We don't know how much HTC is paying in royalties for these patents. In fact, we actually don't even know what patents Microsoft is claiming that Linux-based Android may be violating. Both companies are hiding the specifics under a nondisclosure agreement.
Horacio Gutierrez, Microsoft's deputy general counsel of intellectual property and licensing, said in a blog that "the radio stack -- the functionality that allowed users to make and receive calls ... still commands the highest patent royalties, on the order of 5% of the price the device manufacturer charges the mobile phone operator ... the royalties for codecs (which encode and decode digital media) and other technology represent 1-2% of the price to operators. And now the industry is in the process of sorting out what royalties will be for the software stack, which now represents the principal value proposition for smartphones."
So if the software stack is where the "principal value for smartphones" lies, that means that the royalty payment should be, say, 4%? If so, then $8 from every HTC Droid Incredible from Verizon Wireless, at its fully discounted price of $199.99, goes to Microsoft's wallet. What a deal for Microsoft.
On the record with me, Gutierrez would only say, "Microsoft has a decades-long record of investment in software platforms. As a result, we have built a significant patent portfolio in this field, and we have a responsibility to our customers, partners, and shareholders to ensure that competitors do not free ride on our innovations. We have also consistently taken a proactive approach to licensing to resolve IP infringement by other companies, and have been talking with several device manufacturers to address our concerns relative to the Android mobile platform."
Notice, if you will, that Gutierrez did not say that Microsoft has been talking to Google, the maker of the Linux-based Android operating system. That may make common sense to you, but you're not thinking like a patent troll.
Dealing directly with Google would run the risk of Microsoft having to prove that their patents were both valid and that Linux infringes them. That's taking chances that Microsoft doesn't want to take. Besides, that might lead to Microsoft suing Google and Google returning the favor.
Microsoft doesn't want that. They might lose. Even if they won, they'd be looking at years of expensive litigation. It's so much more profitable to just threaten smaller companies into paying them off.
Google at this time simply told me "no comment" on Microsoft's efforts to profit from their Android spin on Linux. Others in the Linux business were more forthcoming.
Jim Zemlin, executive director of The Linux Foundation, told me, "This is a classic from the Microsoft FUD playbook. A confidential agreement where few terms are disclosed, vaguely referring to an operating system that is beating Microsoft in the market. Microsoft is once again demonstrating that it will attempt to use patents to muddy the waters about the viability of any competitive platform in order to maintain its Windows franchise. Unfortunately for Microsoft, Linux is clearly leading in the mobile space and developers will see this news for what it is and choose to innovation open platforms as opposed to developing on locked-down operating systems from patent-wielding dinosaurs."
Matt Asay, COO at Canonical, the company behind Ubuntu, remarked that Microsoft, which has proven "an utter failure as a mobile product company, [is now trying] its hand as a mobile IP litigation company. Those who can, do. Those who can't, sue. This, to me, is the clearest indication of Microsoft's irrelevance: it's now the hapless litigant."
Microsoft may be irrelevant in mobile phone operating systems, but I see them continuing to try to win a far larger battle: convincing corporate buyers that Linux is plagued with IP (intellectual property) problems and that they need to pay off Microsoft to use it safely. It's a battle they've been fighting for a long time now, starting with its support for SCO and its ridiculous Linux copyright lawsuits. They're no longer trying to fight directly, thus, they're not taking on Google, but by pushing companies that use Linux.
Unfortunately for Linux companies and users, Microsoft is so far getting away with it. Google: it would be a nice time for you to step up to defend your operating system.