There are a ton of different businesses that someone, anyone, could come up with and as in all business ideas, some will be good, some rather poor, but there are a few that will be real juggernauts. Microsoft is one of those businesses that makes an incredible amount of money, has impressive jaw-dropping gross margins, and a market share to die for. While Microsoft is involved in several businesses in which not all of them have been that successful, its core, its raison d'être, is software. Software is the greatest business model of business models because it is something that is very easy to replicate for practically no cost, and the revenues that one receives from it, can continue indefinitely.
Microsoft is a master at receiving and utilizing patents. According to Microsoft's own Patent Tracker, Microsoft has over 40,000 patents. This intellectual property, the patents, and Microsoft's software is how Microsoft makes billions of dollars each and every year. For instance, most people do not realize how profitable, Android is to Microsoft. Because Microsoft owns the patent to the File Allocation Table (FAT) which is used within the Android cell phone, Microsoft is allocated a payment for each Android phone sold. These royalty payments to Microsoft, in which the gross margins must be in the high 90 percent, have been estimated to be as large as $3.6 billion dollars for 2013(George).
The fact that software is patentable, for twentyyears or even longer, and the fact that software patents are fiercely protected, litigated, licensed, and used as a legal form of extortion is troubling. Patents for software should be limited, severely restricted, and for very short periods of time. A patent's place is to protect the cost and expenses made by a given entity, and to reward that entity with exclusivity for its investment of time, labor, and money. In return for this exclusivity or privileges, society reaps the general benefits when innovation leads to breakthroughs or improvements in product development.
However, the continual payment, the continual royalty, and the restriction of access that patents create, are a grand disservice to society at large. Software companies, software itself, do not, and should not receive lengthy patent protections. These patents hurt innovation, raise the cost of products, and distort the benefits of capitalism.
All companies, should have to prove themselves day by day, and should not be permitted to reap royalty payments as a form of tribute as kingdoms did in the past. Quite frankly, there isn’t any valid reason why Microsoft must be paid time and time again, for code and for software in which they have made back all their monies invested thousands upon thousands of times over. That certainly isn't fair, that isn't competitive, and that isn’t innovation. Software patents have become a protection racket, in which the elite shake down the commoners. It isn't right and it isn't American. Benjamin Franklin said it best, over 200 years ago, "that as we enjoy great advantages from the inventions of others, we should be glad of an opportunity to serve others by any invention of ours, and this we should do freely and generously”.