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Could high licensing fees scare off Android manufacturers?

by Kristen Nicole

The Android OS started as the underdog, but has swiftly taken market share from RIM, Microsoft, Apple and Nokia. The rise of smartphones has completely changed the mobile economy, and now that Android’s the dominant player, it’s their turn to be on the defensive. Microsoft and Oracle are two of Android’s largest and most adamant opponents right now, taking down Android with a game of patent wars. Both have positioned themselves strongly in the courtroom, and wins for either Microsoft or Oracle could put a strain on Android’s current growth.

Pressure Android handset makers, then make WP7 more attractive

It’s the manufacturers and developers that are caught in the middle of these patent wars, as both Microsoft and Oracle seek royalty payments from Android devices and advertising sales. Microsoft’s centered its arguments around patent infringement, pressuring handset makers to participate in their own licensing program if they want to continue making Android devices. While most of Microsoft’s wins have been with smaller manufacturers like General Dynamics Itronix and Onkyo, larger handset makers are facing increasing pressure as well. Samsung and Motorola are Microsoft’s latest targets, with Microsoft seeking $15 per Samsung Android device. HTC’s already paying Microsoft for licensing, reportedly around $5 per device. With Samsung breaking sales records for its Galaxy S II this week to reach 3 million sales in its first 55 days, Microsoft stands to make hundreds of millions in royalty payments through its licensing program.

It’s a matter of numbers and patent property ownership, as Microsoft’s been churning out patents for years longer than Google has. Microsoft holds approximately 18,000 patents in its portfolio, while Google holds less than 1,000. When it comes to software patents, there’s a lot of room for interpretation and the patent process itself becomes a method of corporate control. While Google’s been innovative in its software-handset team-ups, pricing and distribution, Microsoft’s reigning in its rule through legal jargon and patent muscle. Microsoft won a portion of the recent Nortel patent auction, along with other Google rivals including RIM and Apple. Should Google have gained the Nortel patents, it may have had a stronger case against Microsoft and Oracle in regards to its use of software. And while Google’s not taking these patent infringement cases lying down, the consortium at Nortel’s patent auction could spark an antitrust lawsuit on Google’s behalf.

Driving manufacturers into the WP7 camp?

Microsoft and Oracle are both being bullies about the whole matter, but a successful and high-priced licensing program could deter manufacturers and developers away from Android in favor of Windows Phone 7. Microsoft also has potential legal claims with Nokia software patents as well, giving them even more fodder for patent-bullying. If the cost of making devices and software for Android becomes higher than WP7, the mobile economy could very well shift away from Android’s blooming ecosystem. As Microsoft seeks ways to regain relevancy in the mobile OS lineup, it’s hedging its bets on all sides, with a heavy reliance on software licenses.