Bold IP Moves Enable Microsoft to Lead in Patent Performance

The inability to dominate in its product lines has not prevented Microsoft from crafting a purposeful IP strategy that has generated billions in patent licensing and enables it to participate other technology businesses’ success.

Microsoft is not you typical technology company. The software business has taken more heat over the past 20 years for what it has not achieved than practically anyone.

While missteps in product development and market strategy have slowed Microsoft’s once meteoric growth and hampered its shares, the time and research spent developing new ideas and protecting them are not without a silver lining.

Microsoft has emerged as a study in smart IP management, and what an evolved business can achieve when it understands the power of selected IP rights and how to deploy it. Not only has MSFT (NASDQ), a laggard with just 300 patents and applications a decade ago, established a formidable portfolio of more than 40,000 patents and a successful licensing program generating about $2 billion annually and likely to generate more, it has displayed a marked ability to move swiftly and deploy its huge cash position when the IP opportunity arises.

“Microsoft: Bold Moves and Intriguing Results,”  will appear as the next Intangible Investor in the January IAM Magazine, out this week. The piece looks at how Microsoft, which has failed to dominate in games (Xbox), operating systems (Windows) or search (Bing) has managed to carve out a formidable niche in IP asset management. A few of the more notable Microsoft IP moves are listed below.

Notable Microsoft IP deals, disputes and investments:

– Purchase/License:
From AOL 925 patents and applications, plus 300 licenses for $1.056M (2012)

– Sale:
To Facebook, 650 patents from the AOL deal for $550M (2012)

– License:
For Adaptix patents from Acacia with Samsung (2012)

– License:
74 smartphone patents from Acacia (2010)

– License:
To majority of Android smartphone manufacturers for up to $10 per unit (2007-2013)

– Acquisition/License:
From Nokia for $7.2B for its mobile phone and services business. Includes, all of some 30,000 Nokia patents for $2.17B over ten years and licensing income from some Nokia licensees (2013)

– Purchase:
Paid approximately $800M for its participation in Rockstar Consortium’s 6,000
patent Nortel portfolio: with Apple, RIM, Sony, Ericsson and EMC. (2011.)

– Suit Filed re: Above:
Rockstar Consortium US LP and Netstar Technologies LLC vs. Google, 13-893. (November)

– MS has been involved in five of the ten largest patent damages suits (see PwC Patent Litigation Study, figure 2c). It has prevailed in three, settled one, and lost at the United States Supreme Court in another.

– Successful Defense:
Eolas (U. of California) v. MSFT; in a decade-long quest for $500 plus in patent damages.

– Successful Defense:
Alcatel-Lucent v. MSFT, reversed $1.53 billion verdict on appeal (2008)

– Unsuccessful Defense:
i4i v. MSFT, $290 loss at Supreme Court (2011)

– Successful Suit:
Won $14.5M in a case against Motorola Mobility/Google for violating FRAND (2013)

– Plaintiff (settled):
Against Barnes & Noble, Foxconn, and Inventec for patent infringement over the retailer’s
Android-based Nook e-readers and tablets manufactured by Foxconn and Inventec (2010)

– Investment:
In 2011, Microsoft announced that it would invest $300M in B&N’s Nook business for a 17.6
percent stake, which ended their patent litigation

– Investment:
Approximately $1B into Intellectual Ventures fund giving it access to IV’s patents (2002)