Windows Buyers Pay Patent Tax of $21.50 ?

An anonymous reader writes "Ars Technica has a story up about an estimate done by the Software Freedom Law Center of how much purchasers of Microsoft Windows are paying in 'patent taxes'. 'SFLA took the total of $4.3 billion dollars in legal costs for Microsoft from 2001 to 2004 and divided it by estimated sales of Windows XP over the same period — approximately 200 million copies — to come up with the $21.50 estimate. The organization added that North American and European customers, who pay more for Windows licenses than customers in other parts of the world, actually ended up paying more of this patent tax, and that people who pirate Windows pass their share of the tax on to paying customers.' The article goes on to point out several flaws in the study's logic. For example, the actual cost of a Windows OEM hasn't increased in the last few years; Microsoft isn't passing this cost directly on to the consumer."

Comments

ohnos the consumer pays developemnt costs

[0racle]

Wow, what a news flash, the cost of developing software is covered by the consumers. I never would have guessed.

Re:ohnos the consumer pays developemnt costs

[tomstdenis]

The point is part of what you're paying doesn't even go towards the people who are writing the software. It'd be like if your car cost $35,000 and $20,000 of which was a "car design patent tax." Wouldn't knowing that a huge chunk of the cost just goes to some squatter who filed a patent first?

That said, I just avoid said tax by not buying windows.

Tom

The better questions are

[s20451]

1. How much of the $21.50 goes to the companies and/or individuals who hold the patents?
2. How many innovators (engineers, etc.) are employed as a result of the $21.50?
3. How much of the $21.50 is eaten up with legal fees?

I've got no problem paying a license fee as long as I am getting a significant amount of innovation for my money.

formula?

[m0rph3us0]

It's a good thing Microsoft doesn't sell any products other than Windows XP. And it's also a good thing none of this technology that was patented will go into any future products. The real price when distributed over the myriad of products Microsoft sells drastically reduces this figure. If you include just Office this figure will drop in half. Now you have to wonder how many of these patents apply or are financed by much higher end products, ie. Windows Server. Basically, $21.50 is the MOST a customer could be paying for patents on Windows XP. The real thing to consider, is whether the average customer will derive more than $21.50 in value from those features. I think they will.

Am I reading wrong or...

[Shados]

Or is this like if we considered Windows XP was the only revenue source of Microsoft during those years? And there I thought Microsoft had quite a few products (even if you don't count the "at a loss" ones).

Re:Passing the cost onto consumers

[secret_squirrel_99]

So in a very real sense no cost is passed on to consumers; the market decides the optimal price for the product

This is true of many purchases for which a simple supply and demand model is adequate. This isn't true of many markets however. In markets for essential goods where there are few alternatives these models collape. The obvious example is the energy market. Rising prices should reduce demand, which should cause prices to fall again, until an equilimbrium is reached. This isn't the case however, costs are passed directly to consumers, demand never wanes and prices keep rising. This is a pretty simple example, of course, but not every market, and certainly not the software market, is a textbook example of supply and demand.

Re:Passing the cost onto consumers

[99BottlesOfBeerInMyF]

A business, by virtue of being a business, always charges whatever will (they think) be most profitable... So in a very real sense no cost is passed on to consumers; the market decides the optimal price for the product.

What you're neglecting to consider is the cost of patent licensing upon the market in question. For example, if it costs MS $20 to license the patents they use, what does it cost Apple to license some of those same patents? What does it cost Sun and Redhat? What does it cost to, alternatively, work around those patents? Once you've determined the above, what the does the cost of patents to the market, in general, do to the price of software and the perceived relative value?

For example, suppose I'm in a more classic market, like televisions. Now suppose I have a patent on the best/cheapest technology needed to lower power requirements to comply with new FCC rules. Everyone licenses this from me for their TV sets. Does that cost get passed on to the consumer? To some degree, yes because all the TV makers are competing partly on price and since the relative prices did not change, it is unlikely that public perception of value will not keep up with current prices.

Now that applies to some degree to the OS market, but exactly how much is hard to determine. I suspect, the OS market being monopolized and thus largely non-competative means it applies a negligible amount compared to the prices MS charges but I'm not privy to their margins/costs.