Gates is a ruthless schemer, says his Microsoft co-founder

By Stephen Foley in New York

Thursday, 31 March 2011

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Paul Allen, left, says he was 'taken aback' by Bill Gates, right, cutting Allen's stake in the company

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Bill Gates is a ruthless schemer who demeaned his employees and conspired to rip off his business partner, according to a memoir written by the co-founder of Microsoft, Paul Allen.

Mr Allen's forthcoming book reveals a deep-seated bitterness at the heart of the famous relationship that created the most successful software company the world has ever seen. In Idea Man: A Memoir, Allen also claims that Gates never gave him enough credit for his contribution to Microsoft's earliest development, nor a big enough share of the company. In effect, Mr Allen is accusing his friend of bullying him out of shares that would have been worth billions of dollars.

Mr Gates and Mr Allen first became friends in 1968 over their Seattle high school Teletype machine, on which they wrote their first software together. Mr Allen moved to Boston and Gates dropped out of Harvard University in 1975 so they could work on what would eventually become Microsoft. The company created what was to become the ubiquitous operating software of the personal computer, and grew into a business that's now worth $220bn (£137bn).

In excerpts published in Vanity Fair yesterday, three weeks before of the publication of Idea Man, Mr Allen says he was "taken aback" when Mr Gates suggested Microsoft should split 64 per cent in his favour, rather than 50-50. Gates won, and it's clear the wounds are still raw.

"I tried to put myself in his shoes and reconstruct his thinking, and I concluded that it was just this simple: 'What's the most I can get?'," says Allen. "He might have argued that the numbers reflected our contributions, but they also exposed the differences between the son of a librarian and the son of a lawyer. I'd been taught that a deal was a deal and your word was your bond. Bill was more flexible."

The memoir also includes the explosive revelation that Mr Gates conspired with Microsoft's first chief executive, Steve Ballmer, to reduce his co-founder's stake even further. Mr Allen recalls overhearing a conversation between Gates and Ballmer in 1982, as he was recovering from treatment for lymphoma, when they discussed the possibility of issuing themselves new share options that would reduce Mr Allen's stake in the company.

"I helped start the company and was still an active member of management, though limited by my illness, and now my partner and my colleague were scheming to rip me off. It was mercenary opportunism, plain and simple." Mr Gates soon apologised for even discussing the idea.

The bitter tone of the book has soured relations between two men who have remained cordial and in contact ever since Mr Allen finally resigned from Microsoft in 1983, a decision he now says was driven by exhaustion at the constant fighting and disillusionment by his co-founder's tendency to demean his programmers using sarcasm.

Mr Gates strove to rise above the accusations yesterday. "While my recollection of many of these events may differ from Paul's," he said, "I value his friendship and the important contributions he made to the world of technology and at Microsoft."

Nonetheless, Mr Allen's book looks set to open up the question of how much credit each of the two schoolfriends should get for Microsoft's early success, and on this, Idea Man makes a determined case to future historians that Mr Gates's credit should be reduced.

"Some said Bill's management style was a key ingredient in Microsoft's early success," Mr Allen says in one tart passage, "but that made no sense to me. Why wouldn't it be more effective to have civil and rational discourse? Why did we need knock-down, drag-out fights?"

After Microsoft: The computer geniuses who parted ways

Although their paths diverged when Paul Allen left the company in 1983, Microsoft's billionaire founders have continued to rub shoulders in the worlds of technology and philanthropy.

But while Bill Gates went on to build a monopoly in software for the personal computer, and expand into gaming and internet services, Mr Allen's ventures in software and cable television were not always so successful.

Last year, his firm sued many of Silicon Valley's most famous firms, saying it has a patent on basic technology for internet search and touchscreens.

In philanthropy, the Bill and Melinda Gates Foundation, where Mr Gates now works day-to-day, immediately became one of the largest foundations in the world. Idea Man is Mr Allen's attempt also to put a spotlight on his philanthropic work, which includes funding for research into the workings of the brain. Mr Allen also owns sports teams and has funded prototypes for new types of spacecraft.

US Patent Reform Bill Passed Senate on March 8, 2011

Some opponents are vehemently against any patent reform despite the fact the U.S. has not updated its patent laws for about 60 years.

"I have been trying to preserve a patent system accessible, fair and enforceable for all since 1992," said Ronald J. Riley who leads a handful of anti-reform groups including the Professional Inventors Alliance.

"It has been clear for a long time that Obama is in the pockets of large transnational business interests whose profits are built on systematic and intentional theft of independent and small business inventions," said Riley

Some opponents of the bill are expected to continue work to strike a shift in the draft legislation from a first-to-file to a first-to-invent system.

S. 23 would move the U.S. patent system from a "first-to-invent" system to a "first-to-file" system used by other nations, meaning that the first to file a patent application on an invention would be awarded the patent, regardless of who first came with the system. The bill is opposed by many in technology, particular advocates of small businesses and entrepreneurs, who critics say would be put at a disadvantage under the first-to-file system.

"Every large entity got something they wanted in the bill, and small entities were completely ignored," said Steve Perlman, a serial entrepreneur who waited eight years to get a patent fundamental to his latest startup, the online gaming service OnLive.

Perlman praised the provision, added just last week, to end patent fee diversion as a way to help clean up a backlog of nearly 800,000 applications, but otherwise took issue with the bill.

The first-inventor-to-file provision will "crush small inventor and startups," said Perlman, who has 100 patents. "We're obliterating the U.S. startup economy," he said.

"No surprise that this bill made it through without a single inventor being allowed to testify to the Senate," he added.

Advocates of the bill say it will streamline a U.S. patent system that many believe is fundamentally broken.

Last week, S. 23 survived a vote on an amendment that would have removed the change to a first-to-file system, something advocates of the bill say would have fundamentally killed the reform. The Senate voted to table that amendment, sponsored by Diane Feinstein (D., Calif.), by a vote of 87-13.
 
"After six years of debate and discussion, the Senate has finally acted to make the first meaningful, comprehensive reforms to the nation's patent system in nearly 60 years," said Patrick Leahy (D., Vt.), sponsor of S. 23, in a statement circulated Tuesday. Leahy said the legislation would promote American innovation, create American jobs and grow America’s economy without costing taxpayers money.

"Having coordinated with the leaders in the House through this process, I hope that the House will look favorably on our work and adopt this measure so that it can be sent it to the President without delay and its improvements can take effect in order to encourage American innovation and promote American invention," Leahy said.  


What do you think? Will the patent reform bill be a good thing for independent inventors or will it, as some say, allow corporations to steal ideas without paying the independent inventor?