The Empire Strikes Back – Microsoft launches IP war on the netbook

A day after officially announcing that a slimmed down version of Windows 7 will be targeted at the netbook (no surprise), Microsoft dropped the other anvil…

Microsoft (MSFT) has gone and done it, they've filed suit in U.S. District Court claiming Linux violates their patents…

No word yet on the finer points of the dispute, all we know so far is Microsoft claims eight patents were infringed…

The suit was launched against a GPS vendor, but nobody thinks they’re the real target. Microsoft has targeted Linux via proxies, but this is the first time they've worn their own face.

Microsoft fully understands the threat they face …

Gordon's Notes: Squeezed 2009: Netbooks, Android and Microsoft

… what's a netbook running Chrome and Linux but a calculator in drag? It's fundamentally complete. It's built entirely of plastic, silicon (sand) and a tiny amount of rare metals. All the technology development costs have been fully realized, and there's no vendor with true monopoly control. IP attacks won't work if China and India decide not to cooperate…

Well, maybe the IP attacks won’t “work”, but they can buy time – time that’s worth hundreds of billions of dollars of revenue. Time to execute on a strategy Microsoft can win with …

They can do this:

1. Buy the pipes, which at this time probably means building cheap to free wireless broadband networks in key markets.
2. Give away XP. Charge $5 a copy for netbook manufacturers.
3. Buy a slice of Dell and start making Microsoft brand netbooks.
4. Create a version of Windows 7 for the netbook (they've probably already done this) that's tied to Windows Live.
5. Become a bank.
6. Build a retail/transaction service across 1-5.

It's a low margin business, but they'll own it end-to-end. They ought to be able to soak up an average of $100/year/user from 2 billion users.

The patent attacks will slow things down. I’m sure this strategy has its own risks. The EU won’t like it for one thing. On the other hand, Microsoft is facing disruptive annihilation. They’ve decided they don’t have a choice.

Now things get ugly.

Look for IBM and Google to move next.