Microsoft Pledges to Let Joint Venture Partners Keep the Patents

(Bloomberg) -- Microsoft Corp. President Brad Smith said customers don't have to worry that the company will help them develop new products and then set up a competing business.

In a blog post, Smith outlined a policy for what the company calls its Shared Innovation Initiative. It pledges that any patents or design rights that result from a joint work agreement will stay with the customer and not with Microsoft.

“There is growing concern that without an approach that ensures that customers own key patents to their new solutions, tech companies will use the knowledge to enter their customer's market and compete against them -- perhaps even using the IP that customers helped create,” Smith said in the post, referring to intellectual property.

Automakers, retailers, and financial firms are using artificial intelligence, cloud computing and data analytics to develop new products, exposing themselves to the often cutthroat patent battles common to the tech industry. Microsoft is hoping its new policy makes it a more enticing choice than competitors like Alphabet Inc. and Amazon.com Inc.

'Something in Writing'

“They're trying to differentiate themselves from companies like Alphabet that don't necessarily have something in writing like this,” said Patrick Moorhead, president of the consulting firm Moor Insights & Strategy, who was briefed by Microsoft on its new policy.

Some companies may not have any experience with patent rights and licensing, and a clear policy helps eliminate problems down the road, Moorhead said. The alternative, he said, is “lawsuits, arguments and things like that.”

Microsoft cited the example of a hospital in South Korea that co-created a motion-tracking AI application that uses sensors to collect data on the movements of a surgeon's hands during operations, to identify possible missteps. The hospital plans to sell software and a training program to other hospitals -- creating a new money maker for the healthcare facility.

“As collaboration like this between tech companies and its customers increases, so will the questions regarding who owns the patents and resulting intellectual property,” Smith said.

Often, when a tech company helps develop a program for a customer, it retains the rights and the customer just gets a license to use it. Instead, under the new program, the customer becomes the owner of the rights without having to negotiate ownership rights.

Microsoft said it would help the companies in navigating the system of applying for patents from the shared work. While it won't own the patents, it will get a license that's limited to improvements for its platform technologies like Azure cloud service, Office 365 and Windows.

Patent issues are a big concern for non-tech companies that witnessed years of patent litigation engulf companies like Apple Inc. and Samsung Electronics Co., and are looking for ways to avoid legal disputes. Last year, Microsoft announced a program called Azure IP Advantage, in which is promised to help protect cloud customers who were sued.

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net.

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, John Harney

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