Even if Microsoft’s smartphone and tablet offerings fail to gain an audience, the company still earns significant revenues from the sale of Android devices, thanks to the “patent licensing agreements” it aggressively pursues with manufacturers. And now Microsoft’s managed to lasso another big one on that front: Hon Hai, the parent company of Foxconn, which manufactures enormous numbers of Android-based gizmos.
Under the terms of the new agreement, Hon Hai will pay Microsoft undisclosed royalties for the Android and Chrome OS units manufactured under its roof.
Microsoft’s licensing program has proven a notable success; by mid-2012, it had forged agreements with the majority of Android manufacturers worldwide, including Samsung and HTC. But not all manufacturers have submitted quietly to Microsoft’s demands—Barnes & Noble, which builds the Android-based Nook tablet, did its best to fight back via the courts before finally acquiescing to an agreement last year. Motorola Mobility, which is owned by Google, still refuses to submit—a battle that could continue for quite some time.
“The fact that any Android and Chrome devices made by the Hon Hai group in the future will result in royalty payments to Microsoft is, in and of itself, bad news for Google,” patent expert Florian Mueller wrote in an April 17 blog posting, “which has flatly denied that Android devices need a patent license from Microsoft even though its own Motorola Mobility subsidiary has in practical terms already lost its own patent dispute with Microsoft by a wide margin.”
Mueller listed Microsoft’s licensing “wins” at 19. “I also believe it won’t take too long before Google’s Motorola Mobility subsidiary will be added to this list,” he added. “It has zero leverage against Microsoft with its own patents (I’m sure it will lose another decision in Mannheim on Friday), but it has been found to infringe various Microsoft patents.”
Microsoft has achieved such success in its licensing efforts thanks to a deep patent reservoir, coupled with the enormous amounts of cash it can deploy in a legal battle. Most manufacturers regard those factors and decide that paying a certain amount per Android device is cheaper than battling the situation out in open court. The irony, of course, is that if Microsoft continues on this successful track, revenue from its licensing efforts could very well outpace any earnings from its actual smartphones and tablets.
“Hon Hai is the world’s largest contract electronics manufacturer that holds more than 54,000 patents worldwide,” Samuel Fu, director of the Intellectual Property Department at Hon Hai, wrote in a statement. “We recognize and respect the importance of international efforts that seek to protect intellectual property. The licensing agreement with Microsoft represents those efforts and our continued support of international trade agreements that facilitate implementation of effective patent protection.”
For added amusement, imagine that statement being read through gritted teeth.