Microsoft could make as much from Android as Google, if it signs licensing deals with all manufacturers

Microsoft could make as much from Android as Google, if it signs licensing deals with all manufacturers
Microsoft is currently wrangling with Android cell phone makers to pay up licensing fees for publicly unknown features or components of Google's mobile OS, for which it probably has filed patents since the dawn of WinMo. Its most popular licensee is HTC, which coughs up $5 per device to Microsoft, and it also signed up Velocity Micro and General Dynamics for the noble cause of padding its bottomline.

The big win, however, will come with Samsung, which might end up paying even more, and, considering it is the world's second largest cell phone manufacturer, this should result in a good chunk of money for Microsoft. Currently Redmond is haggling with Samsung over the terms of the licensing deal - it wants $15 apiece, while Samsung is reportedly leaning towards $10. 

Considering that Microsoft's mobile OS licenses, both for Windows Mobile and now Windows Phone 7, cost about $15, the fact that it is asking for similar amount from Android handset makers is nothing short of astonishing, but that's the patent game in the US for you. A quick napkin calculation shows that with 500 000 Android devices activated daily, if we are to believe Google, and $5 per licence payable to Microsoft, Redmond could be raking in over $900 million annually from Android's exploding popularity.

It pays well to be one of the first, like with WinMo, and we are sure Microsoft won't mind carrying the label "patent troll" for that amount of cash rolling in. Coupled with the licenses from Windows Phone, which might rise parabolically next year when Nokia outs a portfolio of WP7 devices, and Microsoft could very well have a successful mobile business, not to mention the upcoming Windows 8 tablets.

Now let's move to Google. It is being cornered with patent disputes for various Android features or components. Despite being the first to bid for the bankrupt Nortel's wireless patents, which could have shielded it from Android-related lawsuits, it lost to a consortium called Rockstar Bidco. In the last minute this funny company turned out to be none other but Microsoft, plus Apple, RIM and four more wireless companies, which jointly paid $4.5 billion for Nortel's intellectual property. Apple and Microsoft seem to have won the lion's share of Nortel's patents, leaving Google, or, to be more precise, Android manufacturers, largely at the mercy of the courts regarding licensing deals like the one with Microsoft, or various infringements.

Google, in its turn, tries to keep Android free and open, and hopes to make money from search and advertising on the platform, which is its core business. Rumors are that it is making about $1 billion a year currently from these activities on Android, which is roughly the same Microsoft would make, if it strong-arms all Android manufacturers to pony up for its mobile patents, like it already did with HTC, and is on its way to do with Samsung. 

Ironic? You bet. What actually concerns us with the whole litigation trend in the mobile industry, is that these costs might ultimately be passed onto us, as consumers, and Android's "free and open" concept could greatly suffer in the process. Google, however, has managed to come out dry from the many similar pressures regulators or competitors put on it, so we are hoping it will find a way to eventually subside this Android witch-hunting trend.

via GigaOM

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27 Comments

1. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

The patent license costsvwill definitely be passed along to customers. Unless Google is able to re-ingineer infringing components, the manufacturers will have limited options other than to cut a deal for the best terms they can get. HTC is looking to be quite the smart one, with a $5/handset deal....

3. snowgator

Posts: 3621; Member since: Jan 19, 2011

Solid point. Have never heard what part of Android infringes on the patents. They may be able to work around the violations. Google may be large enough though to not have to care, as handsets are so dependant on them that Google can say "take it or leave it" if they want.

7. corps1089

Posts: 492; Member since: Jan 20, 2010

MS has Manufacturing partner licensing deals going back a ways & sued also:http://www.phonearena.com/news/Microsoft-looking-to-mobile-patents-for-revenue_id15002[Microsoft is looking to their patents to provide increased revenue. Microsoft is one of the largest owners of smartphone patents, and would stand to gain a great deal by increasing their patent agreements with manufacturers.]http://www.phonearena.com/news/Microsoft-collects-licensing-fees-from-two-small-Android-manufacturers_id19977[Velocity Micro and General Dynamics, each cut a check payable to the order of Microsoft to take care of licensing fees that allow the pair to use the Android OS. Even though Android is considered Google's baby-and rightly so-the gang at Redmond still have some patents involved in the software]http://www.phonearena.com/news/Microsoft-files-suit-against-Motorola-claims-patent-infringement_id13690[The Redmond based firm claims that Motorola infringed on 9 of Microsoft's patents relating to certain functions found in the former's Android phones. The software manufacturer claims in a press release that these functions are "essential to the smartphone user experience" and include "synchronizing email, calendars and contacts, scheduling meetings, and notifying applications of changes in signal strength and battery power."]Linux based Android & Google has already lost a lawsuit to a patent holder:http://www.phonearena.com/news/Google-loses-Linux-patent-case-pays-5-million-fine_id18368[jury has found in favor of Bedrock Computer Technologies in a patent infringement case against Google. The plaintiffs claimed that Google had improperly used the Linux kernel in its servers and Android smartphones]Oracle claiming Java patent infringements and straight up copied code:http://www.phonearena.com/news/Oracle-claims-Google-directly-copied-their-Java-code_id14258[Oracle says that "approximately one third of Android's Application Programmer Interface (API) packages [are] derivative of Oracle's copyrighted Java API packages."The statement goes on to name Java method and class names, definitions, organization, parameters, the organization of Java class libraries, as well as the content and organization of Java's documentation as infringed copyrights.Oracle's suit is now so bold as to claim that "In at least several instances, Android computer program code also was directly copied from copyrighted Oracle America code."]ORacle already won using these same patents vs.SAPhttp://www.phonearena.com/news/Oracle-claims-billions-in-damages-from-Googles-use-of-Java-in-Android-determined-to-get-them_id19667[Oracle holds thousands of Java-related patterns. Actually, its pattern portfolio increased by 7,000 after the company acquired Sun. In addition, Oracle has a strong legal team including law firms which have won the company $1.3 billions in the SAP lawsuit.]]

22. zee112 unregistered

HTC has been a WinMo partner since its early WinCE days, so Microsoft went easy on them with the $5 deal. Samsung should not have to pay triple!! MS has had a decade+ to make a smart phone customer want to buy! Why hasn't MS sued Apple over these same patents? Antitrust anyone?

2. snowgator

Posts: 3621; Member since: Jan 19, 2011

Google will be fine. Microsoft isn't going after them- they make no money off the patents they use. Like was mentioned, Google provides Android OS for free to all handset makers. The money they make off of the search is where their billion or so (heard they make more on other tech sites, but a billion for this story is fine.) is protected from any litigation. As all these cell phone manufacterers are paying without a legal fight, than we can draw 2 conclusions: 1) Microsoft is completely in the right, and owns those patents. 2) Handset makers are STILL making huge profits off of the free OS from Google. Otherwise, they would stop using it to avoid the patent violations. From what I read on WP central, Samsung is willing to pay, and Microsoft is willing to take less, for a larger commitment to WP7 products being supported by Samsung. Ahhh, to be bargaining from a position of strength.....

23. zee112 unregistered

That sounds like an anti-competitive practice to me: "I'll charge you less than the other guy if you agree to buy MY products as well."

24. langov3 unregistered

No, that's what you call a trade agreement.

4. taco50

Posts: 5506; Member since: Oct 08, 2009

This would help windows phones also since a big attraction for manufacturers is android being free. It looks like it will cost them close to what they pay for windows sw now. It will help microsofts revenues and boost sales of their phones probably.

5. ås unregistered

Hah good for Nokia choosing MS and not Android

6. rican

Posts: 132; Member since: Jul 02, 2011

nokia probably bargained with microsoft knowing this was coming

8. Whateverman

Posts: 3295; Member since: May 17, 2009

I just don't get how they can charge 3 times the amount for Samsung to use the same OS that HTC is using. Its not like Samsung is usinig more licenced features than HTC. Well, MS isn't making much with WP7 just yet, so they have to get it from somewhere I guess.

14. snowgator

Posts: 3621; Member since: Jan 19, 2011

Notice that a good 90% of the W7 devices out there are HTC produced? Plus that, it wasn't until last year that HTC put out a Droid device. (Don't shoot me if I am mistaken. I sure haven't found one earlier.) HTC was all Windows Mobile before that. HTC and Microsoft have a great working relationship. I wouldn't be surprised that if Nokia stumbles at all that HTC will release the first Mango device. Samsung? Not so much. The Focus is nice, but the relationship ain't there.

18. corps1089

Posts: 492; Member since: Jan 20, 2010

HTC was the premier WIndows Mobile manufacturer back in the day and the partnership was very good for both sides, it makes sense that HTC and MS would agree to a mutually beneficial deal while Samsung doesn't get the same preferential treatment...

20. unknown323 unregistered

HTC were the makers of the very first android device in 2008. HTC dream (G1) ring a bell?

25. corps1089

Posts: 492; Member since: Jan 20, 2010

Was it even branded as a HTC phone or just as a Google phone?

21. Goody Bear unregistered

HTC made the very first Android phone. G1 on T-Mobile. Nobody is shooting you, just a correction. Alot of HTC's first devices didn't carry branding, they were a notorious "submanufacturer" for carriers. Now, they're prime-time and paying Gates' pension.

9. The_Miz

Posts: 1496; Member since: Apr 06, 2011

I just don't get why they don't just tell Microsoft to go screw themselves. They are doing nothing but trying to bully companies into these fees and such just because they're too lazy to improve their own crappy products and want to take the easy way out.

10. protozeloz

Posts: 5396; Member since: Sep 16, 2010

The deal is that they hold certain patterns that are used by Android manufacturers so they want money for them, Android has become a success, they are just saying, you used this the same way we did, we have a part of your success we want some $$$ for it, what companies have to do is find work arounds to do stuff to avoid fees. But while they work on them they have to pay… its why I think Google hates those patterns, any company takes your crappy idea and makes it better, hits a success and you want loads of cash for an idea that was gathering dust on your desk or not selling,

12. Whateverman

Posts: 3295; Member since: May 17, 2009

@ the Miz. I agree.

15. snowgator

Posts: 3621; Member since: Jan 19, 2011

Yep, Miz. Just ignore all the court cases that ruled in favor of Microsoft. That will end up much better for manufacturers.

26. corps1089

Posts: 492; Member since: Jan 20, 2010

And they did improve thier own products, they put considerable time effort, and money into WP7.

11. ArmageddonX

Posts: 96; Member since: May 11, 2011

Microsoft & Google should have worked together to integrate Android with Windows instead of Microsoft doing the whole Windows Mobile thing... We don't need another Mobile OS when the market is over-saturated as it is now...

13. stealthd unregistered

I'd rather have more platform choices than just more Android choices personally.

16. snowgator

Posts: 3621; Member since: Jan 19, 2011

3 - 4 OS systems can be supported in this market. Smartphone growth will continue on the upswing for at least the next couple years. I, also, really enjoy having options.

19. corps1089

Posts: 492; Member since: Jan 20, 2010

@ ArmageddonXYou mean "instead of doing the whole Windows Phone thing" versus "Windows Mobile thing". Windows Mobile was out [and on its way out] well before Android was announced.besides, Google decided to go open source and Linux as a core design philosophy for Android and MS would not have gone for that...

17. M$FT unregistered

One interesting thing is, if android is indeed free OS then why do android handsets cost so much? Rave all you want about android being superior, but it was supposed to bring the costs of handsets down, not at par with handsets running closed OS's. If it's one of those business tactics "charge what market will bear" then pay up to the almighty M$FT!!!

27. Andriodian unregistered

one word, Hardware. See when a manufacturer dose not have to include paying for an OS when designing a new phone, they make better hardware. like Super AMOLED and 3d phones. I have not seen a 1ghz WP7 phone for less than 300W/ a contract. not saying android is better, just saying android phones tend to have better hardware before WP7/WMP.

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