Microsoft aspires to double patent portfolio
Is Microsoft taking a page out of rival IBM's patent playbook?
A flood of new patent applications combined with Microsoft's hiring of IBM's longtime patent chief has some experts guessing that the Redmond company seeks to emulate Big Blue's multibillion-dollar patent-licensing business.
Since 1976, Microsoft Corp. has been granted about 3,300 patents by the U.S. Patent and Trademark Office. Compared with IBM Corp., which holds more than 30,000 patents, Microsoft's is a pretty small portfolio.
Yet Microsoft is clearly taking aggressive steps to more than double the number of patents it currently holds. At a recent meeting for reporters and financial analysts, Microsoft chairman and chief software architect Bill Gates said the company, which applied for 2,000 patents in the fiscal year ended June 30, 2004, will apply for 3,000 more in the next fiscal year.
In June 2003, Microsoft hired Marshall Phelps, a former vice president of intellectual property at IBM and a 28-year veteran at of the Armonk, N.Y-based company.
Microsoft officials declined to comment for this story. A spokeswoman for the company said the anticipated increase in patent applications is a result of Microsoft's $7 billion research and development budget.
But some experts think they know what's going on behind the scenes at the tight-lipped software company.
Russell Parr, president of Intellectual Property Research Associates Inc. (IPRA) of Yardley, Pa., said the hiring of Phelps from IBM says a lot about Microsoft's intentions.
"I don't know for certain if they're trying to recreate the IBM model, but the fact that they hired Marshall Phelps sure makes you think they are," said Parr, who has written or co-written eight books on intellectual property.
Microsoft has a good chance of succeeding if it can get the patent office to grant the majority of its applications, he said.
"Three thousand patents is a lot of patents," Parr said. "Usually, if you're applying for patents, you can get most of them. It's pretty rare when the patent office denies them altogether. Usually, they'll tell you to come back to them with a more narrow patent application."
Matt Rosoff, an analyst with Directions on Microsoft Inc., a Kirkland-based research firm, also sees a connection between Phelps' hiring and the increased patent activity by Microsoft.
"My guess is that Microsoft is trying to systematize their intellectual property and license the patents they think they can," Rosoff said. "They want a revenue source."
Rosoff and Parr said it's not clear at this stage of the game just how much revenue Microsoft can derive from its current and future patent base. Both agree, though, that it could be sizable.
Microsoft also wants to protect itself from patent infringement lawsuits, which have cost the company big bucks in the last few years, Rosoff said.
In April 2004, Microsoft settled a 3-year-old patent infringement lawsuit by paying InterTrust Technologies $440 million. In August 2003, the University of California and Eolas Technologies Inc., which developed Web browser software, won a patent infringement lawsuit against Microsoft and were awarded $521 million.
"I think Microsoft was really surprised they lost the (University of California and Eolas case)," Rosoff said. "I don't think they took it very seriously. I could tell from some of the things the judge in the case said that he felt Microsoft was stalling."
IPRA's Parr said if Microsoft is successful in its patent drive, it will make companies think twice about staring it down in court over patent infringement issues.
"The reason IBM doesn't get sued very much in their business is their 32,000 patents," Parr said. "If someone sues them, it's very possible they can find a patent to turn around and threaten to countersue with."
According to the U.S. Patent and Trademark Office, Microsoft has about 1,000 pending patent applications.
They cover a myriad of established and new technologies coming out of Microsoft Research such as digital rights management, operating system applications, peer-to-peer networking, antispam and security programs, digital media for mobile devices and search.
Contact: jmeisner@bizjournals.com • 206-447-8505x103
