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Web Technology > What’s the Deal behind Microsoft’s Patent Deals?
November 10, 2011

Microsoft continues to forge more and more patent licensing agreements with Android manufacturers with no signs of stopping; and with every new company buckling to Microsoft’s terms more experts are starting to speculate their reasons behind such deals. As of last month the multinational corporation’s agreements have covered more than half of all Android devices and 55% of Android Original Design Manufacturers. They have pushed patent deals with some of the industry’s largest, including Samsung, HTC and Acer and their latest agreement is in the works with China-based networking and telecommunications equipment provider Huawei, which might prove to be very lucrative for Microsoft. Mobiledia reports that the Chinese company, though not yet well-known in the US, is the world's second biggest network and telecom equipment supplier and is currently planning to expand to the US, Japan and India next year, and then worldwide in 2013. Should they make these deals final, Huawei will have to pay millions to the software maker in patent royalty fees as it expands worldwide.

The reason so many are agreeing to Microsoft’s deals despite such fees is primarily for protection. According to established technology website TechCrunch Microsoft has been “targeting” Android device manufacturers for months now, with contentions published on Mobiledia that “the Android OS infringes patents it owns” and that it would “bring lawsuits against companies unless they agree to property license settlements.” With Microsoft’s patent portfolio, companies pay a hefty fee but are protected from further litigation from Microsoft and perhaps even Apple.

What it’s Costing Manufacturers

In an article on Mobiledia, Huawei CMO Victor Xu insisted that his company could defend itself in a patent lawsuit, and that they have more than 65,000 patents and “enough instruments” to protect their interests. That may be true, but with their plans for expansion, a lawsuit would simply be unacceptable. Their “instruments” may not be enough to fight back Microsoft anyway, a fact most other phone manufacturing companies have come to terms with which is why majority of them have agreed to these settlements.

Mobiledia notes that these settlements have cost technology and web companies millions, with HTC paying Microsoft $5 for every Android device and Samsung paying $10 per phone, a bargain compared to the original $15 per phone demand that only got lowered after Samsung agreed to create a Windows phone. At this rate, it can be surmised that Microsoft will continue to earn more from Android than from Windows phone sales.

Various Speculations behind Deals

It’s clear that companies agreeing to Microsoft’s terms just want to safeguard against nasty lawsuits, but what about Microsoft? TechCrunch points out that aside from capitalising on the Android’s success, it is possible Microsoft is seeking to create a failsafe in case their newest venture falls flat. This venture is none other than Microsoft’s latest OS, the Windows Phone Mango, which the company is preparing to introduce to the US market. Whether or not Mango succeeds, TechCrunch believes Microsoft will continue to collect loyalties to ensure their “coffers” are “well padded”.

The reaction of Google chairman Eric Schmidt to these deals suggests something else entirely. When asked in a recent press conference about Microsoft’s infringement claims, Schmidt replied, “Microsoft is not telling the truth on this issue, and they are using tactics to scare people because they are scared of the success of Android.”

Microsoft’s Stand Cited by Web Design Publication

According to web design and technology publication MobileBeat, Microsoft appears dedicated to respecting intellectual property rights, and that is all. In a blog post Microsoft’s general counsel Brad Smith and deputy general counsel Horacio Gutierrez wrote, “Our agreements ensure respect and reasonable compensation for Microsoft’s inventions and patent portfolio. Equally important, they enable licensees to make use of our patented innovations on a long-term and stable basis.” Microsoft’s $4.5 billion spent in license patents from other companies further show how highly Microsoft respects intellectual property through responsible licensing, a quality that apparently, Microsoft also expects from other companies.

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