Microsoft expands IP licensing program

Microsoft is expanding a program under which technologies it has developed in its research labs are either licensed to startup companies or offered in exchange for profit sharing or an ownership stake.

Microsoft is now offering 35 technologies as part of IP (Intellectual Property) Ventures, a program started in May 2005, said David Harnett, senior director of IP Ventures.

Brad Smith, a senior vice president and Microsoft’s chief lawyer, is expected to further detail the program during the Government Leaders Forum in Lisbon, a two-day event sponsored by the company with government leaders from around Europe.

Microsoft has six labs on three continents with hundreds of researchers working on projects ranging from consumer-oriented technologies to high-performance computing. But not all of the work ends up in Microsoft’s products, as the research doesn’t necessarily align with the release schedules of the company’s 120 different product groups, Harnett said.

But those technologies can be shared, and in the process, give Microsoft a stake in companies that could take products with those innovations to market. Microsoft expects to release about five patented technologies every quarter for the program, Harnett said.

IP Ventures has a longer-term outlook than traditional licensing, Harnett said. Microsoft is willing to hold an equity stake for three to five years to eventually make a return on its IP if a company is sold.

Microsoft will also train developers at those companies who choose to enter agreements for use of the innovations, Harnett said. But there is a chance that a wily startup could, for example, start working with a competitor such as Google, a sure burn but one Harnett said is the risk of bringing the technologies to the market and taking a chance for new revenue.

“The only way to work with startup companies is to give them absolute flexibility to do whatever they want,” Harnett said. “A startup will have a business plan that will change many times over the first few years of their lives. If we have restrictions over what they can do with their technology, we’re not going to be able to play in this game.”

Microsoft has been working closely with Enterprise Ireland and the Finnish National Fund for Research and Development, known as Sitra. Both are government-funded agencies that aid startup companies in Ireland and Finland, Harnett said.

Enterprise Ireland approached Microsoft in June 2005 to participate in the program, Harnett said. The organization has about 500 companies in their portfolio, and it narrowed down those that could potentially make use of the technologies offered, Harnett said.

Eighteen companies expressed interest, and Microsoft met with them, eventually allowing three to see code under evaluation licenses, he said. One of those companies, SoftEdge Systems, based in Dublin, has reached an agreement to use an image manipulation technology called Interactive Image Cutout developed in Microsoft’s Beijing research lab, Harnett said.

SoftEdge has a graphics software product for children aimed at Europe’s educational market, Harnett said. SoftEdge and Microsoft have a revenue-sharing agreement, and Microsoft will receive a percentage from product sales, Harnett said.

Later this year, Microsoft will announce the start of a new company that will develop a product centered on a technology that came from the research labs. That deal is an equity arrangement where Microsoft has a significant share, Harnett said.