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Acer, maker of the popular Iconia Android 3.0 Honeycomb tablet has become the latest device maker to cave in to Microsoft's licensing demands.  (Source: Amazon.com)
Acer, Viewsonic agree to pay Microsoft's toll

Microsoft Corp. (MSFT) has already inked lucrative licensing details with General Dynamics Corp. (GD) (owners of Itronix, a maker of rugged tablets) [source]; Velocity Micro, Inc. [source]; Onkyo Corp. [source] (JSD:6628); and HTC Corp. (SEO:066570) [source].  It's pressuring Samsung Electronics Comp., Ltd. (SEO:005930) into a similar licensing deal.  Reportedly it wants up to $15 per device sold.  

So what do all these companies have in common?  They all use Google Inc.'s (GOOG) Android operating system and all are afraid that Microsoft may make good on its threat to sue them if they don't pay licensing fees.

Now Taiwan's Acer Inc. (
TPE:2353) has agreed [press release] to a similar licensing arrangement, though it declined to disclose how much it had agreed to pay per device.  Acer makes the popular Android 3.x "Honeycomb" Iconia tablet.

Horacio Gutierrez, corporate vice president and deputy general counsel of Intellectual Property and Licensing at Microsoft comments, "We are pleased that Acer is taking advantage of our industry wide licensing program established to help companies address Android's IP issues. This agreement is an example of how industry leaders can reach commercially reasonable arrangements that address intellectual property."

Of course of amiable phrasing "Help... address Android's IP issues" translates roughly to "forced to pay under threat of lawsuit".

Google does offer Android to device makers for free, so licensing isn't game over to Android manufacturers unlike Apple, Inc.'s (
AAPL) lawsuit campaign [1][2][3][4][5][6], which simply looks to ban Android devices from the market.  However, it does shift the balance of power slightly in the favor of Microsoft, who is trying to push its own Windows Phone 7 smartphone operating system on the masses, by making it less profitable to make Android devices.

Many more manufacturers will like opt the route of Acer and HTC -- simply paying Microsoft's demanded toll.



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By Zuul on 9/8/2011 3:47:12 PM , Rating: 5
I write IT contracts for a living and what I see is Google's current business model of not protecting their partners is now showing it's ugly head. By extension, it reinforces why companies are afraid of using Open Source software that has no amendments around the GNU/Apache License indemnity.

What the competitors (Apple, Microsoft) are doing well right now is showing Google's partners that Google will not legally and directly protect their partners.

The acquisition of Motorola's wireless division (and it's patents) tells me that Google still has no intention of protecting their partners. By acquiring patents themselves, Google is hoping that they can prevent any patent infringement issues by holding onto their own patents to use as leverage in the event infringements come up. Basically, "Mutually Assured Destruction" if any of these companies goes after Google directly.

Since Google doesn't indemnify their partners/developers/users from patent infringement, it still leaves all those parties SOL. For those that don't understand indemnification from patent infringement for Android,it is a legal statement that would say should Google Android infringe on anyone else's patents, Google will accept full responsibility and none of that responsibility will be passed on to anyone who uses it. At this time, Google doesn't do that - so a developer, a partner, or even a user can be held responsible if Google does infringe on patents (kind of a use at your own risk).

If Google is serious about protecting their partners/devs/users, than they need to start indemnifying them from patent infringements. With all those patents they now hold, they can then use those patents as leverage to actually protect the Android community. I certainly hope they do this, it's such poor business practice to screw your partners over like this.

Should the indemnity remain unchanged (or some other miracle change in the patent system), I fear that Android's future may be bleak with Apple and Microsoft attacking their partners from both sides.




By greylica on 9/8/2011 4:10:57 PM , Rating: 2
This is another interesting part of the solution, good to read...


By priusone on 9/8/2011 4:23:04 PM , Rating: 1
Google is quietly amassing a patent portfolio while letting other companies take the infringement heat. It would be interesting to see if in the future, once they have enough patents, Google spins around and using their patent leverage tells Apple, MSFT and who else to back off. Sure, Acer and Samsung may have to take some heat at the moment, but hopefully Google can patent protect them soon enough.


By Zuul on 9/8/2011 4:45:27 PM , Rating: 4
Because of the current legal language, the patent portfolio only serves to protect Google themselves, not the Samsung/HTC's of the world. Google could hold 5 times as many patents as everyone else and it wouldn't help the manufacturers.

Until Google is willing to change the indemnity and take the responsibility off of their partners, it's open season on anyone who uses Android.

From a legal perspective, it's extremely risky to use Android as a core part of your business (ie: building a smartphone line around it) knowing that. I can only assume that the risk management and contracting groups within the companies have already weighed the risk and built a plan around dealing with it. Likely, they have all planned around paying royalties well in advance should it happen - which is what normally happens. That's why they are easily agreeing to Microsoft's approach.

Where it really throws things in a pickle is Apple. Apple has no desire to collect royalties. It's MUCH harder to plan around someone trying to shut your business down when you have no leverage to begin with.

An analogy would be if you owned a McDonalds franchise and someone comes along and sues YOUR franchise because the 'M' McDonalds logo infringes on their copyright. You realize that 'hey, it's not my logo - I'm just a franchise' and you go to McDonalds corp to ask them to fight it for you. McDonalds then turns around and says, 'sorry, it's your problem because I never agreed to protect you from that.'


By Zuul on 9/8/2011 4:26:22 PM , Rating: 2
I should also note, it doesn't matter if the patents are valid or not. The mere threat of litigation will get some of the handset manufacturers to comply.

Since the handset manufacturers didn't develop Android themselves, they will not easily know if the patent is valid or not.

With Google saying leaving them up the creek w/o a paddle, most of them will comply with Microsoft's licensing offer rather.


By bupkus on 9/8/2011 4:42:48 PM , Rating: 3
quote:
The acquisition of Motorola's wireless division (and it's patents) tells me that Google still has no intention of protecting their partners. By acquiring patents themselves, Google is hoping that they can prevent any patent infringement issues by holding onto their own patents to use as leverage in the event infringements come up. Basically, "Mutually Assured Destruction" if any of these companies goes after Google directly.

Absolutely brilliant.

Let me suppose that Android's design has intentionally included vulnerabilities to litigation. Figuring that Apple may just go on the attack to both protect its IP and as a personal vendetta Apple may feel from having Eric Schmidt privy to inside information while on Apple's Board of Directors, Apple will do the dirty work of bringing down smart phone builders allowing Google and Apple to pick up all the pieces.
Google protects themselves and only themselves by buying Motorola IP and manufacturing to leave only two left standing.

If I were a conspiracy advocate I would surely want to know if there were any secret meetings with Eric Schmidt and Apple's Steve Jobs. However, I am not. I would choose the view that Google is just as Machiavellian in its business practices as any other power broker.


By Zuul on 9/8/2011 5:02:41 PM , Rating: 2
When Google changes their legal language, than I'll believe they are after protecting their partners. Until that changes, buying patents only protects themselves.


By SilthDraeth on 9/8/2011 6:10:46 PM , Rating: 2
Would have rated you up, but I wanted to ask a question that no one addressed before.

How do Microsoft and Apple sue hardware makers for their products, when it is Android that is infringing the patents?

Shouldn't Microsoft and Apple be going after Google?

I read your part about Google indemnifying their partners, but I still don't get how the hardware designer/partner is the one that gets in trouble.

For instance, that would be like Microsoft suing Asus, Gigabyte, MSI, Tyan, etc because people build PC with their parts and put a pirated copy of Windows on it. As far as I know this doesn't happen. So I can correlate that part of the problem lies with Samsung and company releasing the hardware with the OS attached to it.


By michael2k on 9/8/2011 6:23:52 PM , Rating: 3
Google designs bullets
HTC makes guns, and licenses a bullet design from Google to use in their gun.
Apple makes both guns and bullets, says HTC's guns infringe on Apple's guns, sues HTC.

Microsoft and Apple have no need to go after Google. Why should they? They could, but why? How, for example, could Microsoft extract license fees from HTC and Samsung et al by suing Google? How, for example, would Apple ban phones manufactured by Samsung when the icons and customizations in question belong to Samsung and not Google?

The analogy you use is poor. The correct analogy is Microsoft suing people for putting a pirated copy of Windows even though the pirate distributing said copies never installed Windows.


By SilthDraeth on 9/8/2011 10:10:03 PM , Rating: 2
I thought it was the OS that was getting Samsung in trouble, hence why stuff running 2.3 is banned, but 3.1 isn't.

I know Apple is in fact sueing over the device looking similar, but several of the patent lawsuits deal with software aka bullet issues.

Nevermind, I will probably never understand it. Thanks for your reply though.


By Zuul on 9/9/2011 1:37:05 AM , Rating: 2
To address your questions:

quote:
How do Microsoft and Apple sue hardware makers for their products, when it is Android that is infringing the patents?


The key is the lack of indemnity Google (you can view this as, hold the other party free of any of liability and thus Google accepting full liability) provides for patent infringement. The patent holder can come after you (the manufacturer or developer) and Google is not legally obligated to help you because they never said they would.

Almost all software manufacturers will indemnify their partners from patent infringements; which is why I said if Google started to do this, they could leverage the Motorola patents to protect all the handset manufacturers. However, they haven't. I certainly hope they do - but I think that's new, uncharted waters for Google's legal team.

quote:
Shouldn't Microsoft and Apple be going after Google?


I think there are several factors for this. One is Google isn't making any money directly off of licensing Android, so it's hard to go after Google for royalties.

Another is that's a much bigger fight than going after the handset makers. Since the handset makers are using an OS which may (or may not) infringe on MS/Apple patents and MAKING MONEY from it, MS is well within their legal rights to go after them. Why take on the big guy directly, when you can go after the little guys around him and do just as much damage?

quote:
For instance, that would be like Microsoft suing Asus, Gigabyte, MSI, Tyan, etc because people build PC with their parts and put a pirated copy of Windows on it. As far as I know this doesn't happen. So I can correlate that part of the problem lies with Samsung and company releasing the hardware with the OS attached to it.


Since none of those manufacturers included a pirated copy of the OS with the product, they are not violating their licensing agreement with MS. If another party uses those parts to build a PC and includes a pirated copy of Windows, than BOTH the person who installed it, AND the person using the computer are violating the licensing agreement and MS is within their rights to go after BOTH parties. Of course in practice, they only go after the companies who install / distribute pirated SW and not the individuals who violate the licensing agreement.


By sprockkets on 9/8/2011 8:22:55 PM , Rating: 2
I don't know why it is so hard for you to see why they offer no protection; they charge $0 for Android.

quote:
By extension, it reinforces why companies are afraid of using Open Source software that has no amendments around the GNU/Apache License indemnity.


You do know that at least the old Novell and Red Hat offer protection against BS from Microsoft? We still don't know exactly what patents MS has against Linux except FUD.


By Zuul on 9/9/2011 12:52:28 AM , Rating: 2
I think you have misinterpreted my intent - I agree with your statement around why they don't indemnify their partners. Since they don't make direct revenue from licensing Android, it's tough to justify it. I'm saying their business model, which includes that, has made them what they are today, however they are now in a very tough situation.

I'm fully aware of Redhat's agreements - before my organization used their OS, I negotiated several of the terms on it and we have our own customized agreement with them. Redhat doesn't run only the standard GNU/Apache License agreement - they have their own modifications for it. As I said, many large enterprises are afraid of using open source that has no amendments around GNU/Apache license indemnities.

I've dealt with companies that refuse to indemnify us from patent infringements. For our organization, the risks are too great - we will walk away and find another solution.

For greater clarity, the agreements i'm referring to regarding indemnity are generally the licensing agreements that most of us when installing software, just click 'I Accept' to. Large enterprises generally negotiate a separate agreement that superceeds the 'click wrap' agreements.


By unimatrix725 on 9/9/2011 2:25:26 PM , Rating: 2
By Zuul on 9/9/2011 3:15:20 PM , Rating: 2
Though I would rather see Google indemnifying their partners, this is definitely a positive step forward!!


By d_day on 9/10/2011 8:54:26 AM , Rating: 2
Why don't the hardware manufacturers just sell the device without an os. Make it a one step process to install the os and give it away on usb key or by free download. People who want to buy android devices want to be able to upgrade the software easily anyway. Plus no worries about software based lawsuits.


“So far we have not seen a single Android device that does not infringe on our patents." -- Microsoft General Counsel Brad Smith














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