HolidayBuyer's Guide

Microsoft--license to deal

You back my patent, I'll back yours. That could be the software giant's motto in its quest for intellectual property.

After stepping up its own patent push, Microsoft is now trying to get its hands on other companies' intellectual property.

Doing so will give the company more freedom to develop software in new areas and help the company as it seeks to indemnify its customers against any claims of patent infringement.

"If we are able to strike cross-licensing deals with the top 30 technology companies, that alone would provide us access to a vast majority of the patents in areas we care about," David Kaefer, Microsoft's director of intellectual property licensing, told CNET News.com.

Microsoft has roughly 100 licensing deals in the works, with about 15 to 20 being broad cross-licensing pacts with other large companies, Kaefer said, adding that it can take from one to two years to reach an accord.

"We're making good progress on some," Kaefer said. "Others are moving more slowly."

It has been 11 months since Microsoft said it would step up its intellectual property efforts. The company has two formal licensing programs--one for its FAT file format and the other for its ClearType font rendering technology--and it could add more soon.

The company has started to increase the number of sales coming in, but Kaefer said the amount of money Microsoft makes by licensing its patents and other intellectual property is still far less than the revenue from any of its traditional business units.

Because Microsoft paid out about $1.4 billion in the last fiscal year to license other companies' technology, turning a profit is not a realistic goal, he said. "However, there is an opportunity to narrow the gap."

Join the clubs
Microsoft also is rapidly trying to boost its presence among the elite in the patent filing world. The software giant, which holds less than 4,000 patents, plans to file 3,000 applications for patents this year alone.

As Microsoft tries to identify companies to talk with on technology swaps, it is trying to think broadly--even striking deals with perceived rivals, such as its agreement with PalmOne. "The thing about IP licensing is you can build alliances with companies people might otherwise see as strange bedfellows," Kaefer said.

In many cases, striking a deal is the easy part, but implementing the cooperative elements can be a challenge. One need only look at the slow pace of work with Sun Microsystems to see how challenging it can be to implement such accords.

Give and take
Microsoft also is finding things tricky as it tries to work with standards bodies and open-source communities, something that is clearly a delicate process. The recent challenges over patent issues related to the Sender ID antispam standard illustrate how conflicts can arise even when various parties have good intentions, Kaefer said.

One place the software titan is trying to avoid is the courtroom. Following the lead of its intellectual property lawyer, former IBM attorney Marshall Phelps, Microsoft is seeking to beef up its licensing without having to file a bunch of suits to do so. Kaefer noted that Phelps built IBM's intellectual property business without filing a single lawsuit (although he inherited one when he took the job).

That said, Microsoft is pursuing negotiations with companies it feels are using its intellectual property. "It's not possible for us to just look the other way," he said.

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