4 October 2014 - In a glimpse of the financial stakes in the smartphone-patent wars, Microsoft said yesterday that Samsung Electronics paid the software giant more than $1 billion for an annual fee to use Microsoft technology in Samsung phones.
Samsung sells smartphones and tablets powered by Google’s Android software. But Microsoft has said some of its patents are included in Android technologies, such as methods for displaying multiple windows in a Web browser. Therefore, Samsung and other smartphone makers pay royalty fees to Microsoft for each Android device they sell.
Neither Samsung nor Microsoft have disclosed previously the size of these royalty payments. The amount of Samsung’s payment made last fall was included in a previously redacted legal filing in a months long contract dispute between the two companies.
In the legal fight that started this summer, Microsoft complained that Samsung failed to honor a 2011 patent-licensing contract between the two companies. Samsung said Microsoft’s purchase of Nokia Corp.’s mobile-phone business in April violated the terms of a business contract between the companies, according to the court filing.
As we know, patent disputes have become common in the smartphone age, and they have spilled repeatedly into courts, including high-profile tussles between Samsung and Apple. The Microsoft lawsuit shows intellectual property remains a flash point among technology giants.
Microsoft is asking a judge to enforce the terms of the 2011 contract with Samsung and declare that the Nokia acquisition doesn’t invalidate the companies’ pre-existing agreement. Microsoft also is seeking $6.9 million in damages because Samsung was late paying the $1 billion royalty payment owed last fall.
And the language!! My oh my. There’s a non-party to this deal that is still at the center of the dispute: Google. About ten years ago, then-Microsoft CEO Steve Ballmer allegedly said (according to a court filing):
“F…ing Eric Schmidt is a f…ing p…y. I’m going to f…ing bury that guy, I have done it before, and I will do it again. I’m going to f…ing kill Google.”
As of today, they’re both doing well, and if anyone was now going to “bury” the other, Google would be far more likely to do it to Microsoft than the other way round (“far more likely” is an understatement).
But Florian Muller (who covers this area in intricate detail) says Google is actually becoming the new Microsoft in terms of the dominant operating system maker of the future — and published an interesting chart from the Wall Street Journal:
Google is making fast market share gains at Microsoft’s expense, in a field of technology in which Microsoft filed tens of thousands of patents over the last 20 years (because it invested tens of billions of dollars in operating system R&D). I would have thought that Microsoft owned a patent thicket that would constitute a lethal entrance barrier even if a new entrant managed to get traction among app developers. Nope.
And it is a complicated ecosystem. The impact of Apple and Microsoft’s IP enforcement efforts was and is obviously not limited to the patents they successfully enforce in court. The fact that they do enforce from time to time (though they both haven’t filed any new claims against Android devices in years) presumably does have an effect on other companies’ decisions. It is very likely that certain features on which Apple and Microsoft hold patents were never incorporated into Android for fear of enforcement. But is Android lacking something today that I as a consumer would miss? No.
There is also the difference in approach: Apple’s exclusionary approach on the one hand and Microsoft’s licensing focus on the other hand. Microsoft has announced a total of 27 Android/Chrome-related license deals and brought infringement lawsuits against only two device makers, while Apple has started three disputes and extended a license to only one Android device maker (HTC).
