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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 Da W on 9/28/2011 4:03:30 PM , Rating: 4
Icons, OS, memory management, power management, GPU usage, they DO have patents on hardware too, who knows, they got a gazillion patents on everything tech. Most of them might have no value, but you will never know that unless you challenge them in court. Hence the merit of Microsoft strategy. Plus they enter into cross-liscencing deal, meaning HTC/Samsung/other won't sue back Microsoft eventually.


RE: What IP are they using of MS's?
By cjohnson2136 on 9/28/2011 4:05:58 PM , Rating: 2
Hmmm the stuff you mentions makes sense I just figured some of that stuff would deal more with Android and not the phone makers. To bad they won't tell which patents were used to push this cross-license


RE: What IP are they using of MS's?
By Reclaimer77 on 9/28/2011 4:16:46 PM , Rating: 4
quote:
To bad they won't tell which patents were used to push this cross-license


Actually if you think about it, that's another brilliant move. While Apple is running around blasting to the world exactly how to avoid patent disputes with them, Microsoft was way more subtle and opportunistic. Whatever these 7 patents are that Google infringed on, they must be very specific and key to the operation of the Android platform. Not broad and generic like Apple's claims. And Microsoft is being very tight lipped about the whole thing because, well, that's just smarter. They wait for you to screw up, and come to you with a deal that everyone can live with and makes them a lot of money.

I just LOVE that his was handled out of court, like men. I'm so sick of the soap opera that is Apple vs The World.


RE: What IP are they using of MS's?
By quiksilvr on 9/28/11, Rating: 0
RE: What IP are they using of MS's?
By ipay on 9/28/2011 7:53:07 PM , Rating: 2
WP7 is licensed for $15 per handset, so Android is still slightly cheaper. At least, if that's all the licensing costs they have - if they end up sending another 5-10 to Apple after all the lawsuits settle it could end up being more expensive.


By PrezWeezy on 9/28/2011 6:17:12 PM , Rating: 5
Because Android is open source the phone makers do not have an agreement with Google which includes an indemnification clause. In infringement you can be held accountable even if you are using someone else's software which infringes upon the holders IP. An indemnification clause in the license agreement means that the maker of the software will take full accountability. So without that, anyone who uses Android and implements the questioned features can be sued for it. That is the reason why when you get an Enterprise License agreement from Microsoft that clause is included. Otherwise large corporate users who install Windows could be sued for any patent Microsoft is accused of infringing upon.


By Darksurf on 10/3/2011 12:01:43 PM , Rating: 2
You'd think this stuff was all common knowledge or tech by now. These patents should be removed as all they do is hinder tech growth. I hate patents! They were intended to provide security to the little man from the big corporations.

Now all it really is, is a way for big corporations to rape each other. It has become an exploited tool that is now doing the opposite of what it was intended for.


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