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Sunday, May 29, 2011

HTC Getting Charged By Microsoft Per Device


By: Kareem

According to reports, Microsoft is getting $5 off of every device that HTC sells. This is due to a previous settlement the two companies made during the latter’s lawsuit against Google.

So here’s how it started due to the fact that most of Microsoft can’t outright go after Google to get at Android, they go after the much smaller and easier to settle with device manufactures. Around the end of April last year they decided they would go after HTC for using Android to infringe on their Intellectual Property. HTC, presumably not wanting to end their relationship with Microsoft (they do make Windows mobile devices after all) decided to settle with the company. Turns out that one of the terms of that settlement is that HTC pay Microsoft a $5 royalty fee on every Android device they sell, be it phone or tablet.

Microsoft didn’t just go after HTC either, the big M is also suing Barnes & Noble for using Android on their Nook eReader’s. And they want to up their take from HTC as well. According to reports Microsoft is looking to get between $7.50-$12.50 from the manufacturer for each Android device they sell. Presumably they will want the same from Barnes & Noble as well if they decide to settle.

  • What really dosen’t seem to make sense to me is:
  • Microsoft is suing Android over infringing on it’s IP
  • Microsoft claims that IP is a companies most prized possession and therefore almost priceless.
  • Android is free and Google is not charging companies to use it

If IP is important and Android is free then why is Microsoft profiting off of someone else's IP? I thought that if a company made software free and open source than no other company could profit off the code. I thought that HTC’s profits came from hardware, not software, Shure they make sense. But a skin is a far cry from an operating system.

Seems to me like Microsoft is using it’s lawyers to scare HTC into paying an unnecessary royalty fee that they don’t deserve for an OS they had nothing to do with by threating to not allow the company to make anymore Windows Phone devices.

The real kicker here is that if Microsoft, Oracle, Apple and all the other companies suing other companies for using Android keep making settlement and getting their undeserved cash than Android might end up being more expensive than WP7 and become basically worthless.

It works like this, Microsoft gets $5-$12 for every Android device, then let’s say the trend continues and Apple wins a lawsuit, now Apple gets $5-$12. So now you have to pay between $10-$24 per device you sell. If more companies join in and keep getting more and more sooner or later it’s just not worth it. You end up having to pay these huge costs or just license from another company that allows you to put their software on your devices. This is where it gets a little interesting.

Microsoft has apparently though this pretty well through, during my research I found out that although Microsoft charges OEM’s to license WP7, they guarantee that the manufacturer will get their money back from advertising and other channels. So in essence WP7 is free, just not open source. Not being open source can also be beneficial to a manufacturer as they can count on timely updates and less fragmentation between devices the make.

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