Microsoft at risk of losing royalty income for Google’s Android in EU

Golden piggy bank

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.

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