Gates Says Microsoft Will Increase Patent Push

Hoping to keep its edge in software in part by producing a torrent of technological innovations, Microsoft is planning to push hard to secure more patents in the coming year.

Chairman and Chief Software Architect Bill Gates told analysts at thecompany’s annual meeting yesterday that Microsoft plans to file up to3,000 patent applications before next July, well above the some 2,000 it sought in the last year.

At that level, Microsoft could overtake IBM as the leading patent seekerin the U.S. Big Blue has held that title for 11 years in a row, filingmore than 3,000 patents last year.

Regardless of the exact number, Gates said, Microsoft is bringing forthpatents that have a potential to make a difference in a number of areas,from interactive television and gaming to office productivity.

“We think, patent for patent, what we’re doing is, if anything, morevaluable than what others are doing,” Gates said. “We try to make sureMicrosoft research is not separate from the product groups,” he said.

Property and Casualty

The patent push is part of Microsoft’s “cycle of innovation” that willinclude protecting its intellectual property while seeking to create othertechnology for use in its product offerings.

The ambitious plan shows that Microsoft understands what’s important toits future success, Enderle Group analyst Rob Enderle said.

“Owning and controlling intellectual property is a key to their abilityto keep existing customers and attract new ones,” Enderle told theE-Commerce Times. Microsoft’s claim throughout its antitrust dealingshas been that it won dominance in the operating system and browsermarkets through innovation, he noted.

Enderle added that while Microsoft’s own research and development teamsare capable of churning out large quantities of patents, and the licensing program will enable it to work with application developers, the company will also consider buying smaller firms, including those in early stages of starting up, in order to acquire additional intellectual property.

“They’ll certainly keep a sharp eye out for those types of acquisitionsthat give them additional features they can roll into their products,”he said.

Flack Warning

Pushing the patent envelop is likely to bring Microsoft more flack.Already some of its patents have come under fire for being too broad ortoo basic. For instance, Microsoft’s acquisition of a patent on theclicking of buttons on handheld devices created a stir when it wasannounced earlier this summer.

But most critics blame the U.S. Patent Office, rather than the softwaregiant, for issuing such patents. The Electronic Frontier Foundation haslaunched a challenge to many recently issued technology patents.

Tom Franklin, a patent attorney with the firm of Townsend & Townsend &Crew in Denver, Colorado, said Microsoft will need to play a numbersgame in order to roll up a significant portfolio of patents, since fewerthan 20 percent of technology patents applications are granted in the end.

“They will probably try to file a tremendous amount of patents and thengo about trying to license it to others and reap the royalties,”Franklin said. Patent reviewers have “a lot of discretion. If they feelit shouldn’t be allowed, for whatever reason, it’s not granted.”

Franklin notes that enterprise customers are now becoming more savvyabout their technology purchases, realizing that buying even popularsoftware can get them in legal hot water. Many customers of Linux havefound themselves in the crosshairs of the SCO lawsuits, for instance.

Microsoft, the Startup

The meeting with analysts was the first since Microsoft announced itsplans to return up to $75 billion in cash to its shareholders over thenext several years in the form of bigger dividends and a stock buybackprogram. That raised questions about whether Microsoft had moved frombeing a growth company to an income stock — one that produces dividendsbut experiences little stock growth.

Its most recent earnings report showed growth remaining strong, however,with the company boasting that it grew the equivalent of a company likeYahoo during the past year.

For his part, CEO Steve Ballmer focused on Microsoft’s desire and needto find new growth areas as its PC-software business matures. Hecontinued to use other companies as a measuring stick, saying that ithopes to grow the equivalent of a Siemens or Nokia going forward.

Ballmer said growing in new areas — he and Gates pointed to homeentertainment and emerging communications tools, such as instantmessaging and search — is important to the company’s bottom line and tokeeping its employees fired up.

“People don’t want to come here to work for some stodgy old company,”Ballmer said. “They want to work for a dynamic company striving tochange the world. They want to know that we’re thinking big, dreamingbig.”

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