Thursday, April 06, 2006

China Agrees to Microsoft Tax

It is being widely reported today that China's main PC manufacturers have agreed to stop shipping machines without a pre-loaded Microsoft operating system.

Supposedly this is to reduce piracy, but in fact it is the U.S. government putting pressure on behalf of Microsoft, which has long licensed its operating system to PC manufacturers based on the number of machines they manufacture. Some of the largest PC manufacturers in China were shipping PC's without any bundled OS.

Under the agreement, regardless of whether a customer wants a PC without an OS, or with an alternative OS such as Linux, the manufacturers end up paying a "tax" to Microsoft for the OS.

This is particularly invidious for large corporate customers who are also forced into bulk contracts with Microsoft. Under programs like Select, a corporate ends up paying twice - once under the Select agreement, and again when it purchases PC's.

Given China's rather visible attempts to avoid paying royalties for foreign IPR (intellectual property rights) for things like DVD's and cell phones, it is surprising that they capitulated on this issue.

Another article indicates that Microsoft is making the same demands on PC manufacturers in the UK.

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