Microsoft asks for $15 for each Android phone Samsung sells

by Phil Hornshaw

The world of patents is a bit of a confusing labyrinth, especially when it comes to technology.

Many rival companies pay one another licensing fees for their products because one or the other owns a patent here or there that’s key to the creation of that product. For example, an on-going story for Apple developers has been the demand of licensing fees for the use of an in-app purchasing patent by a company called Lodsys, to whom Apple and Google pay a licensing fee for the use of the technology. A lawsuit between camera maker Kodak and Apple and Research In Motion, the maker of BlackBerry, could result in a $1 billion award for Kodak if it should win – again, because it claims the smartphone makers used its patents without its permission and without paying.

Microsoft is also the owner of a number of patents, and it’s asking Samsung for licensing fees to use them. The tech giant wants $15 in royalties for every Android handset that Samsung sells, according to a story from Reuters, because it owns a number of patents that Samsung makes use of for its products.

This is kind of a big deal because Samsung is a huge player in the smartphone manufacturing market. Here’s a quote from the Reuters story:

“Analysts forecast Samsung, the world's No.2 handset maker, to have sold about 19 million smartphones in the April-June quarter, with the dominant position running on Android. It is widely expected to emerge as the No.1 smartphone maker, replacing Nokia's more than 10-year reign.”

That’s $285 million to Microsoft on those 19 million smartphones, so obviously this is a high-stakes issue. The Reuters story states that Samsung is expected to bargain down to a lower royalty price of $10 per phone – just $190 million on those 19 million smartphones sold between April and June – in exchange for more involvement with Microsoft’s Windows Phone 7 platform, which is steadily growing.

Microsoft reportedly came to a similar royalty agreement with Taiwanese handset maker HTC on its Android devices in April 2010. The company owns several Windows mobile software patents, which it licenses to other phone makers for use in their devices.

There’s a lot of money to be made by Microsoft in capitalizing on its patents for Android devices. Recent numbers from comScore, reported by SlashGear, find that Android holds 38 percent of the smartphone market. Running a survey of 30,000 smarpthone owners for three months beginning in February, comScore found that Google’s share of the market increased during that time about 5 percentage points, rising from 33 percent of the market in February to 38 percent in May.

Meanwhile, comScore’s numbers show that Samsung device owners make up 24 percent of smartphone subscribers, so reaching a deal with the company is an important step for Microsoft, which, as the numbers show, could be losing out on millions in licensing fees for all those devices.