There is a difference between IP and trade secrets. MS relies on IP, while Google relies on trade secrets.

IP is illegitimate because each concept exists in effectively infinite supply, and therefore cannot be owned anymore than the Pythagorean theorem or the color blue can be owned. _Access_ to a concept, however, can theoretically be owned, since access can only be gained through physical channels (books, bandwidth, oration, etc.), which are inherently limited in volume. Google limits the “supply” of _access_ to its code, while MS (tries to) limit the “supply” of the code itself.

So closed source could still exist in an IP-free world. There’d be nothing to stop people from distributing binaries freely, of course, but there’d also be nothing to stop anyone from concealing the source as a trade secret.