android-1
1 August 2013Patents

Counting the Android cash

It reads like a Who’s Who of the world’s technology heavyweights: Samsung, HTC and LG. Nikon, Hon Hai and ZTE. The list goes on.

Twenty companies have inked deals with Microsoft under its Android patent licensing programme, the tech giant claiming that 80 percent of Android smartphones sold in the US and “a majority” of those sold worldwide fall under licensing agreements. Depending on the source of your information, Microsoft will earn anywhere between $430 million and $3.4 billion from the deals in 2013 alone.

Android, the operating system that powered about half a billion smartphones, tablets and PCs in 2012 and which is expected to support around 1.5 billion by 2017, is a huge cash cow for Microsoft. It may be free to use and Google-owned, but Android technology reads on Microsoft’s patents, allowing it to cut deals with Android device makers who it believes infringes the patents.

Using Android patents more as a shield than a sword, Microsoft’s approach to enforcement may be best summed up by Horacio Gutierrez, its deputy general counsel, who said that “Microsoft is not a company that pursues litigation lightly”.

“Microsoft is very savvy and has taken a more business view of IP,” says Colleen Chien, associate professor of law at the Santa Clara University School of Law. “They have been ahead of the curve for years using IP strategically and have used personnel from IBM, which has had success with patent licensing.”

The roots of Microsoft’s licensing success, says Norman van Treek, attorney at law firm Sheldon Mak & Anderson PC, were sown in the 1980s and 1990s, when it was “on the wrong end of patent lawsuits for a long time”.

Since then, he says, Microsoft has built up a portfolio of defensive patents, licensing them to other companies or collecting enough of them into pools before approaching rivals and saying “it’s cheaper for you not to fight in court”.

He strongly believes that Microsoft’s business model clearly fits the term ‘patent troll’ due to its use of “anonymous patents for years to threaten both the open source community and now anyone producing an Android device”.

Indeed, one of the intriguing things around Microsoft’s successful licensing approach is the mystery surrounding its treasure chest of patents. In the few cases the company has litigated, details have emerged—some of the patents are believed to relate to synchronisation, file storage and security—but not enough to provide a clear picture of what the company is sitting on.

Microsoft has vowed to be more transparent about its records—creating a patent tracker tool allowing its 38,700 patents to be searched—but finding the Android patents would be like finding a needle in a haystack.

“They complain bitterly about non-practising entities (NPEs) and yet they have bought patents and done the same thing,” van Treek says.

The names ‘NPE’, ‘patent troll’ and, increasingly commonly, ‘patent assertion entity (PAE)’, however, are highly charged terms in patent circles and thrown around too easily in the current anti-troll climate. They are also unclear, particularly PAE, a description which could be used for just about any company litigating its patents, only muddying the waters in a fierce debate.

“Microsoft does not fit my definition of a patent troll,” says Bob Stoll, partner at law firm Drinker Biddle. “I can see where people define it more broadly—and some people say producing companies are also sometimes trolls. But I believe that companies that assert patents to protect their products are not patent trolls. I consider a patent troll one that does not produce anything and one that only collects patents in order to assert them.”

Chien adds: “No, they are still making products. Maybe they are asserting patents in a way people don’t like but the money is going back to the products.”

Microsoft v Google

In a rare show of Microsoft-led litigation, the company has targeted Motorola Mobility in countries including the US and Germany. The battle has induced more navel-gazing than it might have done had Google not paid $12.5 billion for Motorola in 2011, acquiring 17,000 patents in the process.

This is really a war between Microsoft and Google, and it is clear who has triumphed so far: Microsoft has won an import ban at the International Trade Commission and several German injunctions against Motorola’s devices. For Motorola, which has fought back and asserted patents against Microsoft, there is a big zero in the victory column.

On the Foss Patents blog, German patent consultant Florian Müller is clear about what Google’s record means: “Google won’t be able to address Android’s wide-scale patent infringement issues through litigation over Motorola’s patents, which have given it no real leverage so far and probably never will.

“The fact that 20 royalty-bearing Android-related patent licence deals have been announced ... is reflective of the complete loss of faith of the wider Android ecosystem in Google’s ability to deter third-party patent holders such as Apple, Microsoft and Nokia from enforcing their rights. Android device makers have had zero benefit—precisely zero—from Google's $12.5 billion Motorola deal.

“Just like Google’s shareholders, Google mistakenly thought that anybody who owns tens of thousands of patents in this industry would be able to settle any infringement issues, no matter their scale, through cross-licence agreements that involve little or no money. This doesn’t work.

“Licensing, however, does work.”

The question on many lawyers’ lips is whether Motorola will be the next big Android player to sit down and shake hands with Microsoft. Following the most recent deal, with ZTE in April 2013, lawyers say Microsoft made its intentions clear through a thinly-veiled warning to Motorola (and others).

Microsoft’s statement at the time read: “We have worked for multiple years to reach an amicable solution with the few global companies who have yet to take a licence, but so far they have been unwilling to address these issues in a fair manner. We’d prefer to consider these companies licensing partners and remain hopeful they can join the rest of the industry in the near future.”

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Patents
21 February 2014   Microsoft has struck a deal with electronics company Hop-on that allows it to license patents reading on Android and Chrome technology.