Microsoft Patent Portfolio Tops IT Industry Scorecards

REDMOND, Wash., Jan. 28, 2008 – Two different organizations that track the quality and quantity of companies’ patent portfolios recently gave their top ranking to Microsoft, a position historically held by hardware leaders such as IBM and HP.

Bart Eppenauer, Microsoft chief patent counsel and associate general counsel

The November 2007 issue of IEEE Spectrum, a publication of the Institute of Electrical and Electronic Engineers (IEEE), ranked Microsoft the IP leader among all technology companies, based on 2006 U.S. patent awards, up from the seventh position a year earlier. In addition, the Patent Board, a leading independent provider of patent metrics, ranked Microsoft’s patent portfolio number one in Technology Strength in their January 2008 Scorecard for the Information Technology (IT) industry, up from second place a year earlier.

Microsoft currently has more than 8,500 issued U.S. patents, with more than 15,000 more pending. Microsoft’s portfolio continues to grow at a higher rate than most companies in the top 25 of patent issuers, and was one of only five in the top 25 to receive more patents in 2007 than in 2006.

PressPass spoke with Bart Eppenauer, chief patent counsel and associate general counsel at Microsoft, and the individual responsible for the oversight of Microsoft’s Patent Portfolio, about how the company accomplished its rise to the top of these two IP rankings and what this means for the company and the industry going forward.

PressPass: What do these two scorecards measure?

Eppenauer: They measure the overall strength of companies’ patent portfolios. Both rankings blend together quality and quantity metrics. The IEEE, which is the world’s largest association of technical professionals, judged Microsoft’s portfolio highest in the IEEE Spectrum scorecard in terms of what they call “Pipeline Power,” which attempts to measure the overall impact of a patent portfolio. The Patent Board’s IT Industry Scorecard characterized Microsoft as highest overall in “Technology Strength,” an aggregate measure of patent quality and quantity, and in “Science Strength,” an assessment of the degree to which a company’s patent portfolio is linked to core science.

PressPass: What do you mean by patent quality?

Eppenauer: Both IEEE and the Patent Board assessed patent quality in terms of a number of metrics, including the degree to which a company’s patents are cited as prior art by other subsequent patent applications, as well as the number of scientific publications referenced in a company’s own patent applications. The number of times a patent is cited in other patents is considered a good indication of how innovative and influential it is.

From Microsoft’s perspective, patent quality starts with patenting inventions that are aligned with our business goals. While Microsoft’s patents are increasingly being cited by other patents in the industry, Microsoft cites more prior art in its patents, particularly more scientific and research papers, than most other patent holders in the industry.  This is generally considered a measure of patent quality because patents are presumed valid over any prior art cited by them.

PressPass: What is Microsoft’s strategy toward patent filing?

Eppenauer: Microsoft is one of the biggest investors in research and development in the world. We spent $7.1 billion on research and development (R&D) last year. Our patent filings attempt to maximize the value of that R&D by capturing the intellectual property it produces, particularly innovations that are aligned with our business strategies.

While we file about 3,000 patent applications a year, that’s only a portion of what we could patent if we were just trying to build up our patent numbers. We pursue patents on only those inventions that are in line with our business objectives and have strategic value to the company.

Working in close collaboration with the research, development and product teams at Microsoft, we have expanded our patent portfolio into newer business and technology areas, such as hardware, online services, business applications, cloud computing and cutting-edge research, in addition to its longtime focus on operating system and productivity software. Close alignment with our business strategies, goals and priorities has enabled Microsoft to become the new standard bearer for patent quality in the technology industry.

PressPass: What roles have Microsoft researchers and developers had in moving the company up on these IP rankings?

Eppenauer: Several years ago, we looked at some industry benchmarks and found that we were actually behind the curve in terms of patents filed per R&D dollar invested. It wasn’t because our researchers and developers were any less productive, but because we weren’t capturing all of our innovations through the patent process. More recently, we’ve been making a conscious effort to correct this. I think our developers have gained a greater appreciation for the importance of IP and patent filings and what constitutes a strategic patent. And I think the rankings clearly show the quality and strength of the inventions of our researchers and developers.

PressPass: Is being highly ranked on these patent scorecards of any real value to Microsoft?

Eppenauer: Absolutely. Aside from the recognition it gives to our R&D people, it gives Microsoft increased standing in addressing issues with policy-makers exploring ways to improve or reform the patent system for the benefit of all patent holders. And it validates and gives enhanced credence to the value of Microsoft’s IP portfolio for the increasing number of companies entering into IP collaboration and licensing agreements with Microsoft. Our IP licensing efforts enable the innovations we have created through our R&D efforts to be both recognized by and shared with the IT ecosystem as a whole. A high quality patent portfolio also gives our customers and partners the assurance that Microsoft is committed to strong IP protection. For our industry as much as any other, IP is the currency of innovation.

PressPass: What kind of changes do you think could help improve the patenting process?

Eppenauer: Some of the key changes relate to what industry can do to help solve some of the challenges facing patent offices worldwide. For example, we understand the demand that the IT and other industries have placed on the world’s patent offices because of the accelerated pace of innovation we all have fostered. So we believe that it is only right that Microsoft and other like-minded industry participants work collaboratively with patent offices and universities around the globe to help facilitate technological solutions to some of those challenges. Specifically, we want to work collaboratively with others in areas like automated machine language translation, sophisticated prior art searching and analysis tools and technology to interconnect examiners from around the world in a secure collaborative workspace. All of these initiatives could help with one of the biggest issues facing the world’s patent offices today — the duplication in examination workloads that contributes to increasing application backlogs.

PressPass: Is the primary value of patents that they can give companies a leg up on their competitors?

Eppenauer: That certainly is one view, but an interesting transition has taken place in the world of patents and intellectual property. IP’s true function in society and the world of business today is no longer to serve solely as a club against competitors. This role has been supplanted in many respects by IP’s ability to serve as a bridge to collaboration. Patents enable innovation and collaboration, they do not stifle it. That is what our efforts with companies like Novell, Samsung and many others have proven.

PressPass: Can you give us some examples of some patents that help Microsoft partner with other companies?

Eppenauer: Definitely. One good example is the technology behind Exchange ActiveSync, a feature of Microsoft Exchange Server. Exchange ActiveSync lets wireless devices like cell phones and pocket PCs access information on a server that is running Microsoft Exchange Server. This lets mobile users access their e-mail, calendar, tasks and contact information, and retain access to this information while they are offline. Exchange ActiveSync uses a wireless connection between the server and the cell phone or PDA, so it doesn’t require access to a desktop computer, cradle or desktop synchronization software. The result is a faster, easier connection. That’s why many mobile phone manufacturers – including Nokia and Motorola – license this technology from Microsoft and incorporate it into their products.

Another is Windows Live Photo Gallery, which makes sharing photos easier by letting users organize and upload individual photos or albums from their PC to Windows Live Spaces. It’s one of the few services available today that takes a “network” approach to digital photo sharing. In December 2007, Samsung Electronics released a new Digital Photo Frame that is based on this patented technology developed by Microsoft Research. This wireless product lets customers display photos from sharing sites such as Windows Live Spaces or from their PCs.

PressPass: We’re more used to thinking of patents as a means of keeping secrets than of sharing information.

Eppenauer: Patents as knowledge-sharing tools may seem counterintuitive at first. After all, patents do give their owners the right to exclude others from using a technology. But even in this case, denying use is very different from denying to others the knowledge of the new technology, which patents by law are required to disclose.

PressPass: So, what do you say to those who believe Microsoft has come to prominence by going it alone?

Eppenauer: The truth is that we’ve entered into numerous cross-licensing deals and IP arrangements with other firms in order to share our patent portfolio, to gain greater freedom to innovate and also to mitigate any potential legal conflicts. Some agreements have even been with direct competitors, such as our November 2006 patent cooperation agreement with Novell, a leading provider of Linux and other open-source software.

We have also expanded our collaborative projects with top universities around the globe. These partnerships let us take part in truly groundbreaking, cutting-edge research that might not have immediate commercial application but nonetheless gives us important insights into the future of IT innovation.

And finally, many of our IP licensing programs are aimed at promoting interoperability between Microsoft’s and others’ software products.

PressPass: These licensing programs are also very lucrative, aren’t they?

Eppenauer: Microsoft isn’t in the licensing business for the money. Even in an optimistic scenario, licensing revenues would amount to only a small amount of Microsoft’s annual revenue. Far more important to us are the opportunities for collaboration with other leaders and innovators in the technology industry.

The days of the self-contained, go-it-alone company are over. Open innovation is one of the keys to Microsoft’s future competitiveness. In today’s world, open innovation is simply smart business; in tomorrow’s, it will be an absolute necessity.

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