Microsoft Innovation For Sale

Could Microsoft (NSDQ: MSFT)'s ability to produce intellectual property be the company's future salvation? A few weeks ago I complained that Microsoft wasn't innovating. Yet the book Burning the Ships talks of Microsoft's burgeoning intellectual property treasure chest. How can both be true?
Microsoft's problem isn't a lack of ammunition, but a lack of aim. Microsoft engineers come up with ideas for new things every year, and apply for patents on those inventions. Yet most of those ideas never seem to survive the arduous corporate journey from brainchild to Microsoft product or service. It still seems to me that Microsoft has evolved into a hide-bound corporation that is unable to innovate because of issues such as internal politics.

Burning the Ships shows the way to another outlet for Microsoft's innovation. Instead of trying to hold their intellectual property close to the vest, Microsoft is beginning to open up the IP treasure chest and let others try to do the work of bringing those products to market. If the product succeeds, Microsoft gets patent royalties; any competitors have to go through Microsoft if they want to produce a similar product. Failure is still an option as well, but Microsoft doesn't pay the PR or development costs.

For all the "evil empire" talk about Microsoft, the company hasn't pushed their intellectual property rights very strongly in the past. They're much more likely to be defending themselves against patents instead of attacking others with a patent cudgel. If IP licensing proves to be a profitable path for Microsoft, the company may push its patents even more strongly.

Microsoft's recent lawsuit against Tom Tom may be the beginning of that IP-protective reaction. Yet I'm not the only one with concerns about the overly generous Patent Office trend that has allowed dubious "inventions" to be patented. For example, some of the software patents I've seen seem like they should be obvious to someone familiar with software development.

Then there are the business method patents, many of which affect Internet companies. The US Supreme Court has recently taken on a case regarding business method patents; a ruling that weakened such patents would probably diminish the value of Microsoft's IP portfolio as well.

BY Dave Methvin

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