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7/7/2011
11:55 PM
Ed Hansberry
Ed Hansberry
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Microsoft Squeezes Android With Patent Fees

A pending agreement with Samsung could net Microsoft about as much per Android handset shipped as it gets for a Windows Phone device.

Microsoft has been making agreements with companies to license technology it owns the patents for that are in the Android platform. Microsoft first made big news in early 2010 when it reached an agreement with HTC where the phone maker pays Microsoft $5 for every Android phone it ships. Now Microsoft is trying to get $15 for each handset that Samsung ships. That has to be within a few dollars for what Microsoft charges for a Windows Phone license.

Android is open source, which is part of its appeal. It is developed by Google, which charges no license fee. As such, those that use Android in their devices do so at their own risk. It is one of the downsides to open source software. When you pay a license fee to a company for software they developed, the license generally indemnifies the licensee for any patent infringement issues.

Put simply, when a manufacturer uses Android and gets served with a patent infringement suit, it needs to call the lawyers and prepare a defense. When a manufacturer uses a platform it pays for, such as Windows Phone, and it gets served with a suit, it just needs to forward the suit to the licensor, or in this case, Microsoft. It is Microsoft's problem, not the licensee.

Right now, Microsoft is going after Android in two ways. First, it is selling licenses that have a key selling point: Whatever the fee is, Microsoft essentially guarantees that is the only fee the manufacturer will ever pay for that handset. Second, to show how risky it is to use an open source platform that is "free," it is suing manufacturers to show that the costs are potentially limited only by how many hours Microsoft's lawyers are willing to put in on a given case.

Clever business model isn't it?

The Guardian is reporting that Samsung is trying to negotiate the fee down from $15 to $10, which speaks volumes in where it thinks it stands. With HTC already in an agreement with Microsoft and Samsung about to enter into one, it doesn't bode well for the other Android players.

It might get worse too. Microsoft and Nokia signed an agreement where they can use each other's patents freely. Nokia has a ton of patents and, chances are, Android infringes on more than one of them. Microsoft's attorneys are probably going over Nokia's patents with a fine-toothed comb to see where Android is vulnerable.

Before it is all over, HTC's $5 fee and Samsung's $10-$15 fee may look like a bargain. And where is Google in all of this while its partners are being bombarded with paper? Hear those crickets?

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