Microsoft and Canon are taking their alliance to the next level. A broad patent cross-licensing agreement will alllow either company to use patents filed by the other.

Microsoft and Canon have some of the largest and most valuable patent portfolios in the world. In 2012 alone, Microsoft filed over 2,000 patents, and Canon over 3,000. Both companies were ranked in the top five companies in their industry according to IEEE Spectrum's Patent Power 2013 ranking, and Microsoft was No. 1 in computer software.

"This collaborative approach with Canon allows us to deliver inventive technologies that benefit consumers around the world," says Microsoft's intellectual property manager Nick Psyhogeosin in a statement. "Microsoft believes cooperative licensing is an effective way to accelerate innovation while reducing patent disputes."

With Microsoft's recent purchase of the hardware division of Nokia, its motivation for acquiring access to Canon patents is obvious. Canon is a world leader in imaging technology, and putting better cameras into Windows phones could help them gain ground against far more popular Android and iOS devices. What's not entirely clear is what Canon gets out of the deal. The company largely sticks to imaging technology, and thus would seem to have little use for Microsoft's  mobile or software patents. However, there are a few possibilities.

Canon could be looking to use technology from Microsoft's smartphones to make smaller and lighter cameras without compromising quality. Display technology used for phones could also benefit digital camera screens. Canon could also want to somehow integrate future printers and copiers with Microsoft Office. Like his counterpart at Microsoft, Canon's intellectual property manager Hideki Sanatake was vague in his description of the reason for the deal.

"This agreement is a natural extension of our longstanding relationship with Microsoft and commitment to developing innovative technologies," says Sanatake in the statement.

Microsoft began entering into intellectual property licensing agreements in December 2003. Since then the company has signed more than 1,100 agreements, and provided numerous companies with access to Microsoft patents and technology. Microsoft is continuing to expand the range of patents it has access to, which could help as it expands further into hardware with Xbox consoles, Surface tablets and Nokia smartphones.

Microsoft has said that under its command the next line of Nokia phones will prominently feature devices targeted at the low-end smartphone market. By making patent licensing deals with companies like Canon, Microsoft can cut down on expensive research and development and focus on cutting costs to make the most powerful and feature-rich smartphones available at lower price points.

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