Microsoft will be happy, because either way it will win the fight for the smartphone market - because Google isn't taking anything away in the corporate server market
Microsoft is reportedly demanding $15 per Android handset sold by Samsung - and has other Android handset makers in its sights as it tries to extract the maximum value from the patents that it owns which it can argue cover mobile.
Previously it has reportedly got HTC to pay around $5 per handset, and earlier this week it announced that Wistron had "signed a patent agreement" for its "tablets, mobile phones, e-readers and other consumer devices running the Android or Chrome platform".
Fabulous quote: "We are pleased that Wistron is taking advantage of our industrywide licensing program, established to help companies address Android's IP issues," said Horacio Gutierrez, corporate vice president and deputy general counsel of Intellectual Property and Licensing at Microsoft. Yes, certainly glad.
If Microsoft can get that money from Samsung (though it's more likely that this is an opening salvo; Samsung is said to want to get it down to $10, which isn't much of a negotiating position) then Android is going to become the best earner Microsoft has in mobile.
Given that Samsung produced 19m smartphones in the first quarter, that would be $190m even at the $10 level; $285m at the $15 level.
There's also a lawsuit going on against Motorola, in which it's claiming that its Android handsets infringe, and with Barnes & Noble over its Nook e-reader (which uses Android).
And that's before Nokia - with which Microsoft has tied up a deal worth billions involving lots of intellectual property flowing back and forth - wades in with its patents against Android, because Nokia has got lots of patents in the mobile phone market. Microsoft would be able to litigate those for it quite successfully.
Even then Microsoft isn't really finished with the patent licensing thing, because you'll recall that it was part of the consortium last week which won the bid for the Nortel patents, which all relate to mobile. Those, it will be able to litigate once the transfer of ownership is complete (Canada seems to be cutting up a little rough about it).
And once that happens, then Android handset makers may really begin to wonder whether the game is worth the candle. If Windows Phone licence from Microsoft costs you around $25 (a guess), but the patent payments are costing you $24 per handset, is it really worth persisting? Especially when everyone else making Android handsets is suffering in the same way, and the more successful you are, the more it hurts to have to write the cheques.
In that case, Microsoft might come to them and suggest that perhaps they would like to put Windows Phone on their handsets instead. After all, Microsoft offers Windows Phone licencees indemnity against software patent lawsuits. That could potentially make Windows Phone a lot cheaper - if Nokia and Microsoft really start getting litigious (to say nothing of Apple, which is trying to put Samsung in a vice over "trade dress" and patent issues).
Note that Apple, which was a partner with Microsoft in buying the Nortel patents, and which concluded a settlement with Nokia last month, comes out looking relatively unscathed.
You might ask: where's Google? On the losing side of that Nortel patent bid (eating humble pi), and bereft of the sort of patent portfolio that it needs to really compete and fend off Microsoft. It's having enough trouble fighting off Oracle, which now owns Sun, and which is annoyed about what it seems as infringement of Java.
But for Microsoft, Android is starting to look like a win-win. If Android prevails, it gets lots of money - and there's no obvious sign in big corporations of them tearing out Microsoft Exchange for their mail servers, so it's safe there (and keeps getting the income from there). If Windows Phone gets the updraft from exhausted handset makers, it wins big through market share.
It's a big game, and it definitely isn't over yet.
A nice example of how the patents game plays out comes from the Forbes blog (which also has some good reading on this): "In the 1980s, attorney Gary Reback was working at Sun Microsystems, then a young technology startup. A pack of IBM employees in blue suits showed up at Sun headquarters seeking royalties for 7 patents that IBM claimed Sun had infringed. The Sun employees, having examined the patents, patiently explained that six of the seven patents were likely invalid, and Sun clearly hadn't infringed the seventh. Reback explains what happened next in this classic Forbes article:"
An awkward silence ensued. The blue suits did not even confer among themselves. They just sat there, stonelike. Finally, the chief suit responded. "OK," he said, "maybe you don't infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?" After a modest bit of negotiation, Sun cut IBM a check, and the blue suits went to the next company on their hit list.
Substitute Microsoft for IBM, and any handset maker for Sun, and you have the picture.
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