Investing in Microsoft Patents

When one invests in Microsoft, MSFT, he is also investing in Microsoft patents. This thought comes to mind as a war of words rages between Google and Microsoft. Microsoft has come to agreements with nearly a dozen smart phone makers over their production of Android devices. According to press reports payments to Microsoft from these manufacturers could come to nearly half a billion dollars in 2012. Microsoft is also suing other smart device makers in attempts to protect the products of their research and development. Google contends, however, that the “patent system is broken.” Their claim is that the recently granted patents are so vague and broadly written as to deter others from developing similar products albeit by decidedly different means. In short Google claims that Microsoft is overreaching in order to profit from the work of others. Microsoft claims that Google and others are building on work done by Microsoft and others and that they need to pay for use of patented processes and ideas. From the viewpoint of the investor investing in Microsoft patents is a good idea. US patent law protects the work of researchers and the law allows the owners of patents to profit by limiting access to their patented ideas and works or by selling a fair market price. In this matter both sides want to be rewarded for investing in innovation . However, he who arrives first and establishes patent rights usually wins. This may well be the case with investing in Microsoft patents when you invest in Microsoft.

The center of this “investing in Microsoft patents” dispute is Android. The Google purchase of Motorola (its handset division) was all about obtaining the rights to the treasure trove of patents that the company possessed and was not successfully monetizing. Android is the name for an operating system for devices such as tablet computers and smart phones. It is open source software. Because of the dominance that Microsoft has developed over the years in person computing it effectively bars many users from benefiting from the advancements of the computer age unless they buy patented Microsoft products for virtually every conceivable application. A longstanding reaction to this situation is the organized development of open source software. This is computer code that is developed publically and available at no cost. Use of such software, such as versions of Linux, is said to save users upwards to $60 Billion a year. Google went this route in first acquiring Android Inc., in 2005. It developed the Open Handset Alliance, more than eighty companies developing both software and hardware for telecommunication. Within this framework is the Android Open Source Project (AOSP). The point of this work is to advance computer science but also to bypass the massive number of patents held by Microsoft. Many consider Android to be the best smart phone platform in the world and as of 2010 had nearly two hundred million users. Investors will want to follow this story as it unfolds because it will help determine if investing in Microsoft and investing in Microsoft patents will prevail or if other companies will be able to use already-developed technology, for free, in promoting the open source Android platform and other technologies yet to come.

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