But Smith argues that Microsoft and others not only have the right to hold their patents, but to exercise them to defend their intellectual property, though also to work in partnership with others.
"There are a whole diverse set of ways that companies can and should use their patent portfolio and technology base not only to protect their own innovation, but to stimulate and share innovation with others," Smith said.
Microsoft has crafted what Smith called "outbound royalty-based patent licenses" that the company has used to transfer technology to startup firms.
"We in the private sector not only have to do a good job of obtaining protection for our own inventions, we also have to do more to work with each other," Smith said. "And we have to license our intellectual property rights to each other for a fair and reasonable term—sometimes its for a royalty, sometimes its royalty free."
Sanjay Prasad , chief patent counsel at Oracle Corp., said, "A lot of people say that patents are the tools of big business to lock out other people, and they certainly are used by big business, but a patent has a quite a bit more value to a small business than a big business, there is just no doubt about that."
Meanwhile, Smith called for patent reform, a refrain of a message he had raised earlier this year.
"The reality is that anybody who is an inventor and is successful both relies on patents and is a target for patent litigation by others," Smith said. "And everybody should have to pay their fair share and respect the rules. But it helps if the system works well. And with the explosion in patent litigation in this country weve see the increase in litigation abuse. Weve seen people inflate their ability to seek monetary awards when it wasnt really deserved."
Smith called for Congress, which held a hearing on patent reform earlier this week, to focus on four things: patent quality, patent litigation abuse, the needs of smaller inventors—"Weve been supportive of what we call the zero fee filing system for small inventors"—and harmonization, "which basically means among other things that the U.S. needs to move to a first-to-file system so that like everywhere else the first person to file an application gets the award rather than it going to the first to invent it."
David Simon, chief patent counsel at Intel, testified before a Senate Judiciary Committee hearing earlier this week and said, "Let me state at the outset that the patent law is not broken. The law is fundamentally sound and works well." However, Simon called for reforms or improvements in the areas of patent quality, training and funding for U.S. Patent and Trademark Office staff, access to prior art, harmonization and litigation abuses, among others.
"More recently, the PTO, with Jim Rogan [former director of the PTO] and John Dudas [current PTO director] providing the political leadership, decided that now was the time to change the fundamental premise on which the PTO would judge whether or not it was really making a contribution to supporting industry by shifting away from what had predominantly been a production-based mentality"—how many patent issues could be generated per staff year of effort"—to attempting to import into the PTO as many different quality improvement techniques and practices as possible," said Brad Huther, a director at the U.S. Chamber of Commerce and former president and CEO for the International Intellectual Property Institute.
At this weeks hearing, Dudas said that the patent law should be changed to award a patent to the first person to file a claim. The current rules allow patents to be granted to the first person who devised the invention.