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Gates' patent legacy turns heat on IBM

Microsoft's hits factory fired up

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IBM has long placed a premium on patents - such a premium, its engineers are expected to routinely create and file patents to prove the company's technical leadership to the world.

Such is the expectation and the size of IBM's brains trust that each year for nearly a decade, IBM has been awarded more patents in the US than any other company on the planet.

In 2008, IBM shattered its own record, with 4,186 patents published.

Last year, though, it looked like Microsoft was finally starting to offer IBM some serious competition and - in doing so - deliver on a strategy initiated by Microsoft's founder and former chief software architect Bill Gates.

The number of patents granted to Microsoft grew by 43 per cent over 2008 to hit 2,903, pulling the company up from fourth place in the US Patent and Trademark Office rankings for 2008 to third in 2009.

IBM still managed to retain its number-one slot with 4,895 patents for 2009, but the numbers mean that if IBM and Microsoft continue at the same pace, Microsoft should slide into the number-two spot behind IBM. Then it's just a matter of time and filings before Microsoft deposes IBM at the top.

Microsoft is not growing the fastest when it comes to USPTO patent awards. That honor in 2009 went to Hon Hai Precision with a 39 per cent increase in awards, followed by LG Electronics and Cisco Systems on 32 and 30 per cent respectively. But Microsoft had a bigger portfolio.

Other high-tech companies are going backwards. Intel, Hewlett-Packard, and Hitachi saw their awards drop in 2009. That's possibly because some in the industry have begun to believe that owning a portfolio of patents is a waste of time and money, as people have failed to turn them into money making machines.

In terms of quality of patents, Microsoft's already beaten IBM according to a survey of patents awarded during the last five years by patent specialist Ocean Tomo. Microsoft scored more valuable patents than anybody else, while IBM ranked eighth in a list of ten.

Ocean Tomo measured patents by factors that included the number of prior patents cited, patent renewal payments, and litigation.

Ocean Tomo told BusinessWeek that IBM's portfolio includes a large number of service-related patents, which do not command as high a price as actual technology patents in things like video-games or software patents that feature heavily in Microsoft's portfolio.

IBM dismissed Ocean Tomo's conclusion, saying the ultimate value is "not some rating" but "the leverage we are able to get from the patent [licensing] negotiations."

There you have it fanbois: Those who think IBM walks on water because of the patents and IP its generously given to Linux and open-source, the mask as finally slipped. Patents to IBM are a currency it uses to get what it wants.

Horacio Gutiérrez, Microsoft's chief intellectual property officer, told BusinessWeek his company's patents are not a profit center but "a currency that you use to trade to another company" for its patents.

That's more in line with IBM's view, but to those like Gutiérrez who say Microsoft's patents are about trade and not profit don't forget the companies using Linux or implementing File Allocation Table (FAT) that Microsoft's played hard ball with on payments of royalties and alleged infringement of patents.

Lest we forget, it was Gates who in 2003 initiated Microsoft's program of filing more patents to get recognition for their value. He told financial analysts a year into the policy Microsoft was stepping up the pace of filings to boost the licensing of its technology and ideas to others.

"We're at an early state on that but it is something that we are pretty excited (about)," Gates said. ®

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