Post 24: Microsoft usher their biggest victory: patent licensing agreement with Foxconn

Microsoft and HonHai Precision Industry (also known as Foxconn) stuck a major patent deal on Tuesday of this week. The Taiwan based electronics manufacturer will pay royalty to Microsoft for a huge line of products that run on Google’s Android mobile or Chrome operating systems. Hon hai manufactures 40% of consumer electronics in the world, including smartphones and tablets that will run on Google operating systems. The patent deal is a major coup for Microsoft, which stands to make a lot of money in royalties. Microsoft has always insisted any Android phone manufacturers should get their authorization in order to access their patents. After struggling for many years, Microsoft now has 1,100 pacts with almost half of the world’s contract device manufacturers. The list includes companies like Samsung, LG, Pegatron, Quanta, Acer, HTC and Bames & Noble.

 Android is currently the largest mobile operating system in the world, with the usage of more than 750 million mobiles. According to Chairman of Google, Schmidt, Android smartphone users will exceed 1 billion in a year or two. I think such a high growth rate is mainly because Google’s strong technical capabilities and ability to grasp the mobile Internet, as well as Android’s unique design that is open and free. We have to know that Android is free just for the system itself and its source code, not involve the relevant patents.

Nevertheless, there is never a free lunch in the world. Microsoft, which had been pushed to the awkward position by Google, can do nothing about this turned to launch a “containment” war using its patents. We can see from this patent case that Android is not really free. An operating system involves lots of patents, including file management, communication management, displays, interactive, browser and other aspects. Many of these patents are needed to pay patent licensing fees to the patents owners, such as Microsoft and Apple. Google has indicated that it would not sign any patent license agreement with Microsoft and other companies, nor does it represent their OEM and partners to do these things. It means companies like Huawei and ZTE need to negotiate the patent licensing with Microsoft themselves. 

Based on Microsoft’s strategy above, as well as its determination and efforts when charging patent licensing fee from those Android phone manufacturers. I think after getting money from the big brands and small brand bulk of foundries, Microsoft has no reason to give up the chance to collect money from the rest of Android devices. On one side, Microsoft can increase its revenue from its patent licensing; on the other side, Microsoft thinks it can promotes its Windows Phone System, which I doubt whether it can be succeed. Up to now, Microsoft makes more revenue based on its patent licensing from Android rather than Windows phones. I am about seeing another Nokia, which survive mainly on its patent. I think increasing containment of Android can be seen as a positive counterbalance from Microsoft to Google, but it seems like the strategy cannot form the true meaning of difficult obstacles to Android at this point. Microsoft might need to think about more approaches to enhance its Windows phone in order to survive in the smartphone market.