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Here's a link backing up your point.

Timeline Inc has won a US Washington Court of Appeal judgment against Microsoft for the right to sue Microsoft's customers, and subsequently sued Cognos. On February 13, 2004, Cognos settled at cost to Cognos totaling $1.75 million

That's such utter bullshit. In either case, the patent holder can sue whichever party he chooses - and will most likely sue whichever party is more of a competitor to himself.

Consider the Timeline vs Cognos case. Microsoft had the infringing code; but Timeline sued Cognos because Cognos was the competitor, not Microsoft.

"For that matter, how many people outside the Linux community even know that they should buy patent insurance if they're using linux at a large company?"

Uh, how many people in the Microsoft community know that they should buy patent insurance if they're suing SQLServer at a large company? It's already happend with the Timeline/Cognos case, and it's almost certain to happen again.

Even Microsoft's 2004 May 27th changes which apply only to customers under enterprise licensing contracts, which Microsoft claims grants greater immunity, contains many loop holes which greatly negate Microsoft's liability.

The section 6 clause contain exceptions:
Our obligations will not apply to the extent that the claim or adverse final judgment is based on (i) specifications you provide to us for the service deliverables; (ii) code or materials provided by you as part of service deliverables; (iii) your running of the product, fix or service deliverables after we notify you to discontinue running due to such a claim; (iv) your combining the product, fix or service deliverables with a non-Microsoft product, data or business process; (v) damages attributable to the value of the use of a non-Microsoft product, data or business process; (vi) your altering the product, fix or service deliverables; (vii) your distribution of the product, fix or services deliverable to, or its use for the benefit of, any third party; (viii) your use of our trademark(s) without express written consent to do so; or (ix) for any trade secret claim, your acquiring a trade secret (a) through improper means; (b) under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (c) from a person (other than us or our affiliates) who owed to the party asserting the claim a duty to maintain the secrecy or limit the use of the trade secret. You will reimburse us for any costs or damages that result from these actions.

Loophole #1 "(ii) code or materials provided by you as part of service deliverables" This would effectively still indemnify Microsoft against most of the Timeline Inc patent claims, as it is the developer/end user's code ( even visual basic code ) which would be in violation of Timeline's patent claims.

Microsoft licensed Database/Datawarehouse technology from Timeline Inc, but unlike Oracle and other database vendors, Microsoft chose a license that did not grant Microsoft's customers the right to fully use that technology.
http://www.theregister.co.uk/2003/02/20/sql_server _developers_face_huge/
Timeline has extended it's patent claims to cover many featured widely used by developers, both ISV and in house.
http://www.winnetmag.com/Article/ArticleID/41479/4 1479.html

Timeline Inc has won a US Washington Court of Appeal judgment against Microsoft for the right to sue Microsoft's customers, and subsequently sued Cognos. On February 13, 2004, Cognos settled at cost to Cognos totaling $1.75 million.
http://www.timeline.com/021304PR1.htm

Microsoft has a history of licensing third party code and patents in such a manner that still leaves developers and users exposed to IP threats. Even going back to the LZH/GIF Unisys patents
http://web.archive.org/web/20020806173115/http://w ww.unisys.com/about__unisys/lzw/

"Microsoft Corporation obtained a license under the above Unisys LZW patents in September, 1996. Microsoft's license does NOT extend to software developers or third parties who use Microsoft toolkit, language, development or operating system products to provide GIF read/write and/or any other LZW capabilities in their own products(e.g., by way of DLLs and APIs)."

Other Loopholes include (v) and (vii), but the killer is (iv), which disclaims any
indemnity for users who wish to input any data. (ix)(a), also since literally it excludes trade secret liability for improper action on
anyone's part, including MS.

Does Microsoft's new agreement include such loopholes? Anyone have a link handy?

Yeah, you're safe. Sure. Safe as in the Microsoft-Timeline patent spat over SQL Server?

You mean this?

Rarely if ever! Even in cases where you have a contract says that it indemnifies you, it'll usually just cover the purchase price of the software. Heck, I'll bet even Gentoo.org'll will cover your purchase price ($0) in the event of a patent infringement if you asked them nicely.

"Usually when there is infringement in a non-free environment, the vendor that did it is solely responsible."

Not in the US. It's illegal to *USE* someones patent without a legal license, and only in the case where a vendor sublicenses it to the customer is it their responsility. If they didn't have a license in the first place, how could you hold them responsible for not sublicensing it to you?

" Company's usually do not go after individual developers..."

No, not "individual developers", it's the users of the patented technology who are liable.

"... that made the infringement, but rather the vendor."

Often the vendor _will_ have a legal license to the patent, but not have the rights to sublicense it to their customers. In those cases of course the patent holder goes after the customer - because after all, the vendor has a license.

Such was the case where Microsoft illegally sold patented technology from Timeline. Cognos, Microsoft's customer had to pay a $1.75 million settlement because Microsoft didn't (and couldn't) sublicense the patent to them.

Well, the common example with MSFT involved is where Microsoft had infringed on Timeline's patents; and Cognos, a customer had to pay Timeline $1.75 million because Microsoft didn't sublicense the patent to them.

Timeline Inc has won a US Washington Court of Appeal judgment against Microsoft for the right to sue Microsoft's customers, and subsequently sued Cognos. On February 13, 2004, Cognos settled at cost to Cognos totaling $1.75 million

In a lot of ways you are better with GPL licensed techology , which effectively grants all downstream users the right to use the patents from upstream developers under the terms of the GPL .

Software Patent are inherently bad but are also pushing an interesting trend. Pushing vendors towards adopting the GPL-like licensing as a form of simpler form of cross licensing arrangement.

There isn't any implied fitness for use or any kind of warranty in ALL the commercial software I have EVER used. In fact every EULA I have ever read removes as _much_ as possible any legal recourse somebody could take against the manufacturer of said commercial software.

One great example is the lawsuit that happened between Timeline and Microsoft over an alleged patent violation. Timeline claimed all SQL Server customers were on the hook for their patent:
according to Timeline's summary of the decision:
"SQL Server developers who create a new product by adding code in an "Infringing Combination" (as defined below) must obtain their own patent license."

Anyways, the point is that the purchase of commercial software in of itself does not protect you from patent claims. EULAs are only about protecting the IP of people who make commercial software.

I think there is an advantage with open source in this respect: using open source could eliminate any claim about an infrigement being underhanded.

The real solution is to clean up software patents.

I hope Munich carefully audits all of Microsoft's source code before deploying it as well.

If the issue is the threat of lawsuits over intellectual property then corporate America and everyone else are actually in a better legal position using GPL'ed Linux than using Microsoft's products as a development platform.

Microsoft has a history of licensing third party code and patents in such a manner that still leaves developers exposed. Even going back to the LZH/GIF Unisys patents,
http://www.unisys.com/about__unisys/lzw/
"Microsoft Corporation obtained a license under the above Unisys LZW patents in September, 1996. Microsoft's license does NOT extend to software developers or third parties who use Microsoft toolkit, language, development or operating system products to provide GIF read/write and/or any other LZW capabilities in their own products (e.g., by way of DLLs and APIs)."

Microsoft also licensed database technology for Microsoft's SQL server from Timeline Inc, under similar license terms as did with Unisys. This license did not grant Microsoft the right to sublicense to third party developers to extend functionality, in some cases even restricting the use of visual basic. Unlike companies like Oracle Corporation and others, Microsoft chose a cheaper option for the license which left third party developers, users of Microsoft SQL Server,Office and other Microsoft products at risk of being sued by Timeline Inc for violation of Timeline Inc patents. Timeline Inc asked Microsoft to upgrade to a similar license used by Oracle, but Microsoft refused, so the whole issue went to court and in 2002, Timeline Inc won.
http://www.timeline.com/021903PR.htm
http://www.theregister.co.uk/content/53/29419.html

While SCO has yet to provide any publicly available substantial evidence in their case against IBM and Linux, Timeline Inc has already won a US Washington Court of Appeal judgment against Microsoft in another contract dispute.

How many other cases exist where Microsoft has included third party technology in it products, but has also taken the cheaper licensing option and left developers and even users exposed to the threat of lawsuit? Due to the closed nature of the proprietary business model, how can third party developers even check?

Microsoft's products and platforms do not provide users and developers an absolute safe haven from the threat from lawsuits based on violations of intellectual property. Microsoft's EULA ( End User License Agreements ) provide the developer and end user with no protection against threat from current or future intellectual property lawsuits.

The Gnu General Public License (GPL) and Gnu Library General Public License (LGPL) are based on years of solid legal research.
http://www.gnu.org/philosophy/enforcing-gpl.html

Since The SCO Group has knowingly sold and distributed the GPL licensed Linux kernel and other components, it must by the terms of the GPL license, provide all those who receive the code from them an implicit license to use any intellectual property, patents or trade secrets which SCO owns and is used within the GPL'ed source code. That implicit license to that SCO intellectual property is also granted to anybody who subsequently receives the GPL source.
http://www.gnu.org/licenses/gpl.html

The GPL only grants the right, for reasons of intellectual property infringement or contractual obligations, to stop distributing the GPL'e binaries and source code if the conditions are imposed upon you by a third party. Since The SCO Group claims ownership the intellectual property in question, it must grant all subsequent recipients of the GPL licensed source code The SCO Group h

Funny thing that you mention SQL Server, since Microsoft was found to have misappropriated IP in its development...

The "What if you get sued?" argument is just like the "Who are you going to sue?" argument. There is really and truly no difference in these situations between what happens when you are a user of Open Source (or Free) Software or Closed Software. In fact it could just as easily be argued that you can get into more trouble with Closed Source Software. I think in the end, though , the pros and cons w/r/t these scenarios balance out fairly evenly, whereas Free Software offers significant advantages to the consumer.

Timeline vs. Microsoft Final Judgement.