Microsoft realizes not to guard intellectual property too closely

This article on Salon.com describes how Microsoft and China, after tough negotiations, came to a three-year $750 million “memorandum of understanding”. Despite the 92% software piracy rate in China, the agreement contained nothing about enforcing Microsoft’s intellectual property. In Chapter 8 of Living Networks I used the example of how Disney has become a dominant cultural force in China, only because its intellectual property was freely copied for a couple of decades. In the case of Disney, they can look back in hindsight and be glad they were ineffective at protecting their IP in China. Disney simply wouldn’t have a presence there otherwise. By now Microsoft understands the game. If everyone in China starts using Windows and Office as their platforms, then as China’s economy develops and as IP protection is tightened up – as it will do in time – Microsoft could see their China revenues rival those in the US. Playing this kind of network game requires a long-term approach, but in any case short-term profit maximisation can often have a severe negative impact on the long-term. As I describe in my book, maximizing profit from content requires integrating protection and promotion, and sometimes that means neglecting protection for a while.