Microsoft Creates Outlet for Technology Spin-offs

by Alex Woodie

Microsoft unveiled a new outlet last week for bringing to market technologies it has developed in-house, including artificial intelligence and biometric technologies. Microsoft IP Ventures, as the new company is called, will seek to line up potential users of technologies created by Microsoft's research and development department with outside venture funding.

Microsoft has one of the biggest research and development (R&D) budgets in the IT sector. For its 2004 year fiscal, which ended June 30, 2004, the company spent about $7.8 billion on R&D, or about 21 percent of its annual revenues. For calendar year 2004, the company recorded 659 patents, a 26 percent increase from the previous year, according to the United States Patent and Trademark Office.

While much of this technology finds its way into various Microsoft products, some doesn't.. For example, consider Microsoft Research's counterfeit-resistant optical fiber technology, which randomly embeds optical fiber strands into physical media, such as a cashier's check or a drug container label, to create a unique barcode signature. While Microsoft has incentive to introduce technology to prevent forgeries and the theft of digital content, embedding optical fiber technology into industrial machinery is really outside of Microsoft's software purview.

Counterfeit-resistant optical fiber is one of the technologies on the block through Microsoft IP Ventures. The new company's goal is to license Microsoft technologies on either an exclusive or non-exclusive basis via a combination of equity, upfront cash, or royalties, according to Microsoft.

Microsoft IP Ventures is working to license various categories of technologies developed by Microsoft Research. Today, there are about 20 different technologies available for venture capitals and entrepreneurs, including: artificial intelligence; usability; graphics hardware; cryptography; digital rights management; security; gaming; multimedia; and databases. Microsoft plans to build programs for more technologies in the future.

Several venture capital groups expressed their support for Microsoft IP Ventures. "We're encouraged that Microsoft is making its large IP portfolio available to launch new companies and strengthen existing startups here in Europe," says Nick Kingsbury of 3i, a London venture capital firm. Other venture firms expressing their support for Microsoft IP Ventures include Advanced Technology Ventures, Mohr Davidow Ventures, OVP Venture Partners, and Insight Venture Partners.

One technology start-up basing its future on Microsoft technologies is Inrix, which is based in Microsoft's home town of Redmond, Washington. Inrix will be using Microsoft-developed technology to deliver predictive traffic information to a range of service providers, device manufacturers, Web sites, and mobile solution providers. "Obtaining technology from Microsoft gave us a distinct advantage in our growth strategy," says Bryan Mistele, founder and CEO of Inrix.