Microsoft unveils licensing policy to expand access

Microsoft unveiled a technology licensing policy Wednesday that the company said signals its commitment to working with other vendors in the industry on intellectual property swaps intended to drive interoperability and innovation.

Microsoft unveiled a technology licensing policy Wednesday that the company said signals its commitment to working with other vendors in the industry on intellectual property swaps intended to drive interoperability and innovation.

Microsoft will create licensing programs to offer access to a broad range of its intellectual property, including copyrights, trademarks, file formats and schema, software technology, and Microsoft-developed standards specifications. Concurrent with its policy announcement, Microsoft introduced programs offering technology and patent licenses for two of its creations, its ClearType technology for improving the readability of text on LCDs and its File Allocation Table (FAT) file system storage format.

Some of Microsoft’s licensing programs will be royalty-free, like the Office XML schemas it began offering developers last month, executives said during a Wednesday conference call with press. Others, like its new ClearType and FAT programs, will carry fees. Details of the various programs are listed on a new Microsoft Web site.

Licensing Microsoft’s FAT technology will cost vendors $0.25 per unit incorporating the system, such as memory cards and digital cameras. Fees are capped at $250,000 per manufacturer. The ClearType program will let vendors use the technology in devices such as handheld computers and mobile phones, with fees generally in the range of $1 to $3 per device.

Microsoft’s new licensing approach is unrelated to its antitrust settlement agreement with the U.S. Department of Justice and its ongoing skirmish over the same issue with the European Commission, according to Brad Smith, the company’s general counsel and senior vice president.

“We felt it was important to take this step based on our strong dialogues with a number of other companies in our industry,” Smith said.

Analyst Joe Wilcox, of Jupiter Research, called the new licensing policy an “important first step” for Microsoft as the industry’s most notorious proponent of proprietary technology edges toward a more open approach to product development.

“Traditionally Microsoft has been very guarded about its IP [intellectual property]. Its approach has been to try to differentiate itself from others with its IP,” he said. “I think what you’re really seeing here as much as anything is evidence of the changes going on within Microsoft.”

Anything in Microsoft’s portfolio is potentially available for licensing, Smith said.

“Access to and exchange of intellectual property is really essential to the continued growth and development of the broader IT industry,” he said during Wednesday’s call. “Microsoft is committed to licensing its intellectual property on clear, commercially reasonable terms based on industry norms.”

While Microsoft, which spends more than $4 billion annually on research and development, owns a vast array of intellectual property, the technologies other developers most often clamor after are those associated with the company’s crown jewels, its Windows operating system and Office applications suite. Microsoft allows limited access to information on those products’ underpinnings through initiatives such as its tightly controlled shared source program. Executives were guarded about how extensively the company would consider expanding its Windows and Office-related licensing.

“We’re aware of the API (application programming interface) issue,” said Microsoft Director of Business Strategy for IP David Kaefer, referring to the interfaces software programs use for connecting with other applications and services. “We’d like to improve information about the APIs that are already available, and then we need to see what people say. Clearly, to the extent that people are still asking questions about them, there’s interest.”

Microsoft has been working for nearly a year on developing a clearer IP policy, Smith said, pointing to the company’s recent hiring of Deputy General Counsel Marshall Phelps as a sign of its commitment to expanding licensing. Phelps will be responsible for managing Microsoft’s IP portfolio and fielding requests for access.

Microsoft expects most licensing arrangements to be made one-on-one with interested companies. Formal programs such as the ClearType and FAT system arrangements will be relatively rare, Kaefer said. Microsoft picked those two technologies as its licensing guinea pigs because it had outside vendors interested in becoming customers. Agfa Monotype plans to use ClearType-related technology in its iType font rendering system, while Lexar Media has licensed Microsoft’s FAT technology for use in its memory cards and other devices.

While Microsoft will charge for some of its licensing arrangements, the company doesn’t expect the new programs to generate significant revenue.

“That’s not why we’re doing this,” Smith said.

Jupiter Research’s Wilcox sees the new licensing approach as a sincere effort by Microsoft to play nicely with others in the industry. Steve Ballmer, now almost four years into his tenure as Microsoft’s chief executive, is more interested in industry collaboration than was his predecessor, Bill Gates, Wilcox said.

“It’s taken a while for changes under his leadership to really filter through the company, but Ballmer is much more customer-oriented. Some of the people that he’s put in place are really interested in improving relations with everybody — customers, competitors, partners and governments,” he said. “The opening of the Office schemas was a huge step. It would have been nice to see Microsoft do it from the beginning, but the fact that it’s licensing these schemas really means the company is serious about Web services.”