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Samsung to pay Microsoft royalties for Android

While some say this makes Google's Motorola acquisition useless, I argue that these Android agreements are more about semantics than technology.

Microsoft has scored another giant patent licensing deal from yet another Android device maker. Samsung will pay Microsoft royalties as part of a broad-scope patent portfolio exchange, Microsoft announced today. Some say that this deal throws ice water on Google's attempts to provide patent protection for Android makers with its pending acquisition of Motorola Mobility.

Samsung Galaxy Tab

First things first. Microsoft wants you to know that Samsung is paying Microsoft for Android, though it doesn't want you to know how much said payment is, nor what other patents are being covered by these payments.

"Under the terms of the agreement, Microsoft will receive royalties for Samsung’s mobile phones and tablets running the Android mobile platform. In addition, the companies agreed to cooperate in the development and marketing of Windows Phone," Microsoft said in its press release.

As we all know by now, Microsoft is making a pretty penny off HTC for every Android device it ships. Microsoft reportedly receives $5 every time HTC sells an Android phone, leading some analysts to conclude that Microsoft makes more money from Android than from licensing its own Windows Phone 7 platform.

For those keeping score, this brings the total number of Android deals to eight, seven of which were signed in the last six months, plus at least two embedded Linux licensing deals signed in previous years -- and two Android lawsuits. In the past six months, Microsoft has signed Android deals with Acer, General Dynamics Itronix, Onkyo, Velocity Micro, ViewSonic and Wistron, according to Microsoft. It  obviously had previously signed one with HTC and now with Samsung.

This Samsung deal could be even more significant for Microsoft than HTC, believes patent industry watcher Florian Mueller. He argues that it throws water on Google's acquisition of Motorola Mobility as a method to protect Android device makers from the likes of Microsoft and Apple. Mueller writes:

"If Samsung truly believed that Google's acquisition of Motorola Mobility was going to be helpful to the Android ecosystem at large, it would have waited until that deal is closed before concluding the license agreement with Microsoft ... By taking a royalty-bearing license, Samsung recognizes that Android has intellectual property problems that must be resolved with license fees, and reduces to absurdity the idea that Google is going to be able to protect Android after the acquisition of Motorola Mobility."

I don't entirely agree, and I'll explain why in a second. But certainly, Mueller's viewpoint is the one that Microsoft wants Android device makers to believe. Microsoft lawyers Brad Smith and Horacio Gutierrez said about as much in a blog explaining today's news:

"Together with the license agreement signed last year with HTC, today’s agreement with Samsung means that the top two Android handset manufacturers in the United States have now acquired licenses to Microsoft’s patent portfolio. These two companies together accounted for more than half of all Android phones sold in the U.S. over the past year. That leaves Motorola Mobility, with which Microsoft is currently in litigation, as the only major Android smartphone manufacturer in the U.S. without a license. ... We recognize that some businesses and commentators – Google chief among them – have complained about the potential impact of patents on Android and software innovation. To them, we say this: look at today’s announcement. If industry leaders such as Samsung and HTC can enter into these agreements, doesn’t this provide a clear path forward?"

So Microsoft's point of view is that the path forward is to pay royalties to any company, such as itself, that can find some patent within its own massive portfolio with which to threaten Android device makers. Huh.

Just to illustrate the kind of "clear path forward" such a philosophy creates here is a graphic of lawsuits in the mobile market done by Reuters last month when Google announced the Motorola acquisition.

A clear path? I don't think so.

Now onto why I don't think Mueller is right to buy into Microsoft's vision ...

I suspect that these cross licensing agreements are constructed in such a way that Microsoft can claim it is being paid royalties for Android when the licensee is really getting access to some less disputed technology, such as ActiveSync -- or even something else entirely. Microsoft throws in a promise to indemnify Android and issues public claims that another Android device maker came crawling to it.

No one has ever actually seen these agreements. Microsoft doesn't spell them out to its shareholders on its IR site nor include more details in its SEC documents, as far as I can find (and I have looked and looked). The licensees -- in this case Samsung -- rarely issue their own statements about the agreements nor share the documents with their shareholders either.

Likewise, the press releases are always clear that these are broad cross-patent agreements, in which more technologies are covered than whatever intellectual property Microsoft believes applies to Android.

For example, Samsung did issue a press release two days ago about how Microsoft and Samsung were working together to embed Samsung's Green Memory (30 nanometer class DDR3 memory) into Microsoft’s virtualized data center products.

In other words, the two companies are working on lots of technologies together, of which the "cross-license the patent portfolios of both companies" as Microsoft puts it, would be beneficial Android or no Android. And, because Samsung already makes Windows Phones, it is perfectly possible that Microsoft sweetened the deal for Samsung by, for instance, drastically reducing the fees it charges for Windows Phone 7 licenses while charging more for licensees for technologies that Microsoft claims Android infringes, such as ActiveSync. (See: The Microsoft/Android war: Which patents are at stake?)

From legal documents filed last October in the ongoing case against Motorola and in March of this year against Barnes & Noble we now know which dozen-plus patents Microsoft claims Android devices violate. These do indeed include some related to Microsoft Exchange ActiveSync, which syncs email, calendar and contacts between a phone and PC. They also relate to technologies that displays signal strength and battery power on phones.

Would Samsung with its 28,000 U.S. patents, a maker of all sorts of memory technologies and one of the world's biggest mobile phone maker really need to go to Microsoft to license signal strength and battery management technologies?

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