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Summary:

It’s estimated that Microsoft rakes in nearly $2 billion a year from Android device makers thanks to patent royalties. That figure could drop significantly going forward as a German court has invalidated one such patent.

Golden piggy bank
photo: Shutterstock / Kristijan Zontar

The cash cow of Microsoft’s royalty income for Android handsets could be milked a little less if courts in the European Union have any say. The Federal Patent Court of Germany spent all day last Thursday reviewing Microsoft’s FAT, or File Allocation Table, patent, and effectively nullified it according to FOSS Patents. The ruling, if upheld in an appeal, would end some payments from Android device makers in on EU sales.

Although this isn’t a world-wide reversal, and could still be reinstated via appeal, it’s a big deal because Microsoft reportedly earns more money from Android device royalties than it does from its own Windows Phone sales: Upwards of $2 billion a year. Device makers that license Exchange ActiveSync, ClearType or other mobile technologies for Android generate these funds. Android handset makers pay between a reported $5 and $10 to Microsoft on every sold device.

HTC Windows Phone 8X

Samsung sold approximately 88.4 million smartphones in the last quarter with most running Android. In a best case situation for Microsoft, those sales times $10 per unit would generate $884 million for the company in a single quarter, for example.

Why the sudden validation of the patent? My guess would be around Motorola; or more to the point around Google. Now that Google’s Motorola is branching out globally with the Moto G, the Google-owned company would be required to pay up for its Android device sales. If that assumption is correct, I’m glad to see it. Google left handset makers on their own to fight with Microsoft on the patents, when I think it should have helped its partners. By doing so now, it’s a better late than never move and one that could hurt Microsoft in the pocketbook.

  1. Ciao, kmq piacere mio :)
    Si l’ho viste e mi piacciono un sacco :) però non so se le puoi inviare anche x la Germania ?!

    Inviato da iPhone

    >

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  2. Terrible analysis.

    1. Microsoft is not licensing 1 patent they are licensing their portfolio of patents to Android developers. So that means even if 1 patent is invalidate the $5-10 covers everything. It will take a lot of invalidation to drop the fee. If a manufacture try’s to renegotiate, MS will simply bring out other patents and say well you aren’t paying fair market value for them so lets renegotiate.

    The invalidation will do nothing to ease the licensing fee.

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  3. If you follow the link to the FOSS site, it does not sound like this ruling will survive on appeal anyway as this is the second time the lower court ruled this way and it was overturned before. Plus the court is going against its own rulings in 2010.

    Sounds like a whole lot of nothing, good or bad.

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  4. Rick Sherlund Monday, December 9, 2013

    $884 for Samsung alone for one quarter, times 4 quarters is way more than the total of almost $2 bil per year so your math does not work, try $3 per unit .

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    1. Rick, bear in mind that the revenue and per device costs are estimates. Samsung sold fewer phones the prior quarters; you can’t figure out a yearly revenue stream with one quarter’s worth of data. ;)

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