Print 69 comment(s) - last by chuckecheeze.. on Oct 16 at 4:17 AM

You won't hear Steve Ballmer say "I love this DEAL!" but Samsung's agreement to pay licensing fees is a big win

"Under my thumb
The girl who once had me down
Under my thumb
The girl who once pushed me around."

-- Mick Jagger and Keith Richards of The Rolling Stones, 1966

The iconic track by The Rolling Stones comes to mind as news of Microsoft Corp.'s (MSFT) new licensing deal with Samsung Electronics Comp., Ltd. (SEO 005930) broke today.  After all, Samsung is top seller of smart phones powered by Google Inc.'s (GOOG) Android OS, which quite literally has Microsoft's Windows Phone 7 smart phone OS down in sales.

But as much as Android has pushed Microsoft around in the market, Microsoft now has Android exact where it wants it -- under its thumb.  It announced [press release] today that after negotiations, Samsung had agreed to enter an intellectual-property cross-licensing agreement.

The old saying goes "you'll attract more flies with honey than vinegar".  While Microsoft's licensing pressure might not seem so sweet to some, it's at least a gentler approach than Apple, Inc. (AAPL), which has sued [1][2][3][4][5][6][7][8] the top three Android manufacturers (Samsung, HTC Corp. (SEO:066570), and recent Google acquisition Motorola) seeking to ban their handsets sales with nary a mention of a licensing settlement.

Indeed Microsoft's approach won over HTC, who was facing a lawsuit from Apple at the time, and now has won over Samsung, the fastest growing handset maker on the market, and the top maker of Android smart phones.

Reportedly the HTC deal was worth $10 USD per handset sold.  For the Samsung deal Microsoft reportedly offered a $15 USD per handset fee, while Samsung countered with a $10 USD per handset fee.  It seems likely that the pair met in the middle with a $12-13 fee.

Samsung and HTC both make Windows Phone 7 handsets, though, those devices haven't sold anywhere near the number of units as their flagship Android devices.

Of Android's "big three", only Google subsidiary Motorola remains without a licensing deal for Microsoft's intellectual property.  The Wall Street Journal is reporting that Microsoft used the announcement as a chance to issue a request/threat to Google/Motorola pressuring it to license.

For Google the situation could be worse.  It still will likely be able to turn a profit on its handsets and it will be free to focus on Android's other legal foes like Oracle Corp. (ORCL) (who is suing Google for Android's use of Java) and Apple.  But it's also not a very pleasant situation as Microsoft's licensing fees tack between $10 and $15 in additional costs onto each handset sold.  Those costs make Google's platform less attractive and competitive offerings more attractive.

Microsoft's Windows Phone Division President, Andy Lees, gushed about the deal, commenting, "Microsoft and Samsung see the opportunity for dramatic growth in Windows Phone and we’re investing to make that a reality. Microsoft believes in a model where all our partners can grow and profit based on our platform."

And Samsung tried to spin the news enthusiastically, with Samsung mobile devices global marketing VP Dr. Won-Pyo Hong remarking, "Through the cross-licensing of our respective patent portfolios, Samsung and Microsoft can continue to bring the latest innovations to the mobile industry. We are pleased to build upon our long history of working together to open a new chapter of collaboration beginning with our Windows Phone "Mango" launch this fall."

However, make no mistake, Microsoft is the winner here, and at the end of the day Google, and to a lesser extent, Samsung, are the losers.  Sure Microsoft would love Windows Phone 7 to be the kind of ringing success it thus far hasn't been.  That would give it all sorts of auxiliary revenue streams -- say from data mining and app sales.  But at the end of the day Android succeeding is almost as valuable to Microsoft, as it will get a sweet licensing cut of virtually every Android device sold -- without having to go to the hassle and expense of actually designing, advertising, and selling the product.

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RE: What IP are they using of MS's?
By JasonMick on 9/28/2011 3:58:56 PM , Rating: 2
I don't understand the hold Microsoft has here -- what are the phone makers using that MS owns the patent to?

That's the really funny thing -- Microsoft and the Android phonemakers have never revealed what patent(s) exactly Microsoft is using to leverage these forced licensing arrangement. They must be pretty good, otherwise Samsung would likely have fought it as it did Apple's patents.

It could get interesting if Google/Motorola continue to refuse licensing. That could force Microsoft's hand to sue, which in turn would reveal what the patents in question are.

RE: What IP are they using of MS's?
By gregpxc on 9/28/2011 4:35:33 PM , Rating: 3
Like someone else said above me, Microsoft isn't blowing infringements drastically out of proportion (which I'm sure they own enough to do so if they so choose). And to be quite honest, I don't think many companies would push back against Windows. Whether they like it or not, Windows and Microsoft make them money all the time, not just in the mobile world, so making Microsoft angry with them would surely be a step in the wrong direction. It's almost like they're forced to give in to Microsoft because of how much power they have in these companies. They rarely ask much of companies and when they do it's a respectable amount, unlike Apple who is simply trying to shut people down for the most ridiculous of things.

RE: What IP are they using of MS's?
By ipay on 9/28/2011 7:46:06 PM , Rating: 4
FAT filesystem is probably one. I'm pretty sure phones still use that for removable storage and MS has sued over it before.

RE: What IP are they using of MS's?
By nafhan on 9/29/2011 8:35:58 AM , Rating: 2
Yep. Most phones do use it. The funny part? Compatibility with Windows is really the only reason to use FAT...

RE: What IP are they using of MS's?
By Jaybus on 9/29/2011 4:40:30 PM , Rating: 2
I suspect FAT is a huge part of their case. It also explains why this is happening now, as opposed to a few years ago. Most of the patents having to do with FAT were issued in the mid 1990's, so will be expiring over the next few years. So the Android phone makers will pay licensing for a couple or three years and then renegotiate when FAT patents expire.

By fteoath64 on 9/29/2011 4:45:53 AM , Rating: 1
"It could get interesting if Google/Motorola continue to refuse licensing. That could force Microsoft's hand to sue, which in turn would reveal what the patents in question are."

MS would not dare because it would EXPOSE their scam in this bluff. If they did, they would likely lose and exposed court records will still expose the scam. Why would people do business with a company behaving like this ?. There are plenty of Open Source sw to be used out there, MS never did try to sue Linux Foundation before. And would Apple try have bounded by BSD license in OSX ?.

"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng's take on patent troll Soverain

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