Microsoft opens up on intellectual property

Microsoft is expanding its efforts to move from a "trade secrets" company to one that banks on sharing its intellectual property....

Microsoft is expanding its efforts to move from a "trade secrets" company to one that banks on sharing its intellectual property.

It wants to be seen as a more co-operative and open-industry player.

The move comes amid an overall effort to balance the amount of technologies the company offers through licensing and those it licenses, said David Kaefer, director of business development for Microsoft's Intellectual Property and Licensing Group.

"We licensed over $1bn in patent rights last year yet we make relatively little from our licences," he said.

It also comes in response to prompting by governments worldwide to loosen its proprietary grip on the software market, analysts say.

"Six years ago we had a trade secrets strategy but we realised that that's not the way to operate today," Kaefer said. "We don't invent everything so to build a robust product you have to license a whole lot from other companies.

"We are a platform company and the value of a platform is how much you can plug into it."

While Microsoft is highly unlikely to hand over its crown jewels, such as the source code for its Windows and Office software, it is willing to share more information in situations where it sees potential benefits, said Neil Macehiter, research director at Ovum.

"If Microsoft can see that the opportunity is bigger by virtue of making their IP accessible, they will do that, like with web services," Macehiter said.

Microsoft officially announced its new licensing policy last December, simultaneously introducing programmes for its ClearType technology for improving the readability of text on LCD (liquid crystal display) screens, and its FAT (file allocation table) file systems storage format.

The US Department of Justice's anti-trust case against the company proved a key driver in convincing Microsoft to open up, Kaefer said.

"There was a lot of handwringing [over the US anti-trust case] but we learned we could do it," he said.

Last year the company began offering its Office 2003 XML Reference Schemas under a royalty-free programme and has been offering governments added access to source code through a shared source programme.

Earlier this year Microsoft ended its legal battle with rival Sun Microsystems in a nearly $2bn (£1.1bn) settlement that saw the companies agreeing to license each other's technology.

The Sun deal not only jolted industry watchers who thought the two companies might never come to terms, but also signalled a more mature approach by the companies to heed customer demand for further interoperability.

While Microsoft is offering some licensing under formal programmes, this kind of large, cross-company licensing is what it is focusing on, Kaefer said. He added that the Sun agreement is still on track and that within the next few months they will be making more interoperability announcements.

In addition to offering selective intellectual property licences, the company is simultaneously looking to protect more of its intellectual property by extending its patent portfolio. 

"We invest some $7bn a year on [research and development], yet we hold relatively few patents," Kaefer said. "We will be increasing the number of patents we hold because we are underdeveloped in this area."

Microsoft currently holds 5,000 global patents, with 3,500 held in the US and some 1,000 held in Europe, according to Kaefer. Its patent holdings are small when compared to those of companies with big intellectual property profit centres, such as IBM.

Microsoft's hiring last year of IBM veteran and intellectual property licensing guru Marshall Phelps as corporate vice-president and deputy general counsel of intellectual property is further evidence of how the software maker is changing its approach to intellectual property .

On 11 October Sun settled a patent dispute with Eastman Kodak for $92m, after the photo company claimed that Sun violated three of its patents when it developed its Java programming language.

Last month the US Patent and Trademark Office decided to re-examine the FAT patent after it was contested by a group claiming that other patents already covered the technology. Kaefer said that nine out of 10 times the patent office will re-examine a disputed patent, putting the onus on the patent holder to defend its claims.

Scarlet Pruitt writes for IDG News Service

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