Microsoft Reflects on Five Years of Collaborative Intellectual Property Licensing

REDMOND, Wash. — Sept. 16, 2008 — In 2003, Microsoft announced it was “open for business” for licensing its intellectual property to other companies; since then the company has built a solid, recognized record in this area, with 500 agreements and counting to date, prompting CNET’s Ina Fried recently to ask who doesn’t have an agreement with Microsoft. Microsoft has compiled an impressive list of collaborators in this area that includes Motorola, Nokia, Novell, and yes, even Apple.; today, Microsoft announced a patent cross-licensing (PCL) agreement with another industry leader, Pioneer Corp., focusing on auto navigation and television-related technologies.

Horacio Gutierrez, deputy general counsel and vice president of intellectual property and licensing at Microsoft

PressPass spoke with Horacio Gutierrez, deputy general counsel and vice president of intellectual property and licensing at Microsoft, to learn more about Microsoft’s history of IP licensing, the current state of affairs and the company’s plans for the future.

PressPass: Why does Microsoft license its IP and how do you think it benefits the industry?

Horacio Gutierrez: Licensing IP is an essential component of the innovation process nowadays. Without sharing inventions in a sensible, fair manner, the pace of innovation slows, which isn’t good for anyone. Increasingly licensing IP works as a bridge that connects different players to accelerate innovation. It is a tool for maintaining an edge in a competitive marketplace. It helps people collaborate at a level they wouldn’t otherwise be able to achieve. And it enables that collaboration in a fair, legal way.

Consumers don’t realize that IP collaboration, for example, enables their cell phone to have unique, cool features. Yet in any given consumer electronics device there are hundreds of patents representing innovations created by other companies that are incorporated into that product because of IP licensing agreements. It is that “invisible web” of licensing agreements in the background that enables that device to be “cool.” That’s a benefit of IP collaboration you rarely hear about, but that is very real.

PressPass: Microsoft began actively licensing IP to other companies in 2003. What was the rationale behind that at the time?

Gutierrez: The rationale behind that approach in 2003 is the same as now: customers expect their technology vendors to engage in meaningful collaboration with other industry leaders to improve the customer experience. Microsoft’s decision to declare that it was “open for business” on the IP licensing front was also an official recognition on our part of a number of emerging trends, primarily the fact that the pace of innovation was — and still is — accelerating. At Microsoft we invest more than $7 billion a year on our research and development (R&D), and as a result have a patent portfolio that is recognized by outside indexes, and the industry, as arguably the strongest — and highest-quality — software patent portfolio. But there are also innovations created by others that we want to use in our products, and we believe it’s only fair and right to compensate them for their work. In the same vein, we have technology that others want or can use, and feel it is appropriate to ensure that those technologies can be accessed by the ecosystem at large. By the way, that was the thinking behind the launch of our unique IP Ventures program in 2005, which operates under an open-innovation model and helps startup companies and entrepreneurs have access to our wealth of innovations, as well as other areas of expertise at Microsoft.

PressPass: How do you feel about where things stand currently? And where do you see them going in the future?

Gutierrez: I see the IP licensing space as a dynamic market and I expect it to grow even further in the future. We’re working with businesses on every continent in all sorts of industries. There’s a depth of engagements we’ve brought to fruition, from software to digital photography to car navigation and other consumer electronics. We have a number of agreements in the U.S. but also several in Europe, Japan and, recently, in China. It was very exciting for me to be in Beijing in April, when Microsoft and Beijing Komoxo Mobile Software announced a patent licensing agreement on text-input technologies for mobile devices. The licensed patent allows Komoxo to integrate Microsoft’s technology and offer new mobile innovations to consumers around the world. This patent licensing agreement is the first of its kind between Microsoft and a China-based company. It’s a testament to the fact that companies around the world are coming to value the importance of IP and how licensing can help them innovate and reach more consumers.

PressPass: Microsoft announced a patent cross-licensing agreement with Pioneer today. What’s the agreement about and how does it fit into Microsoft’s overall IP licensing strategy?

Gutierrez: Pioneer is a great example of the kind of work we’ve been doing over the past five years. Pioneer is definitely a leader in its industry, and our agreement covers a broad range of consumer products from televisions to car navigation. Pioneer is the latest in a long line of PCL agreements Microsoft has entered into with an incredibly diverse group. Some of the agreements, at first, seemed impossible. Yet we have agreements with many open source vendors. Licensing is a very versatile tool that allows us to build bridges that might not have been thought possible before.

PressPass: In the five years that Microsoft has licensed IP, are there any agreements that you feel were especially important?

Gutierrez: The most significant agreement has been with Novell. People didn’t believe it was possible for a software company and an open-source company to reach an agreement. But it’s evolved into a very successful collaboration from every angle, but particularly from the customer perspective. I’m also very proud of our IP agreement with Samsung, which is a very sophisticated company when it comes to IP issues. There is also a whole range of agreements we’ve entered into with various competitors, including Apple, Motorola and Nokia. All of these agreements highlight the value of IP as a catalyst for collaboration.

PressPass: Have there been any examples where efforts to reach an agreement have failed?

Gutierrez: Licensing is the most efficient and effective way to resolve IP disputes, while at the same time opening the door for business collaboration that yields benefits to customers. But sometimes it’s simply not possible to do despite best efforts. We recently filed suit against a company that refused to acknowledge our IP in their products. This litigation against Primax Electronics Ltd. is an unusual example of how, in spite of our best long-term efforts to reach a licensing agreement, one could simply not be achieved. The action was filed with the ITC after repeated attempts during the past several years to engage in meaningful licensing discussions with Primax. Microsoft has an open intellectual property licensing policy, but in situations such as this, in which a reasonable licensing agreement cannot be reached despite our best efforts, we have no choice but to pursue legal action to protect our innovations. To date, more than 20 companies have licensed the U2, Tilt Wheel and Magnifier technologies from Microsoft as part of our successful hardware licensing program. Primax’s practice of using our innovations without taking a patent license is unfair to the many companies that have already licensed our technology, so we had no choice but to take action to protect both our partners and our innovations.

PressPass: There are a few critics in the industry who argue that Microsoft’s IP licensing partnerships have not been successful. How do you respond to them?

Gutierrez: Very simply and very clearly: Look at our track record. In five years we have reached 500 agreements across industries and geographic regions and with companies of all sizes. I believe that speaks for itself.

PressPass: What are the biggest challenges Microsoft is facing in the future?

Gutierrez: There are many challenges that lie ahead. At Microsoft, our main goal is to meet those challenges head-on so that we can continue our efforts that we believe foster more collaboration around IP, not less. These are efforts that will — among other things — provide the IP assurance our customers who are operating in mixed source environments are asking for, and enhance the overall IT ecosystem by enabling greater interoperability among devices.

Editor’s note – Sept. 16, 2008 —
For more background on Microsoft and open innovation, read an


by Horacio Gutierrez that appeared in the April/May 2008 issue of “IAM Magazine”.

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