HTC Pays Microsoft $5 Per Android Phone, Says Citi

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HTC Pays Microsoft $5 Per Android Phone, Says Citi

Microsoft gets $5 for every HTC phone running Android, according to Citi analyst Walter Pritchard, who released a big report on Microsoft this morning.

Microsoft is getting that money thanks to a patent settlement with HTC over intellectual property infringement.

Microsoft is suing other Android phone makers, and it's looking for $7.50 to $12.50 per device, says Pritchard.

We knew hardware companies were paying Microsoft, we just didn't know how much. (In October Steve Ballmer said, "Android has a patent fee. It's not like Android's free.")

Pritchard says we can expect more legal activity to pick up around Android in the coming months because "Google appears to have very little IP to defend itself with."

This is good for Microsoft which is about to enter the tablet market and is trying to make a dent in the smartphone market.

Another Citi analyst, Kevin Chiang, believes Android phone makers have 10%-15% operating margins, and Android tablet makers have operating margins of just 2%-3%.

As Microsoft, Oracle (which is suing over Google's use of Java), Apple, and others sue companies using Android, their margins take a whack for every settlement they make.

As the margins are crushed, it makes using a Microsoft-based operating system for tablets and phones much more attractive, argues Pritchard. (Unaddressed by Pritchard is how much Microsoft gets per device and if it's less than or equal to what Android-based devices end up costing.)

Of course, Microsoft has to prove it has a compelling software package to put on tablets.

Source: Business Insider

[guru]

i wonder how much MS makes off iPhone

[Flawed]

If you can't beat 'em, sue 'em. Microsoft has hitherto been unable to leverage its desktop OS monopoly advantage, so it needed to find a new way of putting the competition at a disadvantage. For we all know, given its history, that without such tactics, Microsoft can never succeed.

It's sad when a product (WM7) can't stand on its own merits, and can only compete by forcing the "Microsoft Tax" on competitors. But we all know by now, Microsoft wins by hook - OOXML: we're open really!, or by crook - Bing stealing search results from Google, forcing the "Microsoft Tax" on competitors in order to make your product seem more attractive, and corrupting the ISO process to get a proprietary locked down format standardised.

[Soldiers33]

I dont understand why does microsoft get paid for every android phone? Could someone please explain to me?

[LaP]

The patent system definately needs an overhaul. The sooner the better.

[lalalawawawa]

Its not a problem with Microsoft and HTC... Its a problem with patents in general. The US patent system must be overhauled.

[BajiRav]

If you can't beat 'em, sue 'em. Microsoft has hitherto been unable to leverage its desktop OS monopoly advantage, so it needed to find a new way of putting the competition at a disadvantage. For we all know, given its history, that without such tactics, Microsoft can never succeed.

AFAIK, Microsoft has never sued HTC (but don't quote me on that).

[LaP]

AFAIK, Microsoft has never sued HTC (but don't quote me on that).

http://www.smh.com.au/technology/technology-news/microsoft-to-license-not-sue-htc-20100429-ttzo.html

MS did not sue them because they made an agreement.

[DJ Woody]

Ok granted the patents system needs an overhaul,

To the guy above who said why are they being sued its because the Android OS copied lines of code and intellectual property from companies such as MS and co? Now because Google made Android open source and only charge OEM?s for the use of Google services such as Gmail, google maps etc etc? the companies that own the IP have cannot sue Google directly and thus sue them via proxy with the OEM?s taking the full brunt. You could say its Googles fault (I do) but then again, no one is forcing the OEMs to use the Android platform.

[LaP]

Ok granted the patents system needs an overhaul,

To the guy above who said why are they being sued its because the Android OS copied lines of code and intellectual property from companies such as MS and co? Now because Google made Android open source and only charge OEM?s for the use of Google services such as Gmail, google maps etc etc? the companies that own the IP have cannot sue Google directly and thus sue them via proxy with the OEM?s taking the full brunt. You could say its Googles fault (I do) but then again, no one is forcing the OEMs to use the Android platform.

Actually MS and HTC did not disclose which patents was covered by the agreement.

[Flawed]

AFAIK, Microsoft has never sued HTC (but don't quote me on that).

Yep it did. But then it settled with the usual NDA so HTC can't discuss how Microsoft is pricing the fees just right so that Android appears more expensive than WM7 (The Microsoft Tax). These are dirty tactics not intended to protect IP, but to disadvantage the competition through patent trolling. This is how big business maintains its hegemony these days, not through superior products or innovation, but through the application of Government issued monopolies (patents).

[DukeEsquire]

Why is everyone taking HTC's side? We don't even know what HTC did because the settlement is not public. For all we know, HTC stole something from Microsoft.

If they settled, HTC probably knew they were going to lose because they did something wrong.

Yep it did. But then it settled with the usual NDA so HTC can't discuss how Microsoft is pricing the fees just right so that Android appears more expensive than WM7 (The Microsoft Tax). These are dirty tactics not intended to protect IP, but to disadvantage the competition through patent trolling. This is how big business maintains its hegemony these days, not through superior products or innovation, but through the application of Government issued monopolies (patents).

Patents inherently disadvantage competition. That is the purpose of a patent. It says, "I came up with it first so you can't use."

Duh.

[Southern Patriot]

Another point to consider: since we don't know the specifics of which patents HTC is paying Microsoft to use, they could very well be totally unrelated to Android itself and related to other functions of the phone (such as using FAT32 for the SD card, or something to do with how the touchscreen or certain buttons are handled). Remember that HTC has a long history of making Windows Mobile based phones, so they could very well be using technology in their Android phones that they were only originally licensed to use with Windows Mobile, thus requiring the new license.

[mdtaUK]

Microsoft believes Android makes use of ideas and technologies (patents) which Microsoft owns, and rather than have to fight a legal case, they agree to settle and pay Microsoft a fee per device, so they can make use of these technologies with Microsoft's blessing and legal protections.

Google have a history of skirting close to the wind with their use of patents, and then offer no protection to their partners and third party developers.

[LaP]

Why is everyone taking HTC's side? We don't even know what HTC did because the settlement is not public. For all we know, HTC stole something from Microsoft.

If they settled, HTC probably knew they were going to lose because they did something wrong.

Patents inherently disadvantage competition. That is the purpose of a patent. It says, "I came up with it first so you can't use."

Duh.

We don't really know. But the patent system is so ****** these days that you can lose without doing anything morally wrong.

The patent system was at first created to protect creativity and inventive work. It's role today is the complete opposite. Patent trolls redefined the patent system we know today.

[guru]

considering MS was in mobile business before android and would have had tonne of patents it isnt surprising that others are infringing on their patents

[Flawed]

To the guy above who said why are they being sued its because the Android OS copied lines of code and intellectual property from companies such as MS

Microsoft is suing Android manufacturers with dubious patents such as "Method for the storage of long/short file names" aka the FAT patent. Microsoft loves to bring that one out against every (yes every) Linux based OS. And others from Microsoft's patent lawsuit against Barnes and Noble:

1. Remote Retrieval and Display Management of Electronic Document with Incorporated Images.

2. Loading Status in a Hypermedia Browser Having a Limited Available Display Area.

3. System Provided Child Window Controls.

4. Selection Handles in Editing Electronic Documents.

5. Method and Apparatus for Capturing and Rendering Annotations for Non-Modifiable Electronic Content.

Those are some real unique and innovative ideas wouldn't you agree? If this isn't patent trolling I don't know what is.

and co? Now because Google made Android open source and only charge OEM?s for the use of Google services such as Gmail, google maps etc etc? the companies that own the IP have cannot sue Google directly

Really? What about Oracle? Although much maligned, at the least, it does go directly to the source instead of waging a campaign against OEM's deploying it with the intention of discouraging them from promoting/selling Android, and making more devices in the future. Absolutely disgusting. This reveals the real Microsoft. Has it changed since the 90's? No. Although it's becoming less and less relevant as evidenced by the SCO behaviour.

You could say its Googles fault (I do) but then again, no one is forcing the OEMs to use the Android platform.

And that's precisely what Microsoft wants. It wants OEMS's to stop producing Android phones and give it a sole monopoly like OEM's do in the desktop OS market. This is the only mentality Microsoft can operate on. Destroy by any means, whether it be by hook, or by crook, and in this case, it's mostly crook. Sue under the guise of protecting IP, all the while, giving your own product a cost advantage.

You see, Microsoft is incapable of competing fairly.. The sooner It goes away the better for everyone in my opinion.

[Flawed]

Google have a history of skirting close to the wind with their use of patents, and then offer no protection to their partners and third party developers.

Protection money eh? Why am I reminded of the Mafia?

[Boz]

You see, Microsoft is incapable of competing fairly.. The sooner It goes away the better for everyone in my opinion.

And Apple seems to be the same. And btw, great post overall.

[Boz]

Patents inherently disadvantage competition. That is the purpose of a patent. It says, "I came up with it first so you can't use." Duh.

Yes, but you that's not how patents work.. Just look Apple for example but Microsoft does that too.. They patent every idea (even if it was never made into a product or software) in very very vague terms because patent systems allows them, then they apply for patent and then they wait. Patents are not granted quickly and sometimes it takes years or even decades to get a patent on something. So instead, what they do as we have seen several times in the past months Apple or Microsoft or any company really, applies for some generalized patents and they sue people on it who actually make something that actually uses even remotely similar system.

Basically what the companies who patented these ideas and generalized concept stifle competition plain and simple and that's why patent system needs to be completely overhauled.

You should NEVER ever be allowed to patent ideas alone. You have to make a commercial PRODUCT or application in order to submit for patent. That's who it should be and then patents would actually be valid. You could go and point to a product or software using that technology and that's ok. But right now, they don't even have hardware or software developed and they are allowed to patent it and troll everyone who even comes to the similar idea. It's awful.

[Ryoken]

i wonder how much MS makes off iPhone

Nothing I'd assume, Apple and MS have a patent sharing agreement.. They both get to use each others..

[mdtaUK]

Its a fault with the patent system, which everyone exploits!

At least Microsoft allows these products to go to market, and does not demand competitors stop producing the products. Google should take responsibility for Android to ensure it does not intrude on patents, yet Microsoft take the blame!

[LaP]

And Apple seems to be the same. And btw, great post overall.

All big companies are. And HTC would do the same if it was in the same boat. Like someone said earlier it's not a problem between HTC and MS it's a flawed patent system problem.

[andrew_f]

Nothing I'd assume, Apple and MS have a patent sharing agreement.. They both get to use each others..

Pretty sure that ended years ago.

At least Microsoft allows these products to go to market, and does not demand competitors stop producing the products.

This. Have people forgotten how Google stopped a number of phones shipping from Verizon because they had Bing built in?

[Neo003]

I don?t' see anything wrong with the patent system, you make something (or don't) and you patent it on time. It's your property and is someone uses you've every right to get you fair share.