In Shift on Intellectual Property, Microsoft Will Team With Outsiders

The program, company executives say, will also provide a path into the marketplace for technology developed by Microsoft researchers that does not necessarily make it into the company's products. The licensing deals, which could include Microsoft's taking equity stakes in startups, will yield added revenue and investment income, though the amounts will be modest at first.

The new initiative points to a shift in Microsoft's intellectual property strategy away from a trade secrets mentality, in which inventions are hoarded under a licensing policy. Microsoft is following the well-traveled course of more mature technology companies, led by I.B.M., which has long licensed its innovations and earns more than $1 billion a year in royalties. Two years ago, Microsoft hired a former I.B.M. executive, Marshall Phelps, as deputy general counsel overseeing intellectual property licensing.

The traditional licensing policies of big companies have mostly focused on cross-licensing deals with other big companies. Yet in the last year or so, several major technology companies have tried ways to sell or share their technology with smaller companies and entrepreneurs by offering more flexible terms or making some patents free, as I.B.M. and Sun Microsystems have done.

Microsoft has been working for more than six months to develop its program with a handful of venture capital firms. Venture capitalists who have been told of the Microsoft effort said the technology on offer was grouped in 20 categories, including artificial intelligence, security, graphics, gaming and databases.

Lucinda Stewart, a general partner at OVP Venture Partners in Seattle, said startups could benefit from using off-the-shelf technology from Microsoft as building blocks for their own new products or services. "This program could accelerate the speed to market for some of the opportunities we're working on," Ms. Stewart said.

Besides building on the Microsoft technology, startups may also want to strike licensing deals to make sure their products or services work well with Microsoft products. "We want to make sure the things our companies are doing fit into the Microsoft ecosystem, and in the past that has sometimes been challenging," said Sam Jadallah, a general partner at Mohr Davidow Ventures in Silicon Valley.

One of the startups Mohr Davidow is financing is Scalix, which makes e-mail server software that runs on the Linux operating system, a competitor of the Windows server operating system. Scalix is also a direct rival to Microsoft's Exchange e-mail server software, lends support to Linux, yet must work well with Microsoft's desktop Outlook e-mail program.

Will Microsoft's more open licensing policy extend to potential competitors like Scalix? "I'm sure those kinds of conversations will take place," said Mr. Jadallah, a former Microsoft executive. "As in all things, you want to see how the execution of this program works."

For Microsoft's labs, which now employ more than 700 researchers worldwide, the new licensing program is a way to have their innovations used more broadly than in the company's products, Rick Rashid, senior vice president for Microsoft's research division, said.

Mr. Rashid cited a deal signed last month with a startup, Inrix, as a forerunner of the new program. Inrix licensed some predictive, real-time technology developed in Microsoft's labs for its business of modeling traffic patterns on highways and streets. "We don't do traffic-flow analysis," Mr. Rashid explained. "Computer science now has a lot to offer in a broad set of fields."

Source: New York Times