When Samsung Electronics blinked last week, Microsoft scored another win in its campaign to strike patent-licensing deals with the makers of smartphones and tablets using Google’s Android software.
Samsung, the largest maker of Android products, will pay Microsoft an undisclosed fee for every smartphone and tablet it makes that uses Google’s free operating system. Previously, Taiwan’s HTC, the second-largest maker of phones using Android, struck a patent-licensing deal with Microsoft.
Free, it seems, has its costs.
Google sees Microsoft as the ringleader in a shady cabal of competitors – “a hostile, organized campaign against Android by Microsoft, Oracle, Apple and other companies, waged through bogus patents,” David Drummond, Google’s chief legal officer, wrote in a blog post.
Not surprisingly, Microsoft views things differently. In an interview last Friday, Brad Smith, the company’s general counsel, said what is happening with patents in the smartphone market is merely a rerun of similar episodes in the past.
When Microsoft moved beyond personal computers into corporate, data-center computing, it licensed technology from its predecessors in the business market. In the last decade, Mr. Smith said, Microsoft has paid $4.5 billion in licensing fees to companies including I.B.M., Hewlett-Packard, Sun Microsystems (now part of Oracle), Cisco and Silicon Graphics.
“That’s the way the industry works and has always worked,” Mr. Smith said.
The rise of the smartphone has added a new layer of patent licenses for the cellphone business. The first layer – or “stack” of technology – was the basic radio technology for cellular communication.
The largest patent beneficiary in the radio layer is the leader in that technology, Qualcomm. The company collects about $20 on every smartphone produced, Mr. Smith estimates.
The second layer was media technology, allowing music and video to play on modern smartphones. Those patent-licensing fees are about $3 to $5 a phone, and go to a variety of companies, Mr. Smith said.
The next layer, he said, is the software layer – the computing operating systems that animate smartphones. The companies that have been working on that technology for years, like Apple and Microsoft, went first and developed software ideas that Android builds upon, according to Microsoft and Apple. And Android uses Java software technology, developed by its Sun unit, Oracle contends.
The inventors, Mr. Smith said, deserve to be compensated through reasonable patent royalties. Their claims have stirred controversy, he concedes, but he points out that was true as well of Qualcomm’s initial efforts to charge licensing fees for its radio technology.
“We’re seeing a licensing regime emerging for the software stack,” Mr. Smith said.
Google says the Microsoft campaign is not just bad for Android, but bad for the industry and consumers as well by substituting litigation and patent deal-making for innovation.
Mr. Smith disagreed. “Patent-licensing regimes allow companies to build on the shoulders of others,” he said. “It allows companies to use technology and ideas, after paying reasonable fees. They can spend their resources on new ideas instead of trying to figure out ways to invent around the work done by others. In that way, patent-licensing is very much pro-innovation.”
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