Microsoft walks the patent tightrope

• Tags:
• Intellectual Property,
• Microsoft

David Becker CNET News

Published: 04 Feb 2004 10:00 GMT

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Double-sighted aim
The goal for Microsoft and other technology companies, such as IBM and Oracle, in promoting XML is twofold: Make sure the standard works well enough that businesses want to adopt it, and make sure your XML implementation is better than the other guy's.

"With any sort of widely accepted standard, once it's out there, it's a matter of who can build the best applications and tools to run on that standard," said Matt Rosoff, an analyst for research firm Directions on Microsoft. "Microsoft thinks Office is the best tool to work with XML...and they're very bullish on their platform being the best way to use Web services."

Dwight Davis, a vice president at research firm Summit Strategies, said XML and other standards are merely a starting point for Microsoft and its competitors.

"By definition, an open standard shouldn't give any one company an advantage over another," he said. "But even within the narrow confines of a standard, you can still make claims your standards-based product is better than other standards-based products. The competition really ends up happening on top of the standards, where you have these higher-level functions. Everyone is competing to come up with more compelling solutions to build on top of those standards."

One of the toughest issues is deciding what level of innovation is worthy of protection. The XML standard itself obviously isn't patentable, but what about a minor and somewhat obvious way of manipulating data based on the standard? What about a fairly radical idea, such as embedding a different customised user interface within every XML document?

"There's a base layer where standardisation is obviously important and everyone plays from the same book," Schadler said. "But there's a layer, whether it's one click up the software stack or several, where interoperability matters less and your solution matters more. Just where that layer is, I don't think anyone's figured it out yet."

"It's really a minefield in some ways for vendors to tiptoe through," Davis added. "I think you're going to see a lot of low-level agreement on standards, and as you move up the stack, things will get into more specialised functions."

Long-term investment
For now, the strategy for Microsoft and others seems to be patent now, profit later. The US Patent and Trademark Office has hundreds of pending applications now for patents on XML-related processes, many of which are unlikely to be granted, and fewer still of which will be commercialised.

"My sense is the big companies are largely working in a pre-emptive way with these patents," Davis said. "There's a self-protection element to filing as many applications as you can. But there's a distinction between patenting something and requiring me to pay royalties for it."

The majority of XML-related patents, Davis said, are likely to be licensed royalty-free, similar to the way Microsoft offers its Office 2003 XML schemas.

"Microsoft and IBM and others are going to identify some ideas as revenue-generating patents," he said. "But they've realised, and it's been a hard pill to swallow, that if they're going to be working on standards...they're not going to be able to charge royalties for that part of that patent portfolio. It's just too difficult politically."

Kaefer said royalty-free licensing made sense for Office XML schemas, but that approach may not apply to other XML-based innovations. "With the XML schemas, we saw a lot of partner and customer requests to make those schemas available," he said. "By making those available, there's a real benefit to encouraging the market to standardise and adopt XML. It's hard to say what beyond that we will do...It comes down to what offers the best benefits for customers and partners."

Kaefer added that free and for-profit intellectual property licensing can serve the goals of interoperability and open standards.

"Often times I think there isn't an appreciation of the fact that interoperability can be promoted through these royalty-bearing approaches as well as royalty-free approaches," he said. "In fact, it is precisely because both these options exist that companies are able to interoperate at the levels they are today. If some companies didn't have the option to monetise their IP, they would never contribute it to a standards process or make it available for licensing."

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