Microsoft, Toshiba Seal Latest in Line of Recent IP Deals

The software giant's effort to cross-license patented technologies from the Japanese companies this month follow in a long line of similar deals, including a pact with rival Sun Microsystems (Nasdaq: JAVA) last year, that analysts indicate have been forced by market demand for interoperability and a mutual desire to keep technology out of court and toward innovation.

"This is something that's been going on for at least 15 years," Gartner (NYSE: IT) vice president Steve Kleynhans told TechNewsWorld. "This is nothing new. The players involved might be new and the technology pieces may be new, but when you're dealing with something as complex as a PC, it's important for players developing new and innovative things to not have to worry about stepping on someone's intellectual property in the process. These (agreements) are just a standard part of doing business in the market today."

IP Key to Industry

Kleynhans said technology companies such as Microsoft would be paying millions more in legal fees if they did not engage in IP-sharing agreements, which allow them to devote more resources to research and development.

The analyst, who said the IP deals often join companies that are competitors, indicated the agreements also tend to come as businesses are working on their next-generation technologies, adding that without some intellectual property to use as bargaining leverage, companies are usually left out.

"To be a strong company in the technology industry, one of the key pieces is the IP you own," he said. "These exchanges and cross licensing agreements show why it's important to get a seat at the IP table, to have something to bargain with."

Expanding Strategy

In light of Microsoft's announced cross-licensing deal with Toshiba -- through which the two companies will share IP and work together on PC and electronics solutions -- Yankee Group senior analyst Laura DiDio indicated that technology companies are eager to avoid courtroom confrontation over intellectual property.

"These settlement things cost a lot of money," she told TechNewsWorld. "So it makes sense from a business-financial-customer standpoint not to do any wrangling over it. Over the last 10 years, Microsoft has really lost its appetite for unbridled litigation."

DiDio said Microsoft, which has partnered similarly with Sun, Siemens (NYSE: SI) and SAP (NYSE: SAP) , is now expanding its IP sharing strategy to the Japanese market. The analyst said Microsoft is also responding to the Lenovo takeover of IBM's (NYSE: IBM) PC business, which is likely to bring more innovation to the market.

DiDio said the IP agreements are also pillars of key partnerships that are a requirement for today's leading technology companies.

"Does it mean they're still going to compete with vigor? Sure," DiDio said. "They're just going to be smart about picking their battles. You need alliances these days."