Every company today is becoming in part a software company – we see this every day at Microsoft. Whether it’s auto manufacturers, retailers, health care providers or financial services firms, our customers are not only transforming their own business operations with our software but collaborating with our consultants and engineers to create new digital products and services that run on our platform. As we look to the future, advancements and the adoption of cloud services, data analytics and artificial intelligence will only accelerate this phenomenon.

That’s why today we are announcing Microsoft’s Shared Innovation Initiative. It is based on a set of principles designed to address co-created technology and intellectual property (IP) issues that give customers clarity and confidence regarding their work with Microsoft. The initiative is designed to strike a healthy balance that will both help our customers grow their business through technology and enable Microsoft to continue to improve its platform products.

A good example of the digital transformation we’re witnessing is the 365mc Hospital in South Korea, which is improving the precision and safety of surgeries through a motion-tracking artificial intelligence (AI) application that it co-created with Microsoft. The hospital used sensors to collect data on more than 2 billion movements of surgeons’ hands during operations and used machine learning to identify patterns that can serve as a “GPS for surgeons.” This AI-powered system guides surgeons during operations and sends warnings and proposes countermeasures when it anticipates possible missteps, helping surgeons master skills while reducing patient risk. In addition to applying this technology to its own business, the hospital plans to now sell software and a training program to other hospitals, creating a new line of business and revenue stream.

As collaboration like this between tech companies and their customers increases, so will the questions regarding who owns the patents and resulting intellectual property. There is growing concern that without an approach that ensures customers’ own key patents to their new solutions, tech companies will use the knowledge to enter their customers’ market and compete against them – perhaps even using the IP that customers helped create.

When we’ve encountered important questions or concerns in the past, we’ve found it helpful to formulate and publish principles to help guide and explain how we’ll conduct our business. We did this with our Windows Principles over a decade ago, and in the years since we’ve followed this with Interoperability Principles, Privacy Principles and most recently, our Cloud Trust Principles. Our newly published Shared Innovation Principles will cover seven areas:

Respect for ownership of existing technology Assuring customer ownership of new patents and design rights Support for open source Licensing new IP rights back to Microsoft Software portability Transparency and clarity Learning and improvement

We’ve listed and provided more details on each of these principles below.

1. Respect for ownership of existing technology. We each own the existing technology and IP that we bring to the table when we partner together. As we work with customers, we’ll ensure that we similarly will each own the improvements made to our respective technologies that result from our collaboration.

More details: The co-creation of new technology in the world today seldom starts from scratch. At Microsoft we bring our existing products, IP and expertise, and our customers do the same thing, often reflecting their world-leading expertise in their particular field. Our ability to co-create relies on both companies respecting each other’s IP.

2. Assuring customer ownership of new patents and design rights. As we work together to create new technology, our customers, rather than Microsoft, will own any patents and industrial design rights that result from our shared innovation work.

More details: Among other things, this means that Microsoft will cooperate in the filing of any patent applications resulting from the new invention work. This also means that Microsoft will assign to the customer all of the rights, titles and interest in the patents we create together.

3. Support for open source. If our shared innovation results in the creation of source code and our customers so choose, Microsoft will work with them to contribute to an open source project any code the customer is licensed to use.

More details: Microsoft is an active contributor to open source development, and we welcome the opportunity to work with our customers to contribute work that we co-create if our customers so choose. At Microsoft we’ve contributed code to the Linux kernel and we’ve helped advance R, the statistical programming language used by data science experts around the world. Over 40 percent of the virtual machines running on Azure today use Linux. Some of our existing platform technology is produced in part with open source code, and Microsoft is bringing many of its flagship technologies to Linux, including .NET, Visual Studio and SQL Server. We’re finding that our customers often want to release deliverables under an open source license on GitHub as part of our engagements, and we frequently work with them to do so.

4. Licensing back to Microsoft. Microsoft will receive a license back to any patents and design rights in the new technology that results from the shared innovation, but the license will be limited to improving our platform technologies.

More details: For this purpose our own platforms include existing and future versions of Azure, Azure Services (e.g., Cognitive Services), Office 365, Windows, Dynamics, Enterprise Mobility and Management, Cortana, Bing, Xbox, Xbox Live, HoloLens, Systems of Intelligence (e.g., Customer Care Intelligence, Market Intelligence, Sales Intelligence), and code and tools developed by or on behalf of Microsoft that are intended to provide technical assistance to customers in their respective businesses.

5. Portability. We won’t impose contractual restrictions that prevent customers from porting to other platforms the new, shared innovations they own.

More details: In the world today, customers want to retain the contractual freedom to move the work they co-create to an alternative platform in the future if they so choose. We respect their right to do so. We’re committed to retaining our customers’ business by offering better performance and value than anyone else, not by locking customers in to something they no longer want to use.

6. Transparency and clarity. We will work with customers to ensure transparency and clarity on all IP issues as the shared innovation project moves forward.

More details: IP issues can get complicated, and shared innovation works well only if there is transparency and clarity for customers throughout the process. We’re committed to well-organized and defined processes that ensure that our customers always have clear and complete information. We’ll also each appoint executive sponsors to help address quickly any questions or issues that may arise during shared innovation work.

7. Learning and improvement. We’ll continue to learn from this work and use this learning to improve further our shared innovation work.

More details: In important ways, shared innovation projects represent the next frontier in developing cutting-edge technology. While we’re confident that these principles represent an important step forward, it’s hard to believe that they represent the last step we’ll ever need to take. We look forward to listening to and learning with our customers as we do more of this important work. We look forward to using what we learn to make future improvements to these principles.

Microsoft believes that our customers should chart their digital transformation with confidence. We first demonstrated this commitment when we announced the Azure IP Advantage program last year. Now, our Shared Innovation Initiative continues to build on that foundation.

We believe this initiative and these principles offer a path that will ensure that the co-creation of digital technologies creates new economic value to companies throughout the economy and around the world, rather than for just a few select companies in the tech sector. And of course, it’s a path that we believe will enable Microsoft to continue to grow as well. In short, it strikes a balance where we and our customers can each focus on what we do best, working together with trust and confidence that we will help each other become more successful.

Tags: Brad Smith, IP