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Microsoft to liberalize licensing Firm seeks to soften image with more generous patent policy

Posted on: Friday, 5 December 2003, 06:00 CST

Microsoft has announced that it will adopt a more liberal policy for licensing its intellectual property, opening the doors of its storehouse of patents and copyrights to outsiders.

The initiative announced by Microsoft on Wednesday is another step in the company's effort to improve relations with other companies and to show government regulators in the United States and Europe that it is a responsible company rather than a predatory monopolist.

For years, industry rivals and antitrust investigators have accused Microsoft of restricting access to its technology as a way to hobble rivals and thus restrict consumer choice. Recently, competitors have said that the company has not lived up to the settlement terms in the federal antitrust suit in the United States that required the company to provide reasonable access to its technology so that rival products can work smoothly with Microsoft's Windows desktop operating system.

A pending antitrust complaint by the European Commission accuses Microsoft of limiting the technical information that it shares with makers of operating systems for server computers, like Sun Microsystems and Novell. Those companies say they need more technical information from Microsoft for their products to work well or interoperate with Windows.

Though not focused on specific antitrust complaints, the Microsoft licensing program is clearly intended to deflect the criticism that the company is an uncooperative bully in its dealings with the rest of the industry.

A general theme has been that they would like to see Microsoft share more technology, said Brad Smith, a senior vice president and general counsel of Microsoft. This is a step that will enhance and promote interoperability.

At another point in a conference call with reporters on Wednesday, Smith said, This is the kind of step that will result in greater consumer choice.

Microsoft executives said that the program would include more royalty-free licensing, especially to industry groups setting software standards for machine-to-machine communication and data- sharing, known as Web services. The Web services standards are regarded as essential building blocks for the further development and growth of Internet commerce.

We'll stoke up our royalty-free contributions, especially in Web services, said Marshall Phelps, Microsoft's deputy general counsel for intellectual property.

As part of the announcement, Microsoft introduced two licensing initiatives for specific technologies that will presumably serve as a model for others. One is for its ClearType software for presenting near-print-quality text on a liquid crystal display computer screen, and another is for file storage technology called FAT, for file allocation table.

Like most of the technology Microsoft intends to make available to outsiders, Microsoft will collect royalties on ClearType and FAT, negotiated with the licensee.

Microsoft executives say they would be willing to talk to companies, including competitors, about most of its intellectual property. We are open for business in terms of licensing our intellectual property, said Smith, the general counsel.

Just how far Microsoft will go in licensing remains to be seen. Analysts note that Microsoft has a self-interest beyond forging better relations with the industry. Licensing fees, they note, can generate sizable revenue and profit, as they do for companies like IBM, and licensing elements of Windows software for use in equipment like digital cameras helps Microsoft strengthen its market position even further.

The more complementary products, the larger the Windows ecosystem, said Al Gillen, an analyst at IDC.

But Microsoft executives say they do not expect a sizable revenue stream from licensing fees anytime soon. That's not why we're doing this, Phelps said. It's more to build relationships and part of the maturation of the company.

Microsoft has been developing the new licensing program for most of this year, meeting with older technology companies like IBM, Intel, Hewlett-Packard, Philips and Fujitsu to study their practices.

Smith, the general counsel, described the licensing program as another step in Microsoft's development as a company.

We're joining the ranks of other important technology companies that have opened up their intellectual property portfolios, he said.

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