The Team Player
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Microsoft IP&L The team player portfolio to support the company’s business Horacio Gutierrez has been objectives. But how do we know if we’re Microsoft’s chief intellectual property successful?” officer for three years now. In that A question of metrics time he has built a 200-strong team During the meeting, team members and dealt with issues fundamental to reported on the work done to date in the company’s future developing various quantitative metrics to assess the business impact of the By David Kline company’s IP strategies. While many of the specifics of their discussion are The members of the Intellectual Property confidential, suffice it to say that the and Licensing (IP&L) finance team sat in a objective of this unique IP&L initiative is to conference room on Microsoft’s main be able to determine more reliably the value Redmond, Washington, campus last 9th of, say, a cross-licence with a large company March, trying to get to grips with a problem in a market in which Microsoft would like that has long confounded corporate IP to do business, compared to the costs and departments around the world. benefits of taking a different approach – Interestingly, the issue under discussion building a portfolio of its own, for example, was not how to achieve IP&L’s ambitious or acquiring a third-party portfolio. goals despite the recent imposition of a 15% It’s not just a simple matter of running budget cut in response to the current some net present value scenarios; not when economic crisis. Efficiencies, after all, were each of the potential IP strategies under already in place that had reduced the cost of consideration involves complexities that a first patent filing by 43%. And new cost- would challenge even the most Type A, saving initiatives underway would further numbers-driven individual (and Microsoft streamline the cost of building, maintaining is famous for filling its employee ranks with and leveraging Microsoft’s IP portfolio. such people). Rather, the question that really stretched As Gutierrez put it: “When you look at the minds of finance team members during your product and technology road maps, its bi-annual Practice Business Review you need to ask which innovations session with corporate vice president and differentiate our offerings from others in IP&L chief Horacio Gutierrez was how, the market, and what sort of IP protections precisely, to develop quantitative metrics by will enable greater market success and in which to assess the strategic business value turn increase our ability to invest in future of the company’s IP strategy. innovations? And, what’s the best path for Taylor Hawes, who was then just 64 securing those rights? Will we have the days into his job as IP&L’s new CFO, time and money to build our own portfolio? summed up the challenge: “How do we Or conversely, does it make sense to develop a common framework and language facilitate collaborative innovation with to understand and measure the benefits and others through something like a patent costs of various IP strategies?” cross-licence? What rights would I have to Gutierrez put the issue in even simpler trade for the rights the other company terms: “We know our job is to use our IP would give me? And what would be the www.iam-magazine.com Intellectual Asset Management July/August 2009 37 Microsoft IP&L competitive implications of that bargain?” At that, one member of the team sighed and said: “My head hurts.” Everyone laughed, providing a brief respite from the tension. This new IP metrics initiative at Microsoft could potentially have relevance for other corporate IP departments. As Gutierrez noted in a later interview: “We’ve all heard the complaint for years that the kind of work that we do in IP really can’t be measured quantitatively since so much of it is strategically oriented. Legal work especially has always been seen as quality driven, not numbers driven. And it’s certainly true, you know, that when you get into issues of strategy, numbers really don’t tell the full story.” But, he continued, there is always something that can be measured: vision into concrete programmes that create Practice Business Review, Redmond, “Sometimes the best you can do is find tangible business value for the company. March 2009 proxy measures. But if you combine Says chief trademarks, copyrights and Gutierrez (centre) talks to Tom Rubin quantitative measures of the impact of your trade secrets counsel Tom Rubin: “Marshall (copyrights and trademarks); to his right IP investments with the more strategic came in and tore down the old building and Taylor Hawes (CFO), then Bart Eppenauer business considerations, which are by poured a new foundation. Horacio is the guy (patents) and David Kaefer (licensing) nature more subjective and qualitative, who rolled up his sleeves and built a very leaning back you’re going to get a much more accurate successful IP programme on top of that picture of the business value you’re foundation.” generating for the company. Not perfect, Indeed, Gutierrez has accomplished a but a much better picture.” good deal during his three-year tenure and Of special significance for corporate IP his plans for the future suggest more is to leaders everywhere, he believes, is the come. He led the team during Microsoft’s possibility that as such metrics continue to 2006 negotiations with Novell, for example, be developed, they will help to propel IP that came up with the creative work-around strategy issues more forcefully into to the restrictive patent provisions of the corporate executive suites, where they open source General Public License – rightfully belong. “CEOs understand providing a covenant not to sue to metrics,” Gutierrez notes. “They understand customers rather than licensing patents the bottom line. So this allows you to have a directly to Novell. This led to the world’s conversation with business leadership in first-ever IP collaboration between an open terms they can naturally relate to.” source and proprietary software firm. Gutierrez also created new IP policy An unlikely path and IP communications teams within IP&L The strategy metrics effort is just one of a to help Microsoft engage more effectively number of innovations in Microsoft’s 205- in the intensifying global debate over person IP group that the 44-year-old patent reform and the role that intellectual Gutierrez has undertaken since he succeeded property plays in innovation and economic Marshall Phelps as Microsoft’s chief development. In addition, he stepped up intellectual property officer three years ago. efforts to deploy an outside virtual law One might imagine that it has not been easy firm and also started offshoring some stepping into the shoes of such an outsized technical analysis and other operational personality as IP Hall of Famer Phelps, who tasks to India that have to date reduced attracted worldwide notice when he came to the average cost to the company of a first Microsoft in 2003 and committed the filing of a patent in the US from over company to a more open and collaborative IP US$14,000 to US$8,000. Gutierrez has licensing policy. This was in contrast to its also launched several experimental previous fortress mentality approach of changes in IP&L’s structure that have jealously guarding its technology. But improved the ability of its various teams Gutierrez, by nature more reserved and even to help support innovation strategy within self-effacing in his manner, appears at least each of Microsoft’s five major business on the surface to be unfazed by the challenge. groups in order to enable them to meet Perhaps that’s because he’s so focused on their market and business objectives translating Microsoft’s collaborative IP more effectively. 38 Intellectual Asset Management July/August 2009 www.iam-magazine.com Microsoft IP&L Even the twice-yearly Practice Business thought about it, the more excited I got Reviews, during which each of IP&L’s six about the possibility of working with a practice teams (patents, licensing, IP leading company like Microsoft and dealing policy, trademarks and copyrights, with all these cutting-edge legal issues customer advocacy and finance) around computer law, intellectual property summarises the state of play in its work and competition law that were just gaining and the key challenges ahead, are an prominence at the time.” innovation Gutierrez brought from his So he joined Microsoft’s Fort Lauderdale previous position in Paris as head of office in 1998 as the company’s lead Microsoft’s Law and Corporate Affairs commercial lawyer for Latin America and Department for Europe, the Middle East the Caribbean (excepting Brazil, which was and Africa. the responsibility of a Brazilian attorney “With everyone so geographically hired the same day as Gutierrez). There he dispersed, the only way to really keep my continued to focus on software licensing, IP finger on the pulse of the work was to bring and international competition law. It was an people together to talk in person about the experience which would prove especially challenges they were facing,” he explains. valuable when Microsoft asked him two “The PBRs also helped break down the years later to move to Redmond and become inevitable silo mentality of each team. The the lead lawyer for the company’s volume benefits of these practice reviews were so software licensing programmes. clear to me that when I later took over the IP&L group, I decided to employ the same Competition challenges process here in Redmond.” What does international competition law Gutierrez came to his current role at the have to do with volume software licensing? helm of Microsoft IP&L by a rather More than you’d think, actually.