M-Cam casts doubts on Microsoft's Android patent portfolio

M-Cam casts doubts on Microsoft's Android patent portfolio

Summary: China revealed exactly what patents Microsoft has in its Android patent portfolio. After examining these patents, M-Cam doubts the validity of many of Microsoft's Android claims.

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When the Chinese government revealed Microsoft 310 Android patents, I predicted that Microsoft Android patent portfolio would face legal and business challenges. I was right.

MSFT-Android-Patents
Taken all-in-all, M-Cam found Microsoft's Android patent claims to be far less significant than Microsoft would have you believe.

M-Cam, a global financial institution that advises corporations and investors on corporate finance and asset allocation by underwriting intellectual property (IP) and intangible assets (IA), has studied Microsoft's Android patents and found them wanting.

Indeed, M-Cam's analysts speculated that the Chinese Ministry of Commerce (MOFCOM) disclosed Microsoft's patents "to counteract Microsoft’s [patent] choke-hold on the smartphone market. By disclosing the detailed list of these patents, companies who currently pay a license to Microsoft for the Android platform may discover that they have patents on the same technologies which precede Microsoft’s patents. This may create an opening for them to either negotiate a better deal or demand that Microsoft license from them. "

So, M-Cam looked at the question of "whether Microsoft actually owns proprietary rights to the Android OS or is the company unfairly taxing device makers by exploiting an uninformed belief in its supposed innovation? "

The company then assessed "Microsoft’s alleged Android portfolio and commercially scored the U.S. granted patents using M-Cam’s commercial asset underwriting systems. This assessment measured the commercial strength and transferability of each patent. Commercial patents are linked directly with cash flows and may have a basis for licensing."

They found that "21 percent of Microsoft’s alleged Android portfolio scored as commercial versus 79 percent as non-commercial. This means that only one fifth of the portfolio was commercially relevant, casting doubt on the overall viability of the Microsoft licensing packages."

Specifically, there's a surprising number of abandoned and expired patents already in Android. Thus, "Much of the Android platform may, in fact, be a 'Freedom to Operate' space and already part of the public domain." From these abandoned and expired patents, M-Com thinks that companies could find free patent alternatives to the Microsoft licensing package.

Thus, the more than twenty companies that have signed Microsoft Android patent deals made to date may have wasted their money. This is not a trivial sum.

Microsoft may be making as much as $8 in patent licensing fees from every Android device sold. This means Microsoft may have made as much $3.4 billion in 2013 from Android sales. This is far more than it makes from its Windows Phone operating systems.

M-Cam continued to dig deeper into Microsoft's patents and found that more than 40 of Microsoft's commercially viable patents had been preceded by patents from other companies which Microsoft had not cited. This opened the patents up to question as well.

M-Cam-MSFT-Android-Prior-Art
M-Cam also found that more than 40 of Microsoft's patents many had been preceded other companies' patents.

Therefore, M-Cam concluded, "If Microsoft’s claim to ownership of the Android OS is not as strong as it has insisted, then its patents on smartphones may not be the standard-essential patents (SEP) that it claims they are. Further analysis of these patents is required for a definitive answer."

The end result will be that Microsoft's Android patent portfolio will face legal and business challenges in the coming year. There is more than enough doubt about these patents' "value" that competing companies will start opposing Microsoft's licensing deals in both the courtroom and the boardroom.

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Topics: Mobility, Android, Google, Legal, Linux, Microsoft, Mobile OS

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54 comments
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  • When Barnes & Noble stood up to Microsoft

    All of Microsoft's patents but one were tossed and I recall that there were 5 patents alleged initially in the case. Pretty close to 1 out of 5 as determined by M-Cam.

    Microsoft and Barnes & Noble ended up settling, with Barnes & Noble gaining both a business partner as well as $300 million U.S. And Microsoft gaining an interest in Barnes & Noble's digital book business.
    Rabid Howler Monkey
  • A legal opinion...

    ...as to the validity and applicability of the disclosed patents would be helpful. That doesn't appear to be exactly what is reported here.
    John L. Ries
    • You can only get that from a court.

      So until somebody takes this to court it is just an "opinion".
      jessepollard
      • Lawyers are paid to give opinions

        The only official ones come from judges, but part of the job of a lawyer is assessing how likely a legal claim is to prevail in court, so they can advise their clients accordingly. And lawyers (especially law professors) do sometimes offer their opinions on such things to the public as well.
        John L. Ries
        • A Definitive Answer

          The line "Further analysis of these patents is required for a definitive answer" says to me they're just guessing. I would think a major electronic corporation would have their legal department check out the patents before shelling out $8 per handset. They wouldn't just take Microsoft's word for it.
          iSmort
          • Research

            The article notes that some of the MS patents may essentially be a rephrasing of existing patents owned by others. Thus, the MS patent is invalid. Also, the prior art come into play. If there is prior art it invalidates the patent. What the review is suggesting is the real MS portfolio is likely only 10 to 20 minor patents not 310 that MS claims.

            If this is true, this could leave MS vulnerable to having to either renegotiate the terms with the possibility of refunding fees or being sued for fraud.
            Linux_Lurker
          • sued for fraud.

            That was my first thought on this as well.

            If MS falsely represented the strength of the portfolio and received value based on that false representation they would seem to have left themselves open to penalties for that. It will be interesting to see how this plays out in coming months. With all that cash on the table I'm sure there will be parties to challenge Microsoft on this heavy-handed shake-down.
            BoxOfParts
          • Fraud?

            Even if MS patents are found invalid, about the only recourse anyone who has paid MS for using covered tech is to stop paying. When you agree to pay typically you are signing over your indication that you agree that the patents are valid.
            Rann Xeroxx
          • Depends on the cost

            The companies licensing the MS patents have to evaluate the cost of going to court vs. the cost of licensing the patents. Unfortunately in our court system where each side pays, even if they win, cost is a factor.
            Harlon Katz
          • Government legal systems across many countries

            Will come into play.

            A nightmare for Microsoft. The repercussions can be detrimental if government entities get involved.
            Uralbas
  • and given

    That the signed deals are all under NDA all of this is just wishful thinking and useless conjecture. That or the lawyers for some of the biggest firms in IT all need to be fired for signing off that the deals where not worth fighting in the first place.

    Also what non-Android specific patents are part of those deals that were signed by the companies is an element that is not mentioned and plays a part in it as well.
    aesonaus
    • It might not be the lawyers

      It's quite possible that several CEOs need to be fired for cowardice. The lawyers are mere advisors and agents; it's the CEO who is responsible for what his company does.
      John L. Ries
      • +1

        Exactly, lawyers are just lawyers. I have had a few. They did as I instructed them to do. The CEOs are the dumb asses.
        Tim Jordan
    • most who paid (if not all)

      require a Microsoft licence as well, so its more like blackmail than valid patents. Otherwise MS would have gone after Google
      deaf_e_kate
  • This story is only just beginning ...

    ... what China did to MS by outing these patents was on a similar scale to what Snowden did to the US government by outing its cherished secrets. Prior to this debacle, MS did everything in its power to protect this prized list of IP. It had a close call with Barnes and Noble, but then likely paid them off to guarantee their cooperation in keeping the information safe. But while they were able to terrorize private businesses with patent portfolio NDAs, NDAs don't work so well with governments. When private businesses don't cooperate, you get relief in the courts. But governments are beyond the reach of the world's judicial systems. So now the pain is beginning for MS. And most of that pain will not likely be public. It will be akin to the pain a gambler feels when he *knows* the other players have already seen his hand. There is little doubt that the lawyers are already at work with attempts to "monetize" this new information. The end result can only be that Android devices will get progressively less expensive and more competitive as this all works itself out. And all of this will likely happen under the veil of secrecy that MS is known for enforcing.
    George Mitchell
    • The only problem with your theory is that many other corporations disagree

      with you.

      In the end many, many lawyers appear to have researched the patents and seen the validity behind MS's claims.

      They signed NDA's and licensed the patents.
      William.Farrel
      • You know this how?

        “In the end many, many lawyers appear to have researched the patents and seen the validity behind MS's claims.”

        Yes, I know just guessing....
        daikon
        • SJVN is not a lawyer

          He is not a journalist. He is a blogger who is transparent in his adoration LINUX and it's derivative OSs Here he crows that he predicted court action over patents. Not exactly a reach. And here we go again with one of his. "legal opinions". Let it go. He doesn't know jack.

          Farrel's comment has more logic in it though it is a guess. It presumes agreements to date reflect rational behavior. The CEOs and their attys take none of this lightly.

          Sjvn's brilliance is getting the reaction he does. Remember this is the year of Linux (redefined as necessary)...
          Luke Skywalker
          • Depends on the definition of "rational behaviour".

            You can spend a million making an exhaustive research of a patent...

            Then spend up to 15 million in a lawsuit over that same patent to get a chance of having it voided.

            And repeat for 300 patents for a cost of 4.8 billion...

            OR

            You spend a million or two per year to avoid the issue for 300 patents.

            Which is the "rational behavior"?
            jessepollard
        • so are you...

          Luke Skywalker