he says. “Somebody is going to have to lose for someone else to win.”
Going forward, customers will be most interested in technologies that make storage more efficient, and minimize wasted disk space, Duplessie notes. That’s one reason EMC was willing to shell out $2.1 billion for Data Domain’s expertise in space-saving de-duplication.
“It ain’t about a disk drive anymore, it really isn’t,” Duplessie says.

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Analysts: Microsoft Q4 results show competitive pressure

Analysts: Microsoft Q4 results show competitive pressure.

Jul 25, 2009 05:43 am IDG News Service
A disappointing fourth quarter sent its stock falling, but analysts expect a bounce in fiscal year 2010
by Elizabeth Montalbano

Microsoft's disappointing earnings for the past quarter point to signs of damage from competitive and global economic challenges that the software vendor had until recently largely deflected, analysts said.
Microsoft Thursday reported revenue for the June quarter that was down 17 percent on net income that was down 29 percent year over year, missing analysts' forecasts. The results sent its stock price plunging more than 8 percent Friday, though it rebounded to close at US$23.45, only slightly lower than its opening price.
Microsoft's quarter proves the company, which has weathered other economic storms soundly, is not completely immune to the global economic crisis and actually may be getting hit harder than some competitors because of the scale and geographic reach of its products, said Matt Rosoff, an analyst with Directions on Microsoft.
"They're coming from a bigger base," he said. "When they fall, they fall farther."
Microsoft's results also show early effects of competitive pressure from the lower end of the markets for its two key products, Windows and Office, Rosoff said.
Netbooks, which run both Windows and Linux, are still cutting into the Windows PC market, while a 30 percent drop in consumer sales for Microsoft Office suite -- which Microsoft did not directly discuss Thursday -- could show pressure from Web-based office suites from Google and others, Rosoff said. "Pressure on the low end is certainly a factor," he said.
One thing that's been difficult for investors and analysts when it comes to predicting Microsoft's financial performance is that the company has not provided guidance about its financial situation since last October, citing economic conditions that were too unstable to predict. This in turn makes it hard for them to forecast Microsoft's performance, which made Thursday's miss so surprising, they said.
An area that's been particularly hard to read is the annuity revenue that comes from volume-licensing contracts, analysts said. Unearned revenue -- of which these revenues are a part -- was down year over year for the quarter, which threw off analyst estimates for how well Microsoft would do in the quarter, they said.
"Investor guess-timates for F4Q09 revenues that utilized F3Q09 as the base case apparently overstated the level of annuity revenues, since the annuity base has been falling as unearned revenues have been falling during the current downturn," according to a research note by FTN Equity Capital Markets Corp.
Analysts said Microsoft's reluctance to buy back shares and hoard stock during the quarter also show it may be preparing for an acquisition, or could just be hunkering down to ride out an economic environment the company expects to remain challenging.
Microsoft and Yahoo are said to be close to some kind of search tie-up, but Microsoft is not likely preparing to buy the entire company. An acquisition, then, would be of a company aside from Yahoo, they said.
"There are a lot of possibilities," Rosoff said. "They may be setting up for an acquisition, they may just be really conservative. ... Some combination of small acquisitions or maybe a larger acquisition is definitely possible. It depends on where they think their biggest weakness is."
He suggested Microsoft would serve itself well by making an acquisition in the mobile space, where Apple is still far ahead. While Microsoft floundered this quarter because of declines across its entire business, Apple reported a strong one mainly because its iPhone continues to do well, Rosoff said.
Despite Microsoft's disappointing quarter, analysts are hopeful the forthcoming Windows/Office product cycle and the commercial availability of the Windows Azure cloud platform in November, among other product launches in the next two quarters, will revive the company's growth.
"Windows 7, Windows Server 2008 R2, Bing, Xbox 360 console update and new Halo content, Office 2010, and the Azure Cloud Platform provide a platform for renewed innovation vigor beyond anything we have seen from Microsoft for multiple years," according to a note released Friday by Goldman Sachs.
The firm noted that although Microsoft is introducing a raft of products at a time when IT spending is low, the new products, combined with even a modest rebound in IT spending, could have a significant impact on boosting Microsoft revenue for the remainder of its 2010 fiscal year, which ends June 30, 2010.

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Can privacy and consumer protection coexist online?

Can privacy and consumer protection coexist online?

Jul 25, 2009 05:31 am IDG News Service
A paper suggests privacy legislation could hurt online services
by Grant Gross

Legislation that would create privacy regulations for online advertising could cause consumers to get fewer free services and isn't necessary because privacy advocates have shown no harm from data collection, the co-author of a study on online advertising said.
Online services have been tracking consumer behavior for a decade without creating problems for consumers, said Paul Rubin, a fellow at the Technology Policy Institute (TPI), a free-market think tank, and an economics and law professor at Emory University.
"Everyone talks about how consumers don't know what's going on, and if they knew what's going on, they'd be horrified," Rubin said. "The reason they don't know about it is they haven't bothered to learn about it, and the reason they haven't bothered to learn about it is because nothing bad has happened."
There's little evidence of data collected by online ad networks being used for identity theft, Rubin said. Instead, consumers see multiple benefits from giving up some personal data, such as information about what sites they visit, he added.
Several lawmakers have said privacy legislation is likely to be introduced later this year, but too many regulations could mean that now-free services like search, maps and Web mail could start to cost money or no longer be available, said Rubin, co-author of a TPI report on privacy and online services.
“More privacy, however, would mean less information, less valuable advertising, and thus fewer resources available for producing new low-priced services," the TPI paper argues. "It is this trade-off that Congress needs to take into account as it considers new privacy legislation.”
But other speakers at the TPI event suggested that the U.S. Congress does need to pass some online privacy rules.
While targeted advertising serves a useful purpose, consumers deserve to know who's collecting their data online and how it's being used, said Representative Cliff Stearns, a Florida Republican. Stearns predicted that Congress would release a draft of privacy legislation later this year.
However, Stearns also called for lawmakers to move cautiously. Although some have called for legislation that would require online businesses to get opt-in approval from consumers before collecting any information, Stearns said such a rule would go too far.
"It's easy to demagogue this issue and say consumers have a right to know everything and nothing happens unless you get their name on the bottom line," he said.
Leslie Harris, president and CEO of the Center for Democracy and Technology, and Alan Davidson, director of U.S. public policy for Google, disagreed with the TPI paper's premise that there are trade-offs between privacy protection and data-based Internet services. Transparency about data collection is necessary, Harris said, so that consumers will have confidence in online services.
Legislation is needed, she added, because in many cases consumers don't know how much information is being collected about them and how easy it is to identify an individual using a couple of pieces of data.
Online companies can protect user privacy and still deliver useful services, Davidson added.
Privacy advocate Jeffrey Chester, executive director of the Center for Digital Democracy, called the TPI paper flawed. TPI's assertion that new privacy rules could cause major harm to online services is "an absurd, reductionistic, and intellectually-dishonest claim," Chester wrote on his blog.
"Consumer privacy laws are required to ensure that our financial, health and other personal transactions online are conducted in a responsible manner," Chester added. Anyone -- or group -- who believes that we can’t have both privacy and a robust online marketplace is out of touch."

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Microsoft's EU offer gets cautious welcome from rivals

Microsoft's EU offer gets cautious welcome from rivals.

Jul 25, 2009 05:25 am IDG News Service
Some think the software giant has given up the fight over browsers and interoperability
by Paul Meller


Microsoft's offer to settle its outstanding antitrust issues with Europe's top antitrust regulator was given a cautious welcome by the company's principal antagonist Friday.
Thomas Vinje, the lawyer representing companies including IBM, Oracle and Red Hat, as well as Opera, the browser manufacturer that sparked the current antitrust investigation against Microsoft, described the software giant's moves as welcome.
Microsoft has offered to carry a browser "ballot," making it easier for even novice users to choose another browser besides IE for their default link to the Internet. It also has offered to promote interoperability between third-party products and a number of crucial Microsoft products, including Windows, Windows Server, Office, Exchange and SharePoint.
"The devil will be in the details, but in principle Microsoft's acceptance of a consumer browser ballot is a very welcome development," Vinje said, adding similar remarks concerning the interoperability offer.
The European Commission also welcomed the move, saying it would now investigate the effectiveness of the offers, focusing initially on the proposal to restore competition in the browser market.
The Commission charged Microsoft in January with distorting competition by bundling its Internet Explorer browser together with its omnipresent Windows operating system. The regulator said this puts rival browsers at a disadvantage and proposed a ballot screen listing browsers that users could then choose from.
"Microsoft vigorously opposed such a remedy, which was eloquent testimony to its effectiveness," Vinje said via e-mail late Friday.
He described Microsoft's decision to accept the ballot screen idea as a "capitulation in the face of near-certain defeat before the Commission."
One industry source closer to Microsoft believes the software giant has lost its will to fight in its long-running antitrust battle in Europe.
"They don't have the appetite to fight anymore. Now their aim is to settle up and make sure that other technology firms, like Google and IBM, are held to the same antitrust standards," said a person familiar with Microsoft's thinking who asked not to be named.

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Free Windows 7 upgrade may not reach $298 laptop buyers

Free Windows 7 upgrade may not reach $298 laptop buyers.

Jul 25, 2009 05:16 am IDG News Service
They may have to purchase Windows 7 off the shelves instead if they want to upgrade
by Agam Shah


Wal-Mart will start selling a fully loaded laptop from Hewlett-Packard for a breakthrough price of US$298 on July 26, but it may have a caveat: The Windows Vista OS included with the machine may not qualify for a free upgrade to Windows 7.
The laptop -- a Compaq Presario CQ60-419WM -- has attracted attention because of its low promotional price and generous features, which include a large screen, fast processor and Windows Vista Home Basic OS.
But according to HP's documents, users will not be able to upgrade the Vista Home Basic OS to Microsoft's Windows 7. Vista has been panned for being sluggish and resource-hungry, while Windows 7, due for release on Oct. 22, has been praised by beta testers as faster and more resource-friendly.
HP is not providing free upgrades (PDF document) from Vista Home Basic to Windows 7, according to HP's Windows 7 upgrade option program. Only PCs with Vista Home Premium, Vista Business or Vista Ultimate qualify for the upgrade.
Microsoft has listed an upgrade path from Vista Home Basic to multiple versions of Windows 7, but HP isn't offering those options. That means customers who want Windows 7 might have to buy a version of Windows 7, priced starting at $120, off the shelves.
HP did not immediately respond to a request for comment. Wal-Mart did not immediately comment on whether it had plans in place to provide free Windows 7 upgrades.
Hewlett-Packard said in June it would offer free upgrades to Windows 7 for customers who buy qualifying PCs pre-installed with certain editions of Vista in the U.S. and Canada. Customers need to go to HP's Windows 7 upgrade Web site to check upgrade eligibility. Qualifying customers will receive Windows 7 upgrade disks starting Oct. 22, when the new OS becomes generally available.
Companies including Lenovo and Dell are also offering free upgrades.
Mainstream laptops under $300 are rare, and for such a low price, the Presario laptop is packed with features. A free upgrade to Windows 7 might have given additional impetus for users to buy it.
The laptop should give better graphics and application performance than netbooks, which are generally less powerful systems with smaller screens and keyboards.
Wal-Mart is expecting a rush of customers and it could run out of stock quickly. "We expect this one will be quite popular," a Wal-Mart employee wrote in its blog entry announcing the offer.

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In India, Gates criticizes U.S. immigration policies

In India, Gates criticizes U.S. immigration policies.

Jul 25, 2009 05:09 am Computerworld
In separate U.S. speech, the Microsoft Chairman touts education reform
by Patrick Thibodeau

Microsoft Corp. Chairman Bill Gates traveled to India this week and delivered a message to Washington: Don't clamp down on immigration. "The U.S. Congress is very tough on immigration," Gates said today at the Transforming India through Technology forum in New Delhi, according to compilation of press reports on Microsoft's MSN India portal. "But why not make an exception for smart people?"
Gates' comments to the Indian forum were mostly boilerplate remarks that he has consistently delivered on both sides of the Pacific. Gates is a longstanding opponent of a cap on H-1B visas and has testified before congressional committees on numerous occasions on that topic.
Earlier this week in the U.S., Gates continued to push for improvements to the educational system. In a speech Tuesday at the National Conference of State Legislatures in Philadelphia, Gates contended that the U.S. education system is in need of reform, citing poor college graduation rates in the country.
"America is a land of staggering opportunity," Gates said. "But if you want to make the most of this opportunity, high school is not enough, and some post secondary [education] is no longer enough. If you want to have the skills to build a career, or [to earn] the resources to raise a family, you need a two-year or four-year [college] degree."
An American Enterprise Institute report ( download PDF) released last month showed that less than 60% of students entering four-year colleges graduate within six years. The percentage varied widely among the long list of institutions. For instance, 44% of freshmen students entering the University of Louisville graduate within six years. while 34% graduate in that time from the University of Memphis and 25% from the University of Alaska, Fairbanks.
"As a country, our performance at every level -- primary and secondary school achievement, high school graduation, college entry, college completion -- is dropping against the rest of the world," Gates said.

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AT&T net income down 15 percent

AT&T net income down 15 percent.

Jul 25, 2009 04:09 am IDG News Service
by IDG News Service staff

The story "AT&T net income down 15 percent," which ran on the wire Thursday, has an incorrect date, due to a reporting error. The first paragraph of the story has been corrected on the wire and now reads:
Telecommunications giant AT&T reported net income of US $3.2 billion for the second quarter of 2009, down more than 15 percent from the second quarter of 2008, spurred by sagging revenues in its traditional voice and directory businesses.

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GM CIO and outsourcing pioneer Ralph Szygenda retiring

GM CIO and outsourcing pioneer Ralph Szygenda retiring.

Jul 25, 2009 04:04 am Network World
by Bob Brown

How big a deal was GM CIO Ralph Szygenda? I once took a meeting with a GM PR person who was on a national media tour just to promote Szygenda's IT vision, and the CIO himself wasn't even in tow.
I was reminded of that one-of-a-kind meeting this week when GM announced, as part of a broader management shakeup, that the 60-year-old Szygenda is retiring on Oct. 1. Szygenda joined GM to become its first CIO in 1996.
12 CIOs who Twitter
Szygenda, who joined GM at a time when EDS dominated its IT operations, was an outsourcing and business process re-engineering maverick who cut billions from the company's IT budget and who negotiated a $15 billion deal a few years back that was often described as the biggest in history. Szygenda's third-generation outsourcing plan was designed to get outsourcing providers to compete with each other while also streamlining their operations by cooperating on standards. During his tenure, Szygenda's team also developed systems key to GM advances such as its OnStar vehicle safety system.
The GM CIO also joined with peers at other organizations, including the U.S. Department of Defense, in support of best practice standards for buying software and services.
Szygenda was often sought out by industry organizations and the press to share his views on IT strategy and industry news (we spoke to him in 2007 about a $1 billion contract GM signed with AT&T).
In 2000, he told us, for a story about career moves, that: "I have always been a businessperson first and a technologist second. And even though I've been in technology jobs, my work had to change the bottom line of business." Simply, the technology didn't interest him unless it affected change to the business process.
Network World named him one of its "Most Powerful People in Networking" numerous times, including in 2006 and Szygenda also belongs to CIO Magazine's CIO Hall of Fame.
Szygenda joined GM in 1996 from Bell Atlantic, where he was vice president and CIO. Before that, he held a slew of IT jobs at Texas Instruments.
The group vice president is being replaced as CIO by Terry Kline, currently GM's process information officer for product development.

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Microsoft offers choice of browsers to satisfy EU

Microsoft offers choice of browsers to satisfy EU.

Jul 25, 2009 03:56 am IDG News Service
The company is seeking to address competition concerns raised by the European Commission in January
by James Niccolai

Microsoft has offered to provide a choice of Web browsers with its upcoming Windows 7 operating system to ease concerns of competition regulators in the European Union, the EU's competition authority confirmed Friday.
Microsoft proposed including a "ballot screen" that would make it easy for Windows 7 users to install a competing Web browser, set it as the default and disable Internet Explorer, the European Commission said in a statement. PC makers would also be able to install competing Web browsers and disable IE.
"The Commission welcomes this proposal, and will now investigate its practical effectiveness in terms of ensuring genuine consumer choice," it said.
The Commission raised concerns in January that Microsoft's practice of tying IE with Windows might be anticompetitive. Later, in June, it said that simply separating IE from Windows might not be sufficient to ensure competition.
After that warning, Microsoft said it would ship a version of Windows 7 in Europe without Internet Explorer, to make sure it complied with the law. On Friday it said it would continue shipping that version, called Windows 7 E, to PC makers until the Commission decides whether to accept the ballot option.
"PC manufacturers building machines for the European market will continue to be required to ship E versions of Windows 7 until such time that the Commission fully reviews our proposals and determines whether they satisfy our obligations under European law," Microsoft said.
Microsoft has also made proposals to the Commission about disclosing information to achieve better interoperability between Windows, Windows Server and third-party products, the Commission said Friday. It is also investigating these proposals, it said, declining to comment further.
Microsoft said the interoperability efforts also include Office, Exchange, and SharePoint. "Like the Internet Explorer proposal, the interoperability measures we are offering involve significant change by Microsoft," the company said.
"We believe that if ultimately accepted, this proposal will fully address the European competition law issues relating to the inclusion of Internet Explorer in Windows and interoperability with our high-volume products," the company said, adding that it would mark "a big step forward in addressing a decade of legal issues."
The EU has already won an earlier competition case against Microsoft. In May 2004 it fined the company a record €497 million ($794 million) and ordered it to sell a version of Windows in Europe that did not include Microsoft's Windows Media Player software, to restore competition in that market.
Few PC makers sold the version of Windows without WMP, however, and the remedy was widely seen as ineffective. The Commission is keen to extract more effective remedies from Microsoft for its latest objections.
Microsoft said it would publish its latest proposals "in full" on its Web site "as soon as possible."

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Oracle users' gripes about support portal going unheeded

Oracle users' gripes about support portal going unheeded.

Jul 25, 2009 03:52 am IDG News Service
The vendor is apparently still retiring its MetaLink site in exchange for a flashier replacement, despite complaints
by Chris Kanaracus

Despite complaints from many users, Oracle is showing no signs it will reverse course on plans to shut down the venerable MetaLink support portal, long used by thousands of IT professionals around the world.
The software vendor is planning to replace MetaLink with My Oracle Support (MOS), a Web 2.0 and social-networking infused portal with a dynamic, Flash-based look.
Oracle has offered users an option of logging into "Classic MetaLink" or the new site, but it will soon be no more, despite outcry from many users who prefer the tried-and-true.
More than nostalgia is behind the complaints. Many Oracle users say the MOS interface's use of Flash, which is not installed on many corporate sites and client machines, makes it difficult for them to do their jobs and has resulted in sluggish performance.
The gripes have been rolling in for weeks on both Oracle's official forums and listservs.
A poll started by Oracle DBA Jared Still has received more than 600 responses, with about 62 percent, or two-thirds, saying they preferred Classic MetaLink over MOS.
"So far I'm very disappointed," one respondent said in a comment. "It's certainly not 'My' support, it's 100% 'Their' support (everything is centered around an idea how to cut as much as possible their support expenses.)"
One European Oracle user said via e-mail that the MOS site struggles to perform over lower-bandwidth lines, and the redesign overall was unnecessary and even counterproductive.
"Who cares...the phone works," said the user, a long-time Oracle projects consultant who preferred anonymity. "And I think that some customers will use the phone even more [now]."
Oracle is going to make sure large customers are taken care of, but that may be a moot point since those users probably have a dedicated support worker anyway, the user added.
"I think that if there are enough complaints from a large number of small customers, so revenue is influenced, then Oracle will listen," he said. "If Oracle does not listen to the customer base as a whole, they are in trouble."
In a recent message to users posted on an official support blog, Oracle framed its decision as one of expedience, given the company's long chain of acquisitions.
"Oracle has acquired 50+ companies in the past 5 years. In order to provide a common, consistent support experience we are in the process of moving all of our customers onto a single, integrated support platform, My Oracle Support," it reads.
MOS is also integrated with Oracle's configuration manager, meaning it can use information about a customer's systems to find the answers to problems faster, the message adds.
Oracle is now working to upgrade the MOS and improve the user experience, according to the note.
But is unclear whether users' complaints are prompting Oracle to reconsider its decision to retire MetaLink, and at least continue providing it as an option. An Oracle spokeswoman did not respond to a request for comment.
Not every Oracle user is upset about the coming change. In a blog post made last year after MOS was first announced, one calledMetaLink "possibly the worst Web site I've ever used in my life."
And another respondent to the ongoing poll said MOS' unified approach should be helpful.
"It will bring together support for the database and support for other applications (such as PeopleSoft). When you have a problem which is on the dividing line between the two, this will be very useful."

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Mozilla official urges openness for the Web

Mozilla official urges openness for the Web.

Jul 25, 2009 03:42 am InfoWorld
Executive at OSCON cites upcoming OneWebDay in September as a rallying point
by Paul Krill


While hailing the emergence of an "Open Web," a high-ranking Mozilla official on Friday nonetheless stressed that steps still must be taken to preserve openness in the face of potential threats.
The official, Mark Surman, Mozilla executive director, urged participation in the "OneWeb Day" set for September 22.
[ The big news out of OSCON was Microsoft's release of code for Linux drivers via the GPL. ]
"The first point I want to make is that the people in this room create cool, world-changing technology,", Surman said during a keynote speech at the O'Reilly OSCON (Open Source Convention) in San Jose, Calif. However, the Open Web needs to be protected and stewarded, he said. The Open Web leverages openly accessible technologies like HTML, JavaScript, and CSS and is hackable and participatory, according to Surman.
Open source software has been a big contributor to the Open Web, Surman stressed. But, during his presentation and an interview afterward, he expressed concerns over threats to network openness in which the Internet could be subject to whims of a 100-year-old telecommunications industry dealing with bandwidth congestion issues. Other problems include a mobile Web that still resembles a phone and Web video that mostly looks like plain old television, said Surman.
"I'm increasingly not convinced that technology alone is enough to preserve the Web we've built and the culture we've built," Surman said.
Data being locked up in silos is another concern, he said. Also a problem is the threat of a failure in security and privacy resulting in Web lockdown, said Surman. "That actually is a threat to openness," he said. If people feel insecure and feel privacy is threatened, employers or governments might lock down the Internet, resulting in a much less free Web, he said.
"If you want the Web to be more secure, let's get rid of the 100 million copies of IE (Microsoft Internet Explorer) 6 that are still out there," said Surman, whose employer is best known as the maker of the Firefox browser that rivals IE.
He advised the audience to spread the word about openness and why it matters. Also, concrete solutions can be found to such Internet threats as identity issues and data portability. Determinations must be made on which products to build, said Surman.
OneWebDay provides an opportunity to push for openness, Surman said. Founded by Susan Crawford, a cyberlaw scholar and technology adviser to President Obama, OneWebDay gathers organizations and partners to broaden public awareness of Internet and Web issues while boosting participation in the Web. Last year, OneWebDay featured volunteer events in 34 cities worldwide.
"Basically, it's going to be Earth Day for the Web," Surman said.
An OSCON attendee lauded the OneWebDay idea but wondered about its effectiveness. "I think it's a great idea," said Cathy Mullican, general software engineer at Trusonic. But she questioned how much having just one day would contribute to the issue at hand.

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Nokia buys assets of social startup Cellity

Nokia buys assets of social startup Cellity.

Jul 25, 2009 02:56 am IDG News Service
The German company will shut down its service, and its team will add to Nokia's social skills

by Stephen Lawson

Nokia has agreed to acquire certain assets of Cellity, a 14-person German startup with a mobile social-networking service that will now be shut down at the end of September.
Cellity's service, which has only been available in beta testing, gives users a place to store all their contacts and then access them on their mobile phones or the Web. The service can also display contacts' latest updates to social-networking sites such as Twitter, according to the company's Web site.
But Nokia said it won't operate the Cellity service after the acquisition, which it expects to complete in the third quarter. Instead, it is acquiring the Cellity team in order to strengthen its social-networking capabilities and will discontinue the company's current offering. In an entry on Cellity's corporate blog, the company said its service will not be available after Sept. 30.
Nokia, the world's largest cell-phone maker, recently has been bolstering its services and software offerings to differentiate its devices and compete with Apple's iPhone. Its Ovi Share service lets Nokia users share content on their phones and the Web, and Nokia has also introduced an Ovi Store that sells mobile applications.
The company said it hopes to accelerate its services development through the acquisition. The Cellity team will become part of Nokia's services unit. The companies did not disclose terms of the deal.

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Microsoft offers choice of browsers to satisfy EU

Microsoft offers choice of browsers to satisfy EU.

Jul 25, 2009 02:48 am IDG News Service
The company is seeking to address competition concerns raised by the European Commission in January
by James Niccolai

Microsoft has offered to provide a choice of Web browsers with its upcoming Windows 7 operating system to ease concerns of competition regulators in the European Union, the EU's competition authority confirmed Friday.
Microsoft proposed including a "ballot screen" that would make it easy for Windows 7 users to install a competing Web browser, set it as the default and disable Internet Explorer, the European Commission said in a statement. PC makers would also be able to install competing Web browsers and disable IE.
"The Commission welcomes this proposal, and will now investigate its practical effectiveness in terms of ensuring genuine consumer choice," it said.
The Commission raised concerns in January that Microsoft's practice of tying IE with Windows might be anticompetitive. Later, in June, it said that simply separating IE from Windows might not be sufficient to ensure competition.
Microsoft has also made proposals to the Commission about disclosing information to achieve better interoperability between Windows, Windows Server and third-party products, the Commission said Friday. It is also investigating these proposals, it said, declining to comment further.
The EU has already won an earlier competition case against Microsoft. In May 2004 it fined the company a record €497 million ($794 million) and ordered it to sell a version of Windows in Europe that did not include Microsoft's Windows Media Player software, to restore competition in that market.
Few PC makers sold the version of Windows without WMP, however, and the remedy was widely seen as ineffective. The Commission is keen to extract more effective remedies from Microsoft for its latest objections.
Microsoft couldn't immediately be reached for comment. The Commission said Microsoft planned to post details of its proposals on its own Web site.

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Microsoft's Revenue: Redmond Can't Outrun the Recession

Microsoft's Revenue: Redmond Can't Outrun the Recession.

Jul 25, 2009 02:36 am CIO.com
by Shane O'Neill

In the financial quarter that just ended, arguably one of its most important quarters ever, Microsoft had a chance to bounce back after an unprecedented year-over-year revenue drop last quarter.
But it was not meant to be. Microsoft yesterday reported historically poor earnings for the fourth quarter of fiscal 2009.
Overall, the company earned $3.05 billion, or 34 cents per share, on revenue of $13.1 billion, down 17 percent from the year before, which is a record decrease for the company. Year-over-year revenue fell in all five business segments, also a first.
Windows 7 Bible: Your Complete Guide to the Next Version of Windows
Total quarterly revenue of $13.1 billion was north of one billion dollars less than Wall Street's expected revenue of $14.3 billion.
Windows client revenue got the worst of the pain, down 29 percent from the year before, although some Windows revenue ($276 million) was deferred as part of Microsoft's Windows 7 Upgrade Option program announced June 25.
The main reasons for Microsoft's continued financial struggles: businesses are delaying PC upgrades due to the bad economy and consumers are opting for low-cost netbooks running Windows XP Home, which does not generate as much revenue for Microsoft as Windows Vista.
When the Economy Goes, so to Goes Microsoft
What's become clear from Microsoft's latest earnings, according to industry analysts, is that the company's earnings are an indicator of the sorry state of the economy.
"Because Microsoft is so broad, it reflects the global economy," said Matt Rosoff, an analyst with independent research firm Directions on Microsoft, in a call with reporters.
It's logical: Microsoft makes most of its money selling to businesses and most businesses are tightening their belts to survive. Much of Microsoft's year-over-year revenue declines can be blamed on companies that were buying Microsoft software a year ago that have downsized or, in some cases, don't exist anymore.
"Microsoft sells a lot of its multi-year software contracts by the seat, so if a company is losing employees and an enterprise agreement is up, a company will say we don't have10,000 seats anymore. We want a smaller contract than we had last time."
But Rosoff posits that Microsoft will also ride the wave when the economy bounces back.
"When the economy is down, Microsoft falls farther than other companies. But when the recovery starts, you'll probably see Microsoft pick up faster than competitors," he says.
On the Bright Side....
Though Microsoft's earnings were dismal, analysts indicate that the software giant may have hit bottom this quarter and the next few quarters show promise. Why? Because Microsoft has a stockpile of revenue-generating products ready to strike.
According to Warren Wilson, research director at technology consulting firm Ovum, Microsoft will struggle for a few more quarters, but the picture will brighten with the releases of Windows 7, Windows Server 2008 R2 in October and Office 2010 next year, and as search tool Bing matures and chips away at Google's search market share.

"The most recent quarter will mark the low point for Microsoft, after which it will ride out the rest of the recession and then - on the strength of the new Windows, Windows Server and Office releases - begin to regain its stride," Wilson wrote in a recent report.
Rosoff is more cautiously optimistic, saying that Microsoft's product pipeline is the strongest it's been in two or three years and that Windows 7 will provide a once-in-every-five-years type spike in retail revenue because it's a new OS. Additionally, Windows 7 will run on hot-selling netbooks and generate more revenue than current netbook OS, Windows XP, he says.
"That will help in Q2 and Q3 a little bit," adds Rosoff.
Rosoff says that Microsoft will benefit if it provides more incentives to enterprises to buy licenses for Windows 7 for multi-year agreements, and adds that the wave of Office, Exchange and SharePoint products in 2010 will also help generate revenue.
Regarding Microsoft's Bing search engine, Rosoff says there won't be huge progress with it in this fiscal year unless Redmond signs a search and online advertising deal with Yahoo.
"Microsoft is dead set on competing in search," he says. "Yahoo is looking to save costs and let Microsoft do the heavy lifting, while still earning some ad revenue from search. Basically everybody's online advertising revenue is down except for Google. So I think a deal between Microsoft and Yahoo is quite likely."
Are you a Tweeter? Follow me on Twitter at twitter.com/smoneill. Follow everything from CIO.com on Twitter at twitter.com/CIOonline.

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Apple releases ProKit 5.0 update

Apple releases ProKit 5.0 update.

Jul 25, 2009 12:18 am Macworld.com
by Peter Cohen

Apple on Friday released ProKit 5.0, an update to the software frameworks that underlies its professional software applications. The new release is available for download on Apple's Web site or through Software Update.
ProKit is used by the applications included in Final Cut Server, Final Cut Studio, Logic Studio and Aperture. The 5.0 update, according to Apple, improves general user interface reliability.
System requirements call for Mac OS X 10.5 or later.

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You don't know tech: The InfoWorld news quiz

You don't know tech: The InfoWorld news quiz.

Jul 25, 2009 12:08 am InfoWorld
Yahoo takes new home page for a ride, Amazon displays its darker sideby Dan Tynan


Yahoo and Amazon, those two aging giants from the dot-com era, were all over the news this week, for good and ill. Yahoo got a new face and a new social media tool; Amazon bought itself a new e-tailer and a lot of bad publicity, thanks to an Orwellian power play on its Kindle customers. But they weren't the only ones making headlines. Intel, Microsoft, and the inevitable Apple rumors filled out the week. Can you fill in the dots to earn a perfect score on our quiz? Correct answers are worth 10 points each. Now let's do this thing.
1. Amazon's been fiddling with customers' Kindles. Which two classics did it quietly delete from their digital libraries?
a. "Third Wave" and "Future Shock"b. "Snow Crash" and "Cryptonomicon"c. "Animal Farm" and "1984"d. "Catch-22" and "A Confederacy of Dunces"
Take the InfoWorld news quiz

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Juniper revenue, earnings fall

Juniper revenue, earnings fall.

Jul 25, 2009 12:05 am Network World
by Jim Duffy

Juniper Networks posted a 34% drop in earnings on an 11% dip in revenue for its second quarter ended June 30.
Net revenues increased 3% to $786.4 million from $764.2 million reported in the first quarter of 2009, ahead of Juniper's guidance of flat growth. The company recorded net income, minus expenses, charges and other items, of $103.8 million, an increase of 12% quarter-over-quarter and a decrease of 34% from the second quarter of 2008.
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Adding expenses, charges and other items – including a non-recurring income tax charge of $52.1 million – second quarter income dropped 88% to $14.8 million.
"We continue to take a disciplined approach to controlling operating expenses as we navigate this challenging economic period," said CEO Kevin Johnson in a statement. "With service provider sales relatively flat quarter-over-quarter, our sequential revenue increase was supported by double digit quarter-over-quarter growth in the enterprise market."
Revenue in Juniper's Infrastructure products group – comprised mostly of service provider routers -- declined 13 % from the second quarter of last year. Sales in the company's Service Layer Technology group – comprised of security appliances, WAN optimization and enterprise technologies – dipped 2%.
"Stability continues to improve," Johnson said in a conference call with Wall Street analysts. "And there are some areas where visibility to projects is improved, yet our ability to predict the timing of orders still remains somewhat limited. We will continue to remain cautious in our operating approach."
Juniper said it expects a flat third quarter but offered a wide revenue range -- $717 million to $805 million. Earnings are expected to range from $101.3 million to $112 million.

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New software contract principles prompt worries

New software contract principles prompt worries.

Jul 24, 2009 11:56 pm IDG News Service
The recently approved principles say those who sell software should guarantee no "hidden material defects"
by Chris Kanaracus

IT vendors and tech industry groups say a new set of legal principles for software contracts developed by the American Law Institute (ALI) could stifle innovation and raise the cost of software, even though they are meant to protect consumers.
One section in the sprawling, 300-plus page document, "The Principles of the Law of Software Contracts," is particularly drawing fire. It states that parties who receive payment for software "warrants to any party in the normal chain of distribution that the software contains no material hidden defects of which the transferor was aware at the time of the transfer."
Given the inherently buggy nature of software, the language may open up the software industry to crushing liability claims, stifling its ability to innovate and driving up prices for customers, vendors and industry associations contend.
Microsoft and the Linux Foundation made headlines in May when, in unlikely fashion, they teamed up on an open letter criticizing the principles, saying they go too far and are not necessary.
"There is no great failure in terms of substandard quality or unmet expectations that would justify imposition of new mandatory rules, particularly given existing remedies under misrepresentation and consumer protection laws," it states in part. The letter didn't stop the ALI from approving the guidelines' final draft later that month.
The ALI, which is made up of lawyers, judges and legal scholars, is a long-standing American nonprofit organization that seeks to clarify laws. While their findings are not binding, judges often turn to them for reference when making decisions.
This has observers like attorney Mark Radcliffe worried.
The language is "very flawed," said Radcliffe, a partner with the global law firm DLA Piper, who specializes in intellectual property and has represented software vendors.
"If this document never got any traction with judges that would be fine with me," Radcliffe said. "[But] the ALI has a great reputation, and judges have a lot of well-earned confidence in them. If they say this is ... best practice then this is going to have an enormous impact."
"Nobody can make a software program that doesn't have defects. Nobody even tries to achieve that," Radcliffe said.
Critics also say words like "material" and "hidden" are too vague. In addition, the principles were created without enough participation from the legal and software vendor community, Radcliffe claimed.
"This is a project that virtually every lawyer I speak with has never heard of," he said. "It was completely off the radar screen. These are lawyers that do software licensing inside major corporations."
But one ALI member who worked on the project scoffed at the idea.
"The idea that this warranty is a sandbagging is absurd," said Cem Kaner, a professor of software engineering at the Florida Institute of Technology, via e-mail.
ALI began developing the principles in 2004, and "lawyers for the publishers were involved from the start," Kaner added. "The warranty of no non-disclosed, known, material defects was put in very early, maybe even the first draft. It was discussed at every meeting that I attended. It appeared in every draft that I read."
Kaner noted that the final version of the principles "go to great lengths to exclude open-source software," which carries no price tag.
But in cases where open source components are part of a commercial offering, judges would "have to make case-by-case determinations about the extent to which warranties apply to the package that would not normally apply to the open source parts of the package," Kaner said.
Meanwhile, other lawyers say there's no guarantee this particular ALI project will have great influence.
Rather than being presented as a "restatement of law," ALI's document presents the guidelines as principles, said ALI member Eric Goldman, an associate law professor at the University of Santa Clara School of Law, and director of the school's High Tech Law Institute.
While the ALI does "terrific work," that decision puts the document "in a very ambiguous bucket as to whether anyone's going to pay attention to it," Goldman said.
The document's own introduction is careful to note the distinction.
"These Principles seek to clarify and unify the law of software transactions. In light of the many percolating legal issues that pertain to the formation and enforcement of software agreements, an attempt to 'restate' this law would be premature," it reads in part.
Kaner characterized the document as a sort of beginning point. "The ALI Principles don't pretend to be legislation. They provide a detailed conceptual framework that some (maybe many) (maybe most) judges will use when deciding commercial software cases, and in rendering those decisions, the judges will criticize and polish the framework and its details, until eventually, we understand the problems well enough to draft legislation that can be accepted by a broad consensus," he said.
"The ALI Principles don't pretend to be legislation. They provide a detailed conceptual framework that some (maybe many) (maybe most) judges will use when deciding commercial software cases, and in rendering those decisions, the judges will criticize and polish the framework and its details, until eventually, we understand the problems well enough to draft legislation that can be accepted by a broad consensus," he said.

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