HTC Pays Microsoft for Google Phone?

From The Register:

HTC has agreed to pay Microsoft a royalty when it sells a mobile phone running Google's Android operating system.

But why does Microsoft make money from Google's software? Android is based on open source software - and Microsoft has long raised fears that aspects of Linux may infringe on its patents.

...

Microsoft's bland eight-line statement makes no mention of which patents are covered. Hat tip to Ina Fried at CNET for joining the dots.

...

Mobile players like Nokia, Apple and RIM are in the midst of a patent lawsuit daisy chain.

Microsoft's press release is here.

From Ina Fried at CNET:

The mobile phone wars got a more interesting late on Tuesday as Microsoft publicly asserted for the first time that Google's Android operating system infringes on its intellectual property.

Microsoft has taken the position, according to those close to the company, that Android infringes on the company's patented technology and that the infringement applies broadly in areas ranging from the user interface to the underlying operating system.

In a statement to CNET, Microsoft deputy general counsel Horacio Gutierrez said that, although Microsoft prefers to resolve intellectual property licensing issues without resorting to lawsuits, it has a responsibility to make sure that "competitors do not free ride on our innovations."

His comments came as Microsoft and HTC announced they have inked a new patent deal that specifically provides the Taiwanese cell phone maker with the right to use Microsoft's patented technologies in phones running Google's Android operating system. Microsoft said it has been in talks with other phone makers.

"We have also consistently taken a proactive approach to licensing to resolve IP infringement by other companies and have been talking with several device manufacturers to address our concerns relative to the Android mobile platform," Gutierrez said.

Although Microsoft and HTC did not disclose details of the financial terms of their agreement, they did note that "Microsoft will receive royalties from HTC." The deal covers all Android-based phones made by HTC, including the Nexus One, which Google sells directly.

"HTC and Microsoft have a long history of technical and commercial collaboration, and today's agreement is an example of how industry leaders can reach commercial arrangements that address intellectual property," Gutierrez said in a press release announcing the deal. "We are pleased to continue our collaboration with HTC."

My question is, why is Microsoft going after HTC for making an Android phone, and not Google? Why not Motorola who released the Droid in 2009? And why did HTC cave to MS?

The Lost Decade

Daniel Lyons, of Fake Steve Jobs fame, has written an excellent article for Newsweek regarding his thoughts on the differences between Microsoft when Bill Gates ran the company to how Steve Ballmer now runs the company. I am a firm believer that you should not have non-programmers managing programmers. If you do not understand how to do the job, you should not be managing the people that do. This is especially true for non-technical CEO's running technology companies.

The Lost Decade

Why Steve Ballmer is no Bill Gates

Last month Microsoft rolled out Windows 7 and opened the first of a chain of new retail stores. As usual with such announcements, there's been loads of hoopla and ginned-up excitement. But mostly people are just relieved. Windows 7 replaces Vista, one of the most disastrous tech products ever. It also caps the end of a decade in which Microsoft's founder, Bill Gates, stepped aside, and the company lost its edge. (Click here to follow Daniel Lyons).

Ten years ago, when Gates appointed his longtime second in command, Steve Ballmer, as his replacement as CEO, Microsoft was still the meanest, mightiest tech company in the world, a juggernaut that bullied friends and foes alike and which possessed an operating-system franchise that was practically a license to print money. Techies likened Microsoft to the Borg on Star Trek, the evil collective that insatiably assimilates everything around it, with the slogan, "Resistance is futile."

That was then. Now, instead of being scary, Microsoft has become a bit of a joke. Yes, its Windows operating system still runs on more than 90 percent of PCs, and the Office application suite rules the desktop. But those are old markets. In new areas, Microsoft has stumbled. Apple created the iPod, and the iTunes store, and the iPhone. Google dominates Internet search, operates arguably the best e-mail system (Gmail) and represents a growing threat in mobile devices with Android. Amazon has grown to dominate online retail, then launched a thriving cloud-computing business (it rents out computer power and data storage), and capped it off with the Kindle e-reader. Microsoft's answers to these market leaders include the Zune music player, a dud; the Bing search engine, which is cool but won't kill Google; Windows Mobile, a smart-phone software platform that has been surpassed by others; and Azure, Microsoft's cloud-computing service, which arrives next year—four years behind Amazon.

How did this happen? How did Microsoft let tens of billions in revenue (and hundreds of billions in market capitalization) slip through its fingers? Hassles with antitrust regulators distracted Microsoft's management and made the company more timid. But the bigger reason seems to be that in January 2000, Gates stepped down as CEO. It's been downhill ever since.

Ballmer is by all accounts an incredibly bright and intensely competitive guy. But he's no Bill Gates. Gates was a software geek. He understood technology. Ballmer is a business guy. To Ballmer's credit, in his decade at the helm Microsoft's revenues have nearly tripled, from $23 billion to $58 billion. The company has built a huge new business selling "enterprise" software—programs that run corporate data centers. Microsoft has also done well in videogames with its Xbox player.

But the problem with putting nontechies in charge of tech companies is that they have blind spots. Gates was quick to recognize that the Internet represented a threat to Microsoft, and he led the campaign to destroy Netscape. In those days Microsoft was still nimble enough that it could pivot quickly and catch up on a rival. Since then the company has become bureaucratic and lumbering.

Worse yet, as Microsoft slowed down, the rest of the world sped up. The new generation of Internet companies needed little capital to get started and could scale up quickly. Google got so big so fast that by the time Microsoft recognized the threat, it could not catch up. With Apple, the threat was not the iPod player itself but the Internet-based iTunes store; by the time Microsoft could create a credible clone of the Apple store, Apple had the market locked down.

Meanwhile, Microsoft's core business hit a snag with Vista. Its engineers have spent three years undoing their mess; Windows 7 doesn't leap past what Apple offers, but it's still really terrific. But while Microsoft has been distracted fixing its broken Windows, yet another new crop of Internet saplings has gained root: Facebook and Twitter in social media, Hulu and YouTube (owned by Google) in online video.

And so it goes. This is perhaps why, in the 10 years of Ballmer's reign, Microsoft's stock has dropped by nearly 50 percent, from $55 to $29. (Apple shares have climbed 700 percent; Google has gone up 400 percent since its IPO in 2004.) A spokesman for Microsoft points out that the company pays a quarterly dividend and in 2004 paid out a special dividend worth $32 billion. Still, it's been a pretty dismal 10 years. Unless the company can do more than focus on the past, the next decade might not be any better.

Broken Promises

Microsoft Lowered Vista Requirements To Help Intel Sell Incompatible Chipsets

So now that the "Vista Capable" lawsuit is a full-blown class action, the judge has unsealed all 158 pages of emails between Microsoft execs trying to sort out what went wrong with the sticker program. While bits and pieces have been blacked out, what remains is still fairly incredible -- although Intel's 915 chipset was initially rejected as compatible with Vista, MS execs flatly admit that "In the end, we lowered the requirements to help Intel make their quarterly earnings so they could continue to sell motherboards with the 915 graphics embedded" and "We are caving to Intel. We worked the last 18 months to drive the UI experience and we are giving this up." On top of that, it seems that the company was getting direct feedback from retailers that the stickers were confusing, with Wal-Mart appealing directly to HP to pull Vista Capable stickers from low end machines, and an MS exec saying that "I was in Best Buy listening to people and can tell you this did not come clear to customers. We set ourselves up." That's pretty damning, if you ask me -- and the complete emails, linked below, are full of similar bombshells. Looks like this case may have some serious legs after all.

Read - Seattle Post-Intelligencer coverage of the case
Read - PDF of all the emails