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Hardware 2.0

Adrian Kingsley-Hughes

Microsoft pulls in $444 million per year from Android patents

By | September 29, 2011, 1:39pm PDT

Summary: Microsoft is expected to pull in a revenue of some $75 billion for the 2012 fiscal year, so $444 million from Android is just loose change.

When you spending your hard-earned cash on an Android smartphone or tablet, you’re actually adding a few bucks to Microsoft’s massive cash haul.

According to a note from Goldman Sachs’s technology analyst team, Microsoft is pulling in between $3 and $6 per Android device sold thanks to patent deals signed with companies such as Samsung and HTC. In all this works out at some $444 million per year for the Redmond giant.

Sounds like a lot, but in the grand scheme of things it’s a drop in the ocean. Microsoft is expected to pull in revenue of some $75 billion for the 2012 fiscal year.

In other words, it’s loose change.

Android might be a cash cow for Microsoft, but you do have to question whether the return Microsoft is making off of the patents is offsetting the damage Android is doing to Microsoft’s mobile platform aspirations.

The upside for Microsoft though is that Android sales are set to soar … so that $444 million will also grow.

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Adrian Kingsley-Hughes is an internationally published technology author who has devoted over a decade to helping users get the most from technology.

Disclosure

Adrian Kingsley-Hughes

All opinions expressed on Hardware 2.0 are those of Adrian Kingsley-Hughes. Every effort is made to ensure that the information posted is accurate. If you have any comments, queries or corrections, please contact Adrian via the email link here. Any possible conflicts of interest will be posted below. [Updated: February 23, 2010] - Adrian Kingsley-Hughes has no business relationships, affiliations, investments, or other actual/potential conflicts of interest relating to the content posted so far on this blog.

Biography

Adrian Kingsley-Hughes

Adrian Kingsley-Hughes is an internationally published technology author who has devoted over a decade to helping users get the most from technology -- whether that be by learning to program, building a PC from a pile of parts, or helping them get the most from their new MP3 player or digital camera.

Adrian has authored/co-authored technical books on a variety of topics, ranging from programming to building and maintaining PCs. His most recent books include "Build the Ultimate Custom PC", "Beginning Programming" and "The PC Doctor's Fix It Yourself Guide". He has also written training manuals that have been used by a number of Fortune 500 companies.

Adrian also runs a popular blog under the name The PC Doctor, where he covers a range of computer-related topics -- from security to repairing and upgrading.

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RE: Microsoft pulls in $444 million per year from Android patents
animekenji 28th Nov
@hazzzaa85

The problem is that Microsoft may not even have any legitimate patent claims against Android. They say they do but when asked what patents are being violated they are loathe to tell. Patents MIGHT be being violated, but it is just the threat of litigation that is causing companies to pay up. If Microsoft is merely threatening to sue without a legitimate claim unless someone pays up, then that is extortion. Microsoft should be forced to publicly disclose which patents, if any, are being violated and if none are then someone needs to go to prison.
And your point is...?
@willfordcr They have to have something that makes money ... BING sure is a loser ($9B) ... too bad the Microsoft money folks have to look to open source for help ...
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this is a despicable racket
The Linux Geek 29th Sep
that does not even make business sense.
the DOJ should investigate it!
@The Linux Geek
What's wrong with the business sense?
@Darkninja962
MS requires an NDA before it will talk specifics. This prevents anyone telling the Linux developers which code is at issue so that it can (potentially) be modified to work around the patent. Or maybe an expert "prior art" search across the Internet could show that the patents are invalid anyway.
@The Linux Geek
Errm... MS owns the patents, they signed a licensing deal with the manufacturers. This is how patents are supposed to work. You invent a technology, or the concept of, patent it, then either build it yourself, or license other companies to do so on the proviso they pay you royalties from their sales.

perhaps you'd rather they just sued people ala the fruit company?
@hazzzaa85

Absolutely. It's how patents work. There's a few options for people that come up with great ideas and patent them. One, build your own widget and make money leveraging it against people that didn't conceive of it. Two, sell it to a company, group, or person that needs it but didn't conceive of it. Three, license it to (company, group, person) that wants to make use of it but did not conceive of it. In every scenario, the patentor makes money from an idea. The concept is simple, the system is not broken. The inventor even has rights to sue others that try to steal it. Why is this so hard for anyone to understand? Personal bias and lack of personal patents or patent experience.

Didn't agree much with the last pointed question, though. Seemed too confrontational and biased, maybe based on past contentions of said 'fruit company' or their fanbase' history.
@hazzzaa85 you seem very unfamiliar with what's happened with the patent system.

Originally, a person or small firm would spend years inventing a better threshing machine, or gin press, or mousetrap. They would patent the _entire_ device, so that a larger better funded company could not COPY it and use their greater fiscal resources to drive the inventor out of business. The inventor could then either sell his entire invention or license it to a company that wanted to manufacture it for him.

Then we got into software patents. There's a patent on using the XOR operation 3 times in a row to invert a signed binary number. There's a patent on using the keypad on your phone to do anything except call another telephone. There's a patent on pretty much every tiny aspect of making a modern smart device of any kind, covering anything from the display, the user interface, the buttons, the case, the software the code is written in, the details of every aspect of the cpu inside the device - NONE of which represent a complete invention.

The patent office as gone basically to the point of allowing someone to patent the process of wiping your butt from front to back, and then banning every bathroom in the world unless they license the wiping patent since it might be involved in the restroom product and allowing front-to-back wiping would be "stealing" the patent owners "IP".

Go ahead. Explain to us what aspect of Android is "stolen" from MSFT. Be specific.
@hazzzaa85
That's how it's supposed to work, problem is that MS is telling which of it's patents Android violates. It just tells everyone that Android violates their patents and that they better pay up or else they are gonna sue. These companies have been so beaten down by litigation that they just pay up instead of fighting. Meanwhile MS refuses to reveal what patents are being violated so that Android developers can't take out the offending code.
It's pretty sinister and an unfortunate fact of software development these days and one that is stifling a ton of innovation. Especially innovation coming from little start ups that just don't have the kind of money needed fight this kind of competition through litigation.
Personally I think there should be a law that if someone threatens you with patent infringement, they should be forced to disclose which patents are being violated.
@hazzzaa85

The problem is that Microsoft may not even have any legitimate patent claims against Android. They say they do but when asked what patents are being violated they are loathe to tell. Patents MIGHT be being violated, but it is just the threat of litigation that is causing companies to pay up. If Microsoft is merely threatening to sue without a legitimate claim unless someone pays up, then that is extortion. Microsoft should be forced to publicly disclose which patents, if any, are being violated and if none are then someone needs to go to prison.
@The Linux Geek : Why amI not surprised from someone who wants everything for free.
Not exactly chump change in my book. It's more than I expected they would make. Oracle may be licking their chops right now in seeing those numbers.
@Rama.NET
"that means you know concretely that they haven't provided any example."

Linux is developed in public. If the examples had been revealed then I'd have heard about them.

I'm not talking about the "Darl McBride" sort of examples that are only revealed if you promise not to talk to the people best qualified to evaluate them...
Nice post Adrian.
@wright_js
"There are also plenty of examples of patents that Linux/Android break, including FAT File System support

MS's patents regarding FAT32 are about Long File Name support. Linux can use the original FAT filesystem without paying MS a dime. And besides, Linux worked around the Long File Name problem too:

http://www.geek.com/articles/chips/clever-linux-folk-find-way-around-microsoft-fat-file-system-patent-2009073/

I also suspect that merely reading FAT32 is fine; you only get into difficulties when writing to it.

As for the "battery signal strength" stuff, that sounds like a fine candidate for "prior art"...
Anyone wanna take a guess at the cost of MSFT's legal team, plus expenses per year? $200/hr x several-hundred-lawyers would eat a hundred million pretty quick...
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Deleted by author
Zogg Updated - 30th Sep
.
@Zogg It is rather "McCarthy"-ish to insist that Android is in violation of a couple hundred patents, and then refuse to provide so much as a single example.

I wonder if at some point someone in the justice department might look at this case (and many others - MSFT is not the only bully in the neighborhood) and explore what amounts to "protection racket" charges since the patent attacks seem to boil down to "pay us off, or we'll ruin you with endless, potentially baseless lawsuits which will cost you more to defend against (right or wrong) than what we demand for protection-money"
@spark555 & @Zogg
that means you know concretely that they haven't provided any example. Could you please elaborate your knowings.
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@spark555

"...to insist that Android is in violation of a couple hundred patents, and then refuse to provide so much as a single example."

If only you'd have finished your sentence.

"...to the general public, instead of only the companies involved that agreed enough to come to a license agreement."

PS - Invoking McCarthyism in a patent forum? Straw grasping, or grandstanding?
@Zogg Those directly involved usually do know, but it is usually confidential (standard lawyer practice), so for the outsider, it looks like it is always a fishing excercise, whereas it often isn't.

There are also plenty of examples of patents that Linux/Android break, including FAT File System support (it isn't the native file system, but support is built in), battery and signal strength indicators (both hardware and software components of the action)...

If Samsung remove the ability to read "industry standard" formatted memory cards and don't include any electronics to measure battery and signal level in their hardware, they could knock a couple of bucks off their licensing costs... But would you want a phone that suddenly switches off, without warning you?
@otaddy Because they haven't.

If you know otherwise - by all means TELL US. What patents does MSFT claim Android is in violation of?
@otaddy
It would be totally ignorant to assume that MS hasn't told Samsung what Samsung is getting for the money it is paying MS.

Samsung has a legal team.

That legal team reviewed all of MS's communications.

If Samsung believed these patents weren't valid, Samsung would fight them.

People like spark555 think they have a right to know but they don't. Samsung has a right to know. spark555 is a nobody with absolutely no right to know.
@otaddy yes I wonder this too. and can he also give an example?
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@otaddy
However, when the Open Source community finally learnt what these were, we not only discovered that the code was there legally but also that it was completely pointless anyway. So the developers deleted it.

We know from the Barnes and Noble case that MS refuses to be specific unless its pigeon signs an NDA first. From this, we can deduce that MS is actively preventing anyone from working around the claim or removing any infringing code: it's all about extracting money from companies.

MS's secrecy also prevents the Open Source community from assisting with a "prior art" search, which would be quicker, cheaper and far, far more extensive than any search that the pigeon would be able to conduct on its own.
@spark555
While keeping the developers in the dark, of course. If the Linux developers knew precisely what MS's complaint was then the issue could probably be resolved far, far more cheaply.

[Repost: my original seems to have vanished!?]
@Zogg Those that are sued do know. But it is not made public knowledge.

Microsoft did a lot of research and development in the affected areas and they are getting the due compensation for others exploiting their work.

Common patents that seem to come up in all these cases include FAT/FAT32 support and electronics to measure signal strength and battery level and pass it on to the user via software, among others.

It would be difficult to include that functionality, without infringing on the patents. It is probably cheaper for the companies involved to pay the licensing fees, rather than to invest in a clean room environment to re-invent the technology, without infringing on the existing patents.
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@wright_is
"Microsoft did a lot of research and development in the affected areas and they are getting the due compensation for others exploiting their work."

That's a matter of interpretation: IIRC, the long file name patent is (like so many software patents) rather obvious. Besides, doesn't it only apply to writing long file names? And the original FAT filesystem is not affected either.

As for any "battery level" stuff, that sounds ripe for a prior art search.

"It is probably cheaper for the companies involved to pay the licensing fees, rather than to invest in a clean room environment to re-invent the technology, without infringing on the existing patents."

I think you're thinking of copyright here, not patents. And I also think the NDA effectively blocks any possibility of giving the Linux developers a chance to code around a problem.
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RE: Microsoft pulls in $444 million per year from Android patents
LoverockDavidson_-24231404894599612871915491754222 29th Sep
Gotta love it. Microsoft makes more from linux than linux companies do! Best part is the irony of that money going into R&D for WP7.
@LoverockDavidson_
+1
@LoverockDavidson_

Microsoft R&D for Word Perfect 7, needs something.
@LoverockDavidson_ : WP7? WordPerfect 7? happy
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Not Android patents as Google does not own the patents, Microsoft does.

You should correct your headline.
plain
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The headline is correct
Zogg Updated - 29th Sep
@Spock Impersonator
Anyone reading the headline would correctly deduce precisely what this article is about, whereas your headline would imply that MS makes $444 million from its entire patent portfolio.

Your pedantry is therefore unwarranted.
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Excellent post
toddybottom 29th Sep
@Mister Spock
+1
sells well this could turn into a 1B/year business for MS.
Which is it? First you say it's a drop in the bucket and then go on to say that it "might be a cash cow".
Mirosoft is not just a computer giant. They own communications technologies, Web technologies, Mobile technologies, and more. Microsoft has more influence on the world than some countries do. No one want's to mess with that. That why they can be like old school gangsters looking for "protection money" or in this case patent money. Companies must play nice or be cut ties to bussness else where.
MS has always been the ultimate bully. Companies sue to protect their intelectual property which far more valueable than gold. But microsoft's evil empire can simply buy out a company to cash in a market they have no chance of succeeding in.
... a year before you minus R&D, support etc. Msft is doing ok.

Google says it's on track to make 1 to 2 billion off all non PC platforms. Since court documents revealed recently that two thirds of Google searches for mobile comes from Apple's iOS, its safe to say Google makes less than 1 billion of Android.

(Msft also makes peanuts of Windows Mobile. I don't know about WP7 but Win Mo several years ago made maybe 200 -300 million a year. Msft sold about 10-15 million Win Mo licenses a year at about 8 -15 bucks a pop.

apple on the other hand will easily clear 50 BILLION a year off mobile. 10 billion every quarter from iPhone alone before iPad, iAds, Apps, Music etc )
unsustainable business model alone. WP7 and Windows 8 better take off or they're toast. If they continue to garner this amount of public antipathy and their products aren't very good, their cash flows will be really hurt when the patent expires.
You guys should all be patent lawyers. You seem so well versed in patent law. Bottom line intellectual property is no different than any other property. The person or company that patented the idea OWNS it. Somehow that does not seem to be registering with a lot of you. How about I come over and just start helping myself to you furniture, it's much nicer than mine, and I don't have the money or resources to buy nice furniture. In a lot of your arguments that is just fine. The system is messed up, you shouldn't have ownership rights to your furniture because you have a better paying job than I do! No patents are not broken. You invent something, you claim you are the first and it's unique, you patent it. Anyone who wants to use your widget has to pay you, or use it without paying you costing you huge legal fees to recover what was yours in the first place. What is broken is companies just stealing patents and figuring that the owner won't come after them. Just like all criminals they think they can get away with it. No difference between me stealing your furniture than company A stealing company B's widget. That is why we have courts, too bad we need them. Oh and to the author I've never heard anyone here call suing for intellectual property rights by Apple trolling? How come?
@skudera@... Also remember that patents are not forever, unlike current copyright law seems to be. US patents from 1995 have a duration of 20 years from the filing date (in order to conform to international treaties on intellectual property), before that it was 17 years. So the idiot trolls who keep harping on FAT patents are just ridiculous. All patented computer tech prior to 1991 is now in the public domain. It's only the latest innovations that are protected by patent. So those trolls that are whining about patents ruining their favorite platform's business only have to wait 10 or 15 years to avoid paying those pesky licensing fees. Or of course they could have original ideas of their own, and patent them.

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