How Microsoft Makes Use of Patent System and Profits from Android Licensing Fees

Android has, no doubt, been exceptionally the best among all other platforms and one of the greatest successes of Google. With 38.1 percent market share in the smartphone industry, it certainly has retained it’s top position leaving behind Apple’s iOS and RIM’s BlackBerry at second and third positions respectively.

Powered by Google’s Android, millions of smartphones have been sold until now. That makes Andorid the number one smartphone OS in the world and Google aims to generate $1.3 billion via mobile advertising revenue by 2012. Although Google is generating big bucks and Android is marking a huge success in the smartphone industry, several actions taken by Oracle and Microsoft for patent infringements could damage the OS’s appeal. Currently, Oracle and Google are tied up in an ongoing lawsuit over Android’s infringement on Java related patents.

How Microsoft Plays with the Patent System and Profits from Android Licensing Fees

However, Microsoft feels a little more obnoxious on how Android is marking it’s success. Microsoft has been demanding royalty payments from various companies who have built smartphones on Google’s Android operating system and has generated huge revenue through it. That’s because, in the last four months, Microsoft has received 700 patents and has totally  piled up  over 18,000 patents which were granted within the last decade while Google has been granted only 700 patents since it was born 13-years back.

With this large number of patents that they hold, Microsoft is targeting and taking aggressive legal actions against companies that are manufacturing and selling smartphone that run Android OS, because Microsoft holds certain patents that are practically used in the code.

Timothy Lee explains that Android has approximately 10 million lines of code in it and auditing  these  many lines of code for consenting with  the 18,000 patents of Microsoft is practically impossible.

Auditing 10 million lines of code for compliance with 18,000 patents is an impossible task—especially because the meaning of a patent’s claims are often not clear until after they have been litigated. Most Silicon Valley companies don’t even try to avoid infringing patents. They just ignore them and hope they’ll be able to afford good lawyers when the inevitable lawsuits arrive.

Few days back, it was reported that Microsoft struck a deal with Samsung to pay $15 for every Android smartphone sold. Earlier, Microsoft had signed a deal with HTC due to the same reasons. HTC was left with no options but to agree and pay Microsoft $5 for every Android phone sold in exchange for the use of the patented technology.

Microsoft has signed similar deals with several smaller companies and for an undisclosed amount. Last year, Microsoft sued Motorola over Android patent infringements and demonstrated that Android could be costlier than Windows 7.

Even though Microsoft has nothing to do with Android’s  design, marketing or manufacturing of Android  smartphone, they are making millions out of it. Microsoft is currently making more money from Android patent settlements than their own platform, Windows 7.

HTC has sold over 30 million Android devices by which Microsoft generated $150 million. Microsoft’s Windows 7 license costs $15 and until now they has managed to sell over 2 million units which got them $30 million. And that’s just HTC alone. Considering Samsung, Motorola and several other companies, Microsoft could be generating on an average of over $900 million per year in revenue. This is seriously good business for Microsoft. Microsoft can just discontinue Windows 7 and rely on the revenue they get from the patent settlements for years.

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Joel Fernandes

Joel Fernandes (G+) is a tech enthusiast and a social media blogger. During his leisure time, he enjoys taking photographs, and photography is one of his most loved hobbies. You can find some of his photos on Flickr. He does a little of web coding, and maintains a tech blog of his own - Techo Latte. Joel is currently pursuing his Masters in Computer Application from Bangalore, India. You can get in touch with him on Twitter - @joelfernandes, or visit his Facebook Profile for more information.