Microsoft Expands Intellectual Property Licensing Program

Opens up ClearType, File Allocation Table (FAT) technologies on royalty

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Under pressure from regulators and advances in the open-source movement, Microsoft has decided to open up more of its intellectual property for licensing.

In a conference call on Wednesday, the Redmond, Wash.-based software giant kicked off the effort by announcing royalty-bearing licensing programs for its Windows FAT file system and ClearType font-rendering technology.

The announcement calls for broad licensing of Microsoft technologies on both royalty-bearing and royalty-free basis and an expansion of cross-licensing deals with smaller companies.

Microsoft's top legal counsel said the company would grant broad access to its portfolio of 4,000 patents, "trade secret know-how" and Web service standards.

The officials would not elaborate on the full scope of IP that will be made available, but told CRN in a conference call that antispam and other file-system technologies are under consideration. (See related story.)

"We are open for business in terms of licensing our IP [intellectual property]," said Brad Smith, general counsel and senior vice president at Microsoft. "Under the revised IP policy, Microsoft is committed to licensing IP on clear, commercially reasonable terms based on industry norms and streamlining the policy to make it easier for technology companies to work together."

Aside from the Windows FAT system and ClearType code, however, it remains unclear the extent to which Office APIs and .Net code will be available and to which companies.

"This will be an ongoing process for us," Smith said. "We'll take similar steps in the months to come."

The IP expansion is the brainchild of Marshall Phelps, a 28-year IBM veteran Microsoft hired away in August to help rationalize the company's restrictive and often-criticized IP policies.

Microsoft will take requests from ISVs on a case-by-case basis and expand the program in the months to come, Smith said.

Microsoft has offered up royalty-free IP to Windows developers for several years but will expand that to those developing on competitive platforms as well, they said. Microsoft will not discriminate for or against any class of products or constituencies, a spokesman said.

"When you do programmatic [licensing], it's fair and transparent, and you cannot segregate among competitors," said Phelps. "You have to make it all available under the same terms and conditions."

On the new IP Web site Microsoft debuted on Wednesday, the company highlighted the ClearType and FAT licensing programs and the existing Web Service-Security (WS-S) and Business Process Execution Language (BPEL) 1.1 standards that are available on a royalty-free basis.

ISVs including Borland, VeriSign, Agfa, Lexar Media, Orbiscom, Info2clear and Network Appliance announced support for the program.

Microsoft claims that licensing the documentation, sample code and patents to its FAT file system will allow ISVs such as Lexis Media and Network Appliances to take advantage of enhanced file-transfer compatibility and build better implementations of the FAT file system in their products.

Some analysts say the FAT licensing program will help manufacturers build peripherals and portable devices that interoperate with Windows.

Yet one analyst said Microsoft has always made IP available to select partners and this move is designed more to improve the company's image in the eyes of government regulators and antitrust watchers.

"Microsoft has always been willing to license its technology when it serves Microsoft's business interests," said Matt Rosoff, an analyst at Directions on Microsoft, Kirkland, Wash. "What's really new is the fact that Microsoft is creating formalized programs for doing this, whereas in the past it's done so on an ad hoc basis."

Smith acknowledged that the decision was influenced by governmental pressure but said Wednesday's announcement is not a direct by-product of discussions with the European Commission.

For instance, he said this licensing expansion does not cover specific requests by European regulators for Microsoft to expand its communications licensing program.

"This kind of step is consistent with kinds of steps others in the industry and some in government have been encouraging us to take, but this has been in the works for some time. It follows in the footsteps of other companies that have done this for some time ... Intel, HP, Xerox, IBM, Phillips and Fujitsu," Smith added. "IP protection is very important. We're building on that belief with the recognition that including licensing is important in enabling multiple vendors to innovate."

"It's a one-stop-shopping approach," said Phelps, noting Microsoft will offer broader IP rights to educational institutions than in the past and will give royalty-free IP to ISVs. "We'll stoke up our royalty-free standards especially in the Web services era, and we have recently offered shared source and Office XML schemas."

One analyst said the new arrangement would help ISVs and partners deliver better interoperability.

"Anyone that wants to place a platform that is not based on Microsoft core technology into a Microsoft shop could make use of this, including VARs, Sun, or Red Hat," said Rob Enderle, president and principal analyst of The Enderle Group, San Jose, Calif. "Coupled with the Shared Source Initiative, this clearly moves the ball in the right direction, and while it clearly won't please everyone, for most this should be good enough for now."

Still, other ISVs and solution providers say they are waiting to see what kind of access will be permitted.

One Microsoft Certified Partner said the loosening up of more intellectual property will motivate ISVs to stick with Windows and .Net development, but he doesn't expect it will filter down to the channel for some time to come.

"It means a lot for programmers, but from the solution provider point of view, we are not doing anything with APIs," said Marc Harrison, president of Silicon East, Manalapan, N.J. "It may indirectly be helpful because someone finds it's more attractive to stay with writing applications for Microsoft than Linux, so in the end, there will be more to offer."

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