Have patents, will share

Microsoft patent law expert says patent licensing, the new tool of choice for safe collaboration, will spur rapid innovation and new financial models.

BOSTON--Patent licensing is about to explode.

At least that is the way things are headed, according to Marshall Phelps, a man who knows a thing or two about patent law.

The corporate vice president and deputy general counsel for Microsoft previously worked for IBM for 20 years, a company who defined patent portfolio asset management long before it became an MBA buzz phrase.

At a keynote at Red Herring East on Thursday, Phelps explained the slow shift in attitude and valuation of patents that corporate patent spectators have been watching from the sidelines for the past few years.

He spoke about the increasing practice of using patent licensing agreements as a way for companies, and companies and universities, to pool resources and share research without losing rights, or with an agreement to share rights or revenue made off of the technology.

"For those of you in VC, this is going to be a radical departure. We used to define competitive advantage as 'I've got and you don't.' Or 'You've got it, but I got better.' Well, today it's 'You got it and I got it, but I make money when you use it," said Phelps explaining the shift to a strong emphasis on companies licensing out their patented technology.

Companies also are aggressively looking beyond their immediate industry to see whether technology they hold can be useful and licensable to leaders in other industries.

The practice is not only for large corporations, but can help small to midlevel companies who might not have the resources to develop original technology, according to Phelps.

"Who benefits the most from this trade and ideas? Rhetoric of class struggle will tell you patents only serve big business and monopolies, but in 1992, 23 percent of U.S. patents went to small firms (and that statistic has steadily grown since). Small start-ups are not being squeezed out," said Phelps.

Trade in patents and licensing is growing at twice the rate of trade in goods. Patented tech innovation accounts for half the growth of the U.S. economy and some suggest it pushes 80 percent, according to figures Phelps gave to the audience.

"We are not in the licensing for money. Most people look at IBM and say why can't we do that? Well, I know how IBM did it and most companies will never do that. Rather than have it be the business, make it serve the business," said Phelps.

"They (patents) are the bridge to collaboration between companies. It's going to open a whole bunch of new financial models," said Phelps.

"I have hopes for China for one reason. India is sitting right next to them, and they have changed their legal regimes drastically. These countries are competitive with each other," said Phelps.

That desire to compete globally against India will force the Chinese government to eventually clean up its patent infringement problem so they aren't left out of the technology-sharing game, according to Phelps.

"But in between you would have lost $40 or $50 million dollars?" quipped Red Herring CEO Alex Vieux, who conducted a question-and-answer session after Phelps' presentation.

"Yes, but it's hard to conduct public policy as a company. As big as Microsoft is, you need the help of the government. Counterfeits are a worldwide problem," said Phelps.

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About the author

In a software-driven world, it's easy to forget about the nuts and bolts. Whether it's cars, robots, personal gadgetry or industrial machines, Candace Lombardi examines the moving parts that keep our world rotating. A journalist who divides her time between the United States and the United Kingdom, Lombardi has written about technology for the sites of The New York Times, CNET, USA Today, MSN, ZDNet, Silicon.com, and GameSpot. She is a member of the CNET Blog Network and is not a current employee of CNET.

 

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