Experimental Microsoft technology that lets people manipulate virtual objects in space using hand gestures could be coming soon to an auto dealer, trade show, or Home Depot near you.

Microsoft disclosed Tuesday night that it has licensed the technology behind "TouchLight," an interactive display system created in its Redmond, Wash., research lab, to Eon Reality, an Irvine, Calif., company that sells computer systems for visualizing industrial and consumer products to customers including Airbus, Boeing, Intel, and Siemens.

Terms of the deal weren't disclosed, but a Microsoft executive said Eon plans to deliver a product based on TouchLight by the end of the year, and Microsoft will earn royalties on any sales. Eon's technology license includes both patents and trade secrets, according to a spokesperson for Microsoft.

The agreement is part of a year-old licensing program called "IP Ventures," in which Microsoft licenses technology from its labs to startups, in exchange for cash, royalties, or equity stakes. Microsoft has completed about 15 such deals so far, according to David Harnett, senior director of Microsoft's IP Ventures group. Others have included software for traffic-prediction and photo-editing.

Microsoft spends about $7 billion annually on research and development, and maintains one of the computer industry's largest basic research labs. But it can't commercialize everything it creates. The IP Ventures program is an example of a trend toward "open innovation," in which companies exchange or license intellectual property to draw external ideas and talent into their orbit, said Henry Chesbrough, a professor at the University of California, Berkeley's Haas School of Business, and author of a book on intellectual property. His remarks came during a press conference at Microsoft's Mountain View, Calif., office on Wednesday.

The approach can lower companies' cost of conducting research by generating returns on projects that don't make it into their product pipelines, and attract venture capital to technology once it moves out of the research lab. "VCs don't pay for research—they pay for development," Chesbrough said. He added that it is to Microsoft's credit that the company is trying out new ways of commercializing technology while its historic approaches are still successful. "Microsoft is experimenting with business models," he said.

Microsoft has sharply stepped up its efforts to amass a portfolio of intellectual property during the past three years. The company holds more than 5,000 patents, up from about 2,300 in 2002. Microsoft three years ago hired Marshall Phelps, a longtime intellectual property lawyer at IBM, as its head of IP licensing, and under Phelps has built a larger portfolio of in-house and licensed technology that give the company more freedom to build its products with technologies developed elsewhere. Entering into more cross-licensing deals has reduced Microsoft's risk of infringing on other companies' intellectual property.

Under the Eon deal, Microsoft licensed out a system called TouchLight that was created by Andy Wilson, a Microsoft researcher. During a demonstration of the system at a computer graphics conference last year, Wilson showed the ability for TouchLight, which uses a pair of cameras to sense gestures, to let a user manipulate objects such as a map of Italy in virtual space, at eye level. During the next few months, Wilson plans to work with Eon to create a software development kit for TouchLight that would let Eon's programmers customize the system for its clients.

Microsoft's Harnett says Eon will initially target the market for advertisements at trade shows with the product it develops based on TouchLight. Eon also plans to develop marketing displays for retailers such as The Home Depot and Lowe's and to target auto dealerships' display windows. Microsoft and Eon say the technology could have applications for commercial and military airplanes.

This story was modified on July 20.