Microsoft is waging a legal fight against open-source providers such as Linux, claiming that the popular software violates at least 235 of its patents.  Fortune’s Roger Parloff in a terrific piece published today has the scoop from his interviews with the Microsoft legal team who are on a mission to get free and open-source software (FOSS) users to pay their royalities. 

The event may call to mind memories of IBM’s 2003 lawsuit against Unix vendor The SCO Group.  In the process of that legal event, Microsoft licensed the rights to Unix from The SCO Group. Now the intellectual property drama between ”the free world” and the Redmond, Wash. giant is back on the front page.

Linux and other open-source technologies are perhaps the perfect example of creative destruction, when emerging technologies cause great firms to fail (or perhaps demand royalities and legal cause).      

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Outside of politics, the law alone bears tremendous challenges for emerging companies entering markets entrenched by industry heavyweights. When young companies introduce new technologies into the marketplace it often results in the displacement of more established technologies, a process that economists refer to as creative destruction.  Unfortunately, in my opinion, established companies often try to keep upstarts from innovating in their marketplace by forcing them into the courtroom, where judges must follow the letter of the law - not weigh how a disruptive technology offered by the upstart could really benefit the consumer.

On Friday, a federal judge ruled that Vonage, a popular Internet calling service, cannot sign new customers unless it stops infringing on Verizon patents. Vonage, which has 2.2 million subscribers, immediately appealed and received a temporary stay to avoid its service from being shutdown. As Vonage’s attorney told the WSJ: “It’s the difference of cutting off oxygen as opposed to the bullet in the head.”   

Vonage is among a number of other telco startups that sought to challenge the traditional copper-wire phone companies such as Verizon by providing consumers the capability of making low-cost calls via the Internet. In my research, I don’t think that Verizon, despite its patent holdings, even offers a comparative service to Vonage.  

Classic example of the law can impede innovation and ultimately consumer choice.  

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