Print 11 comment(s) - last by Skywalker123.. on Apr 25 at 2:04 PM

Top Chinese phonemaker will pay Microsoft royalties on its devices

And then there was one less.

I.  ZTE Caves to Licensing Demands

On Tuesday, Microsoft Corp. (MSFT) VP and general counsel Horacio Gutierrez posted that his company had successfully coerced... er... convinced top Chinese Android smartphone maker ZTE Corp. (SHE:000063) to pay royalties.  The news comes hot on the heels of Microsoft's announcement that top Taiwanese manufacturer Hon Hai Precision Industry Comp. Ltd. (TPE:2317had agreed to licensing.  Hon Hai owns the Chinese manufacturing subsidiary Foxconn.

In his commentary Mr. Gutierrez comments that Microsoft pays for licensing all the time, just like it's forcing OEMs to.  He writes:

Much of the current litigation in the so called “smartphone patent wars” could be avoided if companies were willing to recognize the value of others’ creations in a way that is fair. At Microsoft, experience has taught us that respect for intellectual property rights is a two-way street, and we have always been prepared to respect the rights of others just as we seek respect for our rights. This is why we have paid others more than $4 billion over the last decade to secure intellectual property rights for the products we provide our customers.

ZTE will pay Microsoft on every handset it makes. [Image Source: Reuters]

The licensing deal with ZTE is a big deal as the Chinese OEM is vying with Huawei Technologies Comp. (SHE:002502) for the title of the world's second largest Android phonemaker.

II. Licensing Remains Microsoft's Top Smartphone Cash-Driver

Nearly three-quarters of Android manufacturers now license Microsoft intellectual property.  Microsoft has pressured top Android OEMs like HTC Corp. (TPE:2498and Samsung Electronics Comp., Ltd. (KSC:005930) into licensing payments of $10 or more per Android device sold.

Reports from 2011 indicated that Microsoft is making far more money from these licensing agreements than from its own smartphone product, Windows Phone.  Given that Android growth has outpaced Windows Phone growth and Microsoft has scored many more royalty deals since then, it's relatively safe to say that situation remains even more true today.

Royalties are where the money's at for Microsoft. [Image Source: Life's Cheap Thrills]

Among the top companies to try to fight Microsoft's licensing threats have been Google Inc. (GOOG) subsidiary Motorola Mobility and Barnes & Noble Inc. (BKS).  Barnes & Noble -- perhaps the most vocal critic of Microsoft's threats -- caved in April of last year, "partnering" with Microsoft and agreeing to pay royalties.

Google/Motorola -- whose legal counsel compared Microsoft to a "deranged Easter bunny" -- is still fighting the good fight when it comes to patents.  However, the company faces a major judgment day this Friday in Germany.  If it loses, it may see its handsets not only banned, but also seized and destroyed.  Some experts believe that a loss in Germany could force Google to swallow its pride and agree to licensing after long encouraging OEMs to fight Microsoft's demands.

Source: Microsoft

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die M$...please!
By mjv.theory on 4/24/2013 12:23:38 PM , Rating: 0
...willing to recognize the value of others’ creations in a way that is fair

If I wrote a book on how to screw the world, I would be able to "copyright" it, not to "patent" it. IMO software is no different in this respect.

Obviously, I am referring to a fair and sane world. In a world of evil tyrants, fair and sane may not apply.

RE: die M$...please!
By inperfectdarkness on 4/24/2013 12:39:55 PM , Rating: 2
I'm actually happy about this. It's gotta be the first time in history a Chinese company actually paid for something, rather than just stealing it and pretending nothing happened.

RE: die M$...please!
By Mitch101 on 4/25/2013 8:05:10 AM , Rating: 3
I agree about time someone is calling out China and them realizing maybe its time to pay up.

Every major corporation does this. Apple, Google (through Motorola so it doesn't look like they play evil either), Microsoft, etc etc etc.

This is 2011 but you get the idea.

RE: die M$...please!
By acer905 on 4/24/2013 12:50:11 PM , Rating: 2
Copywrite would protect the actual code, a patent would protect the function that the code achieves. IBM was screwed by Columbia, Compaq, and pretty much everyone else when they all reverse-engineered the IBM BIOS, without copying a single line of code used (clean-room technique). Had they been granted a patent on the BIOS, the entire computer industry would be vastly different. Since then, tech companies have went off the rocker with patenting everything they can to prevent that sort of situation from repeating itself.

The problem is that the patents have the same timeframe as patents for physical inventions, even though the software world moves much faster. Software patents should expire no more than 5 years after filing. Not 20.

RE: die M$...please!
By mjv.theory on 4/24/2013 1:30:29 PM , Rating: 2
a patent would protect the function that the code achieves

You may be right, but I am curious. What sort of "function" would you regard as worthy of patent protection?.

RE: die M$...please!
By Solandri on 4/24/2013 4:31:59 PM , Rating: 2
IBM was screwed by Columbia, Compaq, and pretty much everyone else when they all reverse-engineered the IBM BIOS, without copying a single line of code used (clean-room technique). Had they been granted a patent on the BIOS, the entire computer industry would be vastly different.

Or maybe not. The same thing happened with Betamax videotapes. Sony patented it up the wazoo and jealously guarded and restricted who could make it in an attempt to control the market. As a result all the other manufacturers switched to the easily licensed VHS format. And we all know how that turned out. Arguably the same thing is happening to Apple with the iPhone vs Android phones.

When there's strong demand, and a manufacturer tries to inflate prices by controlling supply, the market reacts by bypassing that manufacturer entirely.

RE: die M$...please!
By Shadowself on 4/25/2013 1:56:12 PM , Rating: 2
Arguably the same thing is happening to Apple with the iPhone vs Android phones.
You forget that Apple has a cross licensing deal with Microsoft over mobile device related patents. Apple did license many of its mobile device patents to HTC. Apple offered to license its mobile device patents to Samsung before any of the lawsuits started flying.

There are many people on this site who completely forget the things that Apple developed in house then put into the public domain: mini Display Port, Open CL, etc.

Is Apple faultless in all this? Absolutely NOT. There is more than enough blame for Apple. They are as guilty as any other company (and in a few cases more guilty) for pushing through patents that should NEVER have been issued -- and then trying to enforce them through litigation.

Because I refuse to look at Apple very narrowly I routinely get smacked on this site. But I insist on looking at Apple with respect with a healthy dose of skepticism.

RE: die M$...please!
By amanojaku on 4/24/2013 1:43:24 PM , Rating: 1
Say what you want about MS, but at least it's seeking the licensing route for technology it actually created, rather than trying to ban competing products that can't help but be similar due to function. Like that one company that claimed ownership of the green call button, a rectangular device with curved edges, and a touchscreen display that lacked physical buttons...

RE: die M$...please!
By Skywalker123 on 4/24/2013 4:48:03 PM , Rating: 3
Like when MS tried to rip off Stackers memory compression tech?

RE: die M$...please!
By amanojaku on 4/25/2013 12:01:41 PM , Rating: 1
Your ignorance is just appalling. First of all, MS is licensing its technology TO ZTE and every other Android handset maker. And it has every right to:
Unlike Motorola's patents, Microsoft's relating to Android are not standards-essential - and so it is not obliged to license them, or can name its price.

With regards to Stac Electronics, MS didn't try to rip Stac off. MS tried to license Stac's compression technology and had been in negotiations for around two years. The negotiations fell apart, so MS made its own disk compression utility, licensed from Vertisoft . Stac then sued MS and Vertisoft, claiming MS stole source code.

Interestingly, Stac was found to have infringed on MS's pre-loading technology, and had to pay MS for damages.

MS eventually decided to invest in Stac Electronics and pay royalties, eliminating the need for either company to pay damages to the other.

The Stac and ZTE cases are nothing at all like Apple's douchebaggery in trying to prevent the competition from selling product.

RE: die M$...please!
By Skywalker123 on 4/25/2013 2:04:35 PM , Rating: 2
you're more than ignorant and a fool to boot. I am not commenting on zte, rather Microsoft's willingness to rip patents when and where they can

You have the story completely wrong.

n 1993, Microsoft released MS-DOS 6.0, which included a disk compression program called DoubleSpace. Microsoft had previously been in discussions with Stac to license its compression technology, and had discussions with Stac engineers and examined Stac's code as part of the due diligence process. Stac, in an effort led by attorney Morgan Chu, sued [1] Microsoft for infringement of two of its data compression patents, and won; in 1994, a California jury ruled the infringement by Microsoft was not willful, but awarded Stac $120 million in compensatory damages, coming to about $5.50 per copy of MS-DOS 6.0 that had been sold. The jury also agreed with a Microsoft counterclaim that Stac had misappropriated the Microsoft trade secret of a pre-loading feature that was included in Stacker 3.1, and simultaneously awarded Microsoft $13.6 million on the counterclaim. [2]
While Microsoft prepared an appeal, Stac obtained a preliminary injunction from the court stopping the sales of all MS-DOS products that included DoubleSpace; by this time Microsoft had already started shipping an "upgrade" of MS-DOS to its OEM customers that removed DoubleSpace. By the end of 1994, Microsoft and Stac settled all pending litigation by agreeing that Microsoft would make a $39.9 million investment in Stac Electronics, and additionally pay Stac about $43 million in royalties on their patents.

"Well, there may be a reason why they call them 'Mac' trucks! Windows machines will not be trucks." -- Microsoft CEO Steve Ballmer

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