Patent Policy Tested

In late 2003, Microsoft launched a program to monetize its large portfolio of intellectual property. The company currently holds about 5,000 patents, is filing about 10 new patent applications a week, and currently has about 10,000 patents pending. The goals of this effort are to generate new revenue from patent licensing, to preempt possible patent claims against its own products, to limit what competitors can do without licensing Microsoft’s patents, and to create a stable of patents that can be traded and licensed in exchange for access to other companies’ technology.

But as events in fall 2004 illustrated, patent licensing can also stall innovation and introduce financial uncertainties that work against Microsoft’s interests. Two events illustrate these problems: the Sept. 2004 MARID breakup, and a decision by the U.S. Patent and Trademark Office (USPTO) to reexamine an important patent on the File Allocation Table (FAT), a data structure used by Microsoft OSs to store files efficiently.