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.
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.