Is Microsoft a Patent Troll?

What is a patent troll?

  1. An entity that misuses patents as a business strategy by positioning itself in a way to collect patent licensing revenue by doing just enough research to prove it had the idea first, or by purchasing patents for such purpose.
  2. A small green man hiding under a bridge demanding payment for passage as first depicted in "The Patents Video" in 1994.

As much as I enjoy the imagery of Microsoft (NAS: MSFT) CEO Steve Ballmer lurking below the Evergreen Point Floating Bridge near Redmond, Washington to pounce on unsuspecting passersby, I think the first definition is a more appropriate description of the company's recent activities.

Of course, the company disagrees with that characterization. Microsoft Corporate Vice President and Deputy General Counsel Horacio Gutierrez has defended the recent slew of suits against Google (NAS: GOOG) Android in an interview with the San Francisco Chronicle. Gutierrez compares the current climate to historical contexts, saying, "There is a period of unrest and a period of readjustment," following the advent of any disruptive technology.

Most industry watchers, myself included, consider the current web of software-related patent suits a problem -- a roughly $83-billion-per-year problem. Rather, Gutierrez actually considers licensing the solution, and companies like Google "standing on the shoulders" of companies like Microsoft the problem.

The interviewer even asks Gutierrez about dubious patents, such as one in its case against Barnes & Noble (NYS: BKS) related to an indicator that a website is loading, and Gutierrez points to user experience and how numerous features contribute to the whole, while the courts will ultimately make the final call.

Microsoft has also been on the receiving end, and Gutierrez does acknowledge that non-practicing entities, or NPEs, abuse the current system. He mentions that there is currently a debate beginning over whether or not NPEs like InterDigital (NAS: IDCC) and Rambus (NAS: RMBS) should even be entitled to obtain injunctions.

Gutierrez's stance is unsurprising, as his job includes leading Microsoft's worldwide intellectual property and licensing group. Regardless of how you define "patent troll," Mr. Softy's onslaught of Android suits falls within the realm in some form or fashion. No one can argue that Microsoft is a non-practicing entity, but I'll argue that buying patents to attack competitors still makes you a patent troll.

Add Microsoft to your Watchlist to see if it continues its patent trolling ways. Get access to this free report on the latest raging revolution in smartphones and how you can profit from it.

At the time this article was published Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Microsoft and Google. Motley Fool newsletter services have recommended buying shares of Microsoft, InterDigital, and Google, as well as creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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