Why Microsoft is right to chase Android patent deals

Microsoft is not only right to chase companies that use Android and get them to sign patent deals, it has a duty to do so in order to maximize shareholder return.
Written by Adrian Kingsley-Hughes, Senior Contributing Editor

As Microsoft continues to struggle to gain traction with its Windows Phone platform, Android is proving to be quite a cash cow for the Redmond, Wash.-based software giant, as the company signs more patent licensing agreements with companies that want to use Android.

The latest companies to sign up to Microsoft's intellectual property (IP) licensing program in exchange for being able to use Android without fear of being sued are handheld devices and terminals maker Hoeft & Wessel and Android tablet maker EINS.

While the details of the deals remain confidential, Microsoft admits that in both cases the deal involves Microsoft receiving a royalty. Similar deals that Microsoft has signed with companies such as LG, Samsung, and HTC net it some $15 for every Android device sold.

While on the face of these deals look like a Goliath pushing around the little guy (or, at the very least, smaller Goliaths), and making money off of a platform that, on the face of it, the company has nothing to do with, Microsoft is right to chase Android patent deals.

In fact, it has a duty to do so. Here's the deal.

Microsoft is a publicly held corporation, and like every other publicly held corporation it is beholden to its shareholders to maximize returns, even if this means hiring an army of lawyers and going after companies that it believes owes them money. That's how companies operate.

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If Microsoft, or any other company in a similar position, chose not to take steps to maximize shareholder return then the company would be opening itself up to a shareholder lawsuit.

The issue here isn't whether it is fair for Microsoft to do this, or somehow morally or ethically wrong, it is legally sound. It has nothing to do with taking sides or playing fair and everything to do with following the law. Microsoft believes that Android infringes on its intellectual property, and as such Microsoft needs to show its shareholders that it is collecting money owed to it.

For the 2012 fiscal year, it was estimated that Android licensing deals would pull in some $440 million for Microsoft.

When Microsoft, or any other company, approaches another entity with intellectual property infringement claims, things can go one of two ways. The companies can come to an arrangement, as Microsoft has done in this case, or they can duke it out in the courtroom. Deals are preferable because they are quicker, easier, and a lot less painful, but sometimes things end up in the courts and the matter is put in front of a jury to decide what happens.

Forget the fanboys and their pseudo-religious chanting and see these deals for what they really are -- a big corporation maximizing profits and shareholder return.

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