Microsoft Broadens Its Licensing EffortsMicrosoft Broadens Its Licensing Efforts

After years of exercising tight-fisted control over its software, Microsoft last week revealed plans to make its intellectual property more readily available to technology companies, researchers, and others. Yet, it's unclear who might want Microsoft's code, trademarks, or copyrights--or, beyond some introductory pricing, what terms they'll have to meet to get them.

As steps in the new direction, Microsoft introduced a licensing program for its ClearType technology, which makes text easier to read on LCD screens, and another for its File Allocation Table file system, which supports media sharing between PCs and other devices. Two licensees are queued up: Agfa Monotype Corp. will use ClearType in conjunction with its own iType font-rendering subsystem for consumer electronics. Lexar Media Inc. plans to use the File Allocation Table system to support interoperability across its memory cards, cameras, and other consumer electronics.

"It's a smart move," says Al Gillen, a software analyst with IDC who believes the strategy, if successful, could lead to even wider use of Microsoft technologies. "This is something of a mind-set shift for Microsoft," he says.

A more limited licensing policy has been in place for two years, and Microsoft has made its technology available for more than two years to partners through cross-licensing agreements. What's different now is the "pace and scope" of the effort, says Microsoft VP and deputy general counsel Marshall Phelps, who characterized the earlier policy as ad hoc and "inward facing." The revised policy, he says, is meant to be more structured and open.

Microsoft has 4,000 technology patents and 5,400 patents pending, all of which are now available for potential licensing. Terms vary, with royalty-free use of Microsoft software provided for schools and certain industry standards, such as Web services, and fee-based licenses in other cases. The price to license the File Allocation Table system is 25 cents per device; a ClearType license ranges from $1 to $3 per unit.

The change of heart is explained by a growing interest among companies in licensing Microsoft's technology, company officials say. But the move also might be interpreted as a response to the rising popularity of open-source software or pressure by government regulators in the United States and Europe to create a more open software environment. Microsoft officials deny those factors directly influenced the strategy change but admit a successful intellectual-property program could help Microsoft in both areas. The move is "consistent with the steps government regulators have been asking us to take," Microsoft general counsel and senior VP Brad Smith said in a conference call with media and analysts.

Microsoft's existing licensing programs include its Shared Source Initiative, which makes the Windows CE operating system, the C# language, and other code available under certain conditions to schools, governments, customers, and other software companies. Last year, in compliance with terms of its antitrust settlement with the Justice Department, Microsoft began licensing some of its communications protocols. Last month, the company made the XML reference schemas in Office 2003 available for free download.

The closely held Windows source code may even be available to license, though company officials say they'll be cautious about any such requests.

A few software vendors expressed support for Microsoft's plan, but not everyone is lining up. A spokeswoman for Red Hat Inc., contacted by E-mail, responded that the Linux distributor has "no interest in licensing Microsoft technologies."