Patent Law

Bull Run

By Gary Odom and Jordan Kuhn

For the 17th year running, IBM has gotten the most U.S. patents. "Their patent department is a profit center," observed Bruce Lehman, former PTO director, and now head agent provocateur at the International Intellectual Property Institute. IBM made something in the neighborhood of $1.1 billion from patent licensing in 2009. But patent maven Ocean Tomo holds that Microsoft's patent portfolio is three-fold more valuable than IBM's. "The ultimate value is not some rating," toots Manny Schecter, IBM's chief patent counsel. "It's the leverage we are able to get from the patent [licensing] negotiations." Right there is the rub about Microsoft and patents: they don't know how to monetize patents, nor even valuate them.

Microsoft's patent mercantile philosophy is to treat patents like barter chits.  Horacio Gutiérrez, Microsoft patent poobah, considers patents not as a profit center, but "as a currency that you use to trade to another company." In other words, Microsoft's patent monetization strategy is built on fear: trade with us so we don't have to worry about being sued. For its licensing pains and gains, Microsoft has nickeled-and-dimed its way through a hundred or so patent license trades in recent years, particularly with Japanese companies, themselves generally a patent gun-shy crowd.

Whether Microsoft actually makes any money from patents, net, is an open question. Microsoft constantly infringes patents, facing around 40 lawsuits at any one time. Microsoft's distaste to pay a "patent tax," and its mentality of infantile denial, maximizes what it pays for infringement. The i4i, Uniloc, and Lucent cases are recent examples of maximal self-inflicted damage. i4i and Uniloc were considered nuisance suits by Microsoft, and Microsoft was sorely blindsided by the Lucent damages award. Microsoft itself appears to have zero ability to valuate patents. No wonder, with a patent portfolio objectively guesstimated in value 3.3 times IBM, that the Microsoft patent corral is all hat and no cattle.

Full post as published by The Patent Prospector on January 14, 2010 (boomark / email).