Microsoft: Patents Aren’t Perfect, But They’re The Best We’ve Got

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Fixing patents

What improvements would Microsoft like to see to the patent system?
In the US, small and medium enterprises (SMEs) pay 50 percent of the fees that large companies pay. We have advocated that it should go to zero, so that large companies would fund better access to patents for smaller companies in the US.

In Europe we put forward similar ideas of having smaller fees or no fees. We submitted a response to consultation in the UK, saying let’s let small or medium companies developing patents, to take an R & D tax credit for that work. You can reduce the fees of the patent filing process, bu t it still costs money to work with an IP specialist to create the work-product.

What about patent wars? Do they harm creativity rather than encouraging it? Should patents be used in a more defensive than offensive way?
That’s topical, and I can talk about Microsoft’s views. When I started at MS in 1995, we were filing patent applications. Today we have a $9 billion R & D budget, we would be expected to protect that.

Back then, we really did think more defensively; we were trying to create a portfolio that would allow us freedom to operate. We wanted to give developers the freedom to go out and create the best products in world and sell them and we would work out the IP details that would enable them to do that. I think that still is very primary function of a lot of the patent activity you see in companies small and large.

What do people mean by offensive and defensive use of patents? To keep a competitor out of a sector, or to shut down a rival?
It might mean different things, but I think when people talk about defensive use, it is a way of taking the heat out of wanting to have a patent portfolio.

When people say they have a patent portfolio for defensive purposes, they mean that if some day down the line someone brought a lawsuit against us, we have a lawsuit which we in turn can use to help settle the case. That is a perfectly legitimate and good use for filing patents and intellectual property.

Taking that a step further, companies might want to look at their patent portfolio, to say “Hey, you can’t just go out and copy everything I’m doing. That’s not fair”. That is  the other side of the coin, and may be what people refer to when they talk about offensive use of patents.

So Microsoft, Apple, Google and Facebook and companies like that negotiate to have roughly equivalent strengths of patent portfolio so the intellectual property issues can be parked and it ends up a business discussion?
Fundamentally what is lost on people is what is the purpose of creating an intellectual property portfolio? There are companies that have portfolios that are not practicing, and that is their whole business, but the fundamental purpose of a patent portfolio is to support the business. The companies you mention are using IP in support of the business.

They think about it holistically: where am I trying to go, and how does intellectual property help my client get there. There are nuances to that – how do you think about the patent portfolio, trademarks and copyright issues, trade secrets. It can get fairly complicated.

Intellectual property – the best man-made product ever?

What about patents that are misjudged and are being used to restrict creativity on the part of other companies? What about the darker side, and how can we avoid this?
There have been improvements already, and if you think about a US context, Microsoft has been vocal along with other tech companies in improving the system. We would say a lot of the improvements came through important cases such as eBay, which refined the standards by which you can get an injunction, and other cases that defined a reasonable level of damages.

My overall take is that the system is not perfect. There are always going to be cases where you wonder about the ruling. What I think sometimes gets lost is that while the system is not perfect, it works really really well. For all the cases you read about in the Financial Times or the Wall Street Journal, where there has been a big controversy, there are millions of cases working well behind the scenes.

The fact that intellectual property does incentivise people to create things, and gives them a currency to trade, may be the most phenomenal man-made product in the world. To me it is an inspiring thing, and we have to be careful not6 to look just at the drawbacks.

As things stand, we have some states in the US and Europe, where intellectual property cases get taken because they are easier to win.
With any litigation you have to worry about forum shopping, about qualified advocates, and are the rules set up to give a fair trial and such. We should take stock of that, and where we can, improve it, but be aware that some of this comes with the fact IP isn’t immune to the litigation issues you see in other areas. Part of this comes with the uncertainty that is litigation.

The legal system is also a phenomenal man-made product, but maybe not such a good one as the intellectual property idea? 
Right.

What next for Ideas Matter. Any practical goals?
While not perfect, patents are a pretty good system and we should be careful when changing it. Today’s launch was a first step. Practically we hope that more people will join. We want this to be as broad based as possible. We want the system to work for everyone. Because this area is helped by the context of lobbying we are staying at a level where we think we can get a lot of agreement.

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