Microsoft gets HTC to pay royalties over Android patent threats

Microsoft says Android itself violates its patents, not just because Android stems from Linux

Yesterday, Microsoft announced that it would be collecting royalties from HTC for its intellectual property used in Android phones. This marks Microsoft's first public statement that singles out Android particularly as an offender. Microsoft is not just lumping in Android as part of its broader claims against Linux generally, sources say.

In talking to folks in the know, the story I've been told is that Microsoft approached HTC and said it would much rather license than litigate, but if HTC didn't want to cough up the royalties, it would find itself battling Microsoft in court, just like it is now battling Apple. What's a poor device manufacturer to do? HTC bowed and agreed to pay license fees and sources say it was a one-way agreement. Microsoft isn't licensing any of HTC's patent portfolio in return. Microsoft is not being specific as to which features, functionality it believes Android and HTC violates. Its statement says:

"Microsoft Corp. and HTC Corp. have signed a patent agreement that provides broad coverage under Microsoft’s patent portfolio for HTC’s mobile phones running the Android mobile platform. Under the terms of the agreement, Microsoft will receive royalties from HTC."

HTC manufacturers Android phones like the Hero and Dream. And more importantly, it makes Google's own Nexus One. However, Microsoft's successful settlement with HTC hardly punches Android too deep in the stomach. Motorola's Droid's has the lion's share of the Android market, at 32 per cent, according to March figures released by AdMob.

Will Microsoft be successful at getting royalties from Motorola, Samsung and the other manufacturers? More importantly, will Microsoft's success with HTC have implications for the young-but-promising Android netbook market? No doubt Microsoft hopes so.

Microsoft officials say that HTC could indeed be only the beginning. Horacio Gutierrez, corporate vice president and deputy general counsel of Intellectual Property and Licensing at Microsoft told Network World in an statement via e-mail, "Microsoft has a decades-long record of investment in software platforms. As a result, we have built a significant patent portfolio in this field, and we have a responsibility to our customers, partners, and shareholders to ensure that competitors do not free ride on our innovations.  We have also consistently taken a proactive approach to licensing to resolve IP infringement by other companies, and have been talking with several device manufacturers to address our concerns relative to the Android mobile platform." 

But royaltyagreements from others remain to be seen. HTC could be a unique case, rather than a precedent. It is particularly vulnerable because of its fight against Apple and also because HTC is the world's largest maker of Windows smartphones. Microsoft has leverage with HTC that isn't duplicated elsewhere. So far, however, HTC's lawsuit with Apple hasn't hurt its smartphone sales any. In all likelihood, this agreement with Microsoft won't hurt HTC's Android either.

In a strange way, would the Android market actually benefit if Microsoft feels it could profit from widespread licensing agreements?

Posted by Julie Bort

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