Microsoft Now Receives Royalties On Over Half Of All Android Sales

Microsoft's general counsel and deputy general counsel (Brad Smith and Horacio Gutierrez) have co-written a new blog entry detailing Microsoft's latest licensing achievement. Yesterday's broad cross-licensing agreement with Compal Electronics means that Microsoft has now negotiated licensing terms with the ODMs (original Device Manufacturers) that build over half the Android devices on the market.

The team writes: "Amidst continuing clamor about uncertainty and litigation relating to smartphone patents, we're putting in place a series of agreements that are reasonable and fair to both sides. 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."

At present, Microsoft has agreements in place with 55 percent of ODMs and 53 percent of US handset manufacturers. Of the latter group, Samsung and HTC have 23 percent and 29 percent of the market. The pair claim: "For those who continue to protest that the smartphone patent thicket is too difficult to navigate, it's past time to wake up. As Microsoft has entered new markets from the enterprise to the Xbox, we’ve put together comprehensive licensing programs that address not only our own needs but the needs of our customers and partners as well. As our recent agreements clearly show, Android handset manufacturers are now doing the same thing. Ultimately, that's a good path for everyone." (emphasis added).

The unnamed target of the blog post is, of course, Google. In early August, David Drummond, Google's Chief Legal Officer, struck out at Apple, Microsoft, and Oracle, claiming that the three were waging a "hostile, organized campaign against Android." The three companies, according to Drummond, are "attempting to make it more expensive for phone manufacturers to license Android (which we provide free of charge) than Windows Phone 7." Drummond further claims that "our competitors want to impose a “tax” for these dubious patents that makes Android devices more expensive for consumers."

Certainly it's true that Steve Jobs wanted to bury Android for personal reasons—but Drummond's attempt to paint Google as the poor victim of bullies needs a reality check. All of the company's claims about providing Android "for free" hide a nasty flip side:  Google provides no indemnification for Android patent infringements.Indemnification is a legal guarantee of protection. In this context, it guarantees that if a licensed product is found to violate the patents of another company, the company providing the license will cover the infringement costs. Apple, for example, indemnifies app developers who build software for the iPhone. Patent trolls sometimes sue small developers anyway, hoping that they'll choose to settle rather than bear the cost of fighting the litigation, but indemnification allows small companies/developers to risk supporting a product, knowing that they've got tag-team protection in the event that someone comes banging on the door.  

Apple indemnifies iOS and OS X. Microsoft indemnifies Windows and Windows Phone 7. Google... does no such thing. A significant part of the reason Samsung and HTC are hanging in the wind to begin with is that Google avoided the cost of providing indemnity by claiming that Android is "free," and left the task of negotiating licensing in the hands of individual manufacturers. This is why Amazon went to such great lengths to develop its own version of Android for the Kindle Fire, and why you don't hear the company talking up its tablet's heritage.

It's all well and good to call for patent reform, and we're not fans of the way software patents are handled in the US. That doesn't change the fact that there are rules to how the game is played. It'd be one thing if Google was calling for patent reform while protecting the companies who've done the heavy lifting to make Android popular. It hasn't. One of the unspoken reasurances of indemnification is that offering it to your customers is perceived as a sign of good faith that due diligence has been properly conducted. Promising indemnity without doing so could be murderously expensive even by the standards of the largest companies. Google's unwillingness to do sends the message, intentionally or not, that the company knows darn well that Android infringes other patents and isn't foolish enough to actually offer to pay for the liability of doing so.

It's easy to paint Apple, Microsoft, and Oracle as the villains of the piece, but it's not that simple a situation. The plight of Samsung and HTC is at least as much Google's fault as it is the fault of the other three.