Microsoft continues to build IP licensing portfolio

In a continued effort to derive revenue from licensing patented technology, Microsoft plans to let third parties license intellectual property it developed for its own mouse products.

Microsoft will open up licensing for three technologies – Tilt Wheel, U2 and Magnifier, said David Kaefer, a director of business development for Microsoft. It marks the first time the company is licensing patents for hardware technology, he said.

Tilt Wheel is mouse technology that allows a user to scroll not only up and down but also horizontally with a mouse’s flywheel. U2 allows a mouse or other peripheral device be immediately recognized by a computer’s port even if the port it is using is not native to the device. For example, if a USB device has to use a PS/2 port by using an adapter, the technology will allow the peripheral to work seamlessly without needing any extra software on the hardware device to which it is attached. Magnifier allows a cursor on a screen controlled by a mouse to immediately magnify parts of the screen with one click.

Tilt Wheel and U2 will be licensed to users for 30 cents and 35 cents a unit, respectively. Microsoft has not decided on the pricing for Magnifier yet, but it will likely be similar to that of Tilt Wheel and U2, Kaefer said.

Microsoft has offered mice that include Tilt Wheel and Magnifier for only about a year, he said. U2 has been around longer than that and already other companies have built similar competing technologies into their products.

Microsoft thought it was the right time to begin licensing all three technologies before other companies build their own to compete with them, he said. In this way, the company can begin making money every time another vendor sells hardware using its patented technology.

Licensing patented technology to third parties is a fairly new practice for Microsoft. In 2003, the company hired Marshall Phelps, the mastermind behind IBM’s patent-licensing program, to lead its Intellectual Property Licensing Group, hoping to follow IBM’s success in making money from charging third parties to use technology it has patented.

IBM has earned the most patents of any company worldwide for 13 years running. According to its 2005 financial statement, the company that year earned nearly $367 million in royalty-based licensing fees and $236 million in sales and other transfers of intellectual property.

Rob Enderle, principal analyst for the Enderle Group, said Microsoft is interested in seeing its own patent-licensing business grow not only to make more money, but also to have a hand in directing future uses for products that use its intellectual property.

“Microsoft has learned over time that license revenue goes straight to the bottom line and has virtually no risk associated with it,” he said. “More importantly, if what you license is broadly used, it gives you substantial say on the direction of future offerings that use your stuff.”