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Let's be perfectly clear. Everything is up for negotiation and nothing is off the table when it comes to Microsoft's dealings with open source. Except for one thing: patents.

Microsoft's legal chief Brad Smith this week made it abundantly clear that while Microsoft is increasingly prepared to deal with open source companies and projects, the company won't surrender ownership of patents in Windows - contrary to the wishes of many.

Smith, speaking at the Open Source Business Conference, also made it clear Microsoft's emphasis is on working with "entities" - companies like Novell or projects such as Samba - rather than individual developers. They, instead, will have to hope for some kind of protection under Microsoft's licensing and royalty deals with entities.

Hanging over Smith were claims he and Microsoft licensing chief Horacio Gutierrez made last year that free and open source software violates 235 Microsoft patents. The tricky part is Microsoft will not publish details of those patents to the frustration of many in open source, who could use the information to validate the claims and build work arounds.

At last year's OSBC Microsoft patents attorney Jim Markwith justified the reason not to publish the claimed patents saying it was "administratively impossible".

Nearly 12 months later the justification is not administrative. It's just the price of doing business, and - hey - there's no such thing as a free lunch.

Smith told OSBC a promise from Microsoft not to assert its patents against Linux or open source - a "free pass" - is "not something you are likely to hear in the near future or distant future."

Also out is publishing Microsoft's patents minus royalties - even though Microsoft stands to make a minuscule amount of cash from such charges. Seems it's the realities of working in a dog-eat-dog world and the principle that patents are a force for good, which are more important to Microsoft.

"People come to us, they have open source software, they have proprietary software and they expect us to take a license," Smith said.

He recalled Microsoft's $900m payment to Sun in 2004 to settle outstanding patent disagreements, which saw Microsoft pay $350m to license Sun technology.

Smith claimed patents foster innovation and Microsoft would charge for cross licensing of its patents according to each patent's value.

"What gives me pause is the premise that: 'Make the stuff expensive or free, but don't make it cheap' - I don't buy that. We should price things according to their value and in a way that will work for the industry and customers as a whole," Smith said.

Microsoft wants to license Windows patents to open source companies in the same way it's licensed patents to companies like Motorola in the past. "Because cathedrals can do agreements with each other its possible to sit down with the companies we have and say: 'Let's see what we can work out that works for you and our business'."

Smith was borrowing the phrase "cathedrals" from Eric Raymond's book The Cathedral and the Bazaar, which talks about the open source, or bazaar, method of development versus the traditional vendor approach. "We'd be prepared to sit down with any entity that can deal with the issue in real terms," Smith said.

It's a vital emphasis, and one that could harm technology and business innovation in open source. Many open source products and businesses today have begun life with individuals or groups of individuals working on projects, unencumbered by worries about the ability of their project to support royalty payments to a patent owner down the line.

"We are much better connected with the open source community today, we love open source software running on Windows and we are working to interoperate with it," Smith said. " But I can't give you an answer saying: 'Here's the blank check,' he told OSBC.

Having made Microsoft's position clear, Smith called for a willingness in the open source community to compromise in negotiations and solve problems. In translation, that appeared to mean: stop requesting publication of all Microsoft patents under a royalty free license. According to Smith a solution can be reached to "normalize the IP relations" to "reach almost all spectrums"

You catch Smith's recorded comments on Uberpulse here.®

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