News

With ZTE Pact, Microsoft's IP Deals Cover 80 Percent of Android Phones

• By Kurt Mackie
• April 25, 2013

Microsoft has inked an intellectual property agreement with China-based equipment maker ZTE concerning the Linux-based operating systems fostered by Google.

ZTE is licensing some of Microsoft's patents to cover intellectual property used in ZTE's "phones, tablets, computers and other devices running Android and Chrome OS," according to Microsoft's Tuesday announcement, which was attributed to Horacio Gutierrez, Microsoft's corporate vice president and deputy general counsel for legal and corporate affairs.

ZTE, a manufacturer of telecom and networking equipment in addition to mobile devices, reported $13.6 billion (CNY 84.2 billion) in revenue in 2012. Microsoft's announcement of the ZTE deal comes shortly after it announced a similar one with Taiwan-based Hon Hai, the parent company of device-maker Foxconn Ltd.

With those deals in place, Gutierrez now claims that Microsoft's has established intellectual property agreements with the device manufacturers responsible for 80 percent of the Android-based smartphones sold in the U.S. market, as well as "a majority of those sold worldwide." While that seems rather one-sided, he suggested that intellectual property licensing is a "two-way street" at Microsoft. For instance, he said that Microsoft paid more than $4 billion over the last 10 years to license the intellectual properties of other entities.

That $4 billion amount doesn't seem so great given just one estimate that Microsoft may have pulled in nearly $800 million in one quarter from HTC and Samsung royalty payments. It's thought that Microsoft may make more money from intellectual property licensing associated with Android than it does from Windows Phone royalties. Windows phone badly trails Android in terms of the number of users. Microsoft's mobile OS has about 3.2 percent of the market, according to recent comScore measurements.

Gutierrez suggested that device manufacturers could avoid the "smartphone patent wars" by simply licensing Microsoft's intellectual property. Most have done so, although Google's Motorola Mobility arm has offered some legal resistance in the courts.

The details of these royalty payments to Microsoft have typically not been available to the public. There was no disclosure of what ZTE agreed to pay.

Microsoft isn't quite done with the licensing holdouts yet.

"We have worked for multiple years to reach an amicable solution with the few global companies who have yet to take a license, but so far they have been unwilling to address these issues in a fair manner," Gutierrez stated. "We'd prefer to consider these companies licensing partners and remain hopeful they can join the rest of the industry in the near future."

Recently, Microsoft set up a Web portal and tool to disclose its intellectual property holdings. However, Microsoft had initiated these smartphone platform wars initially by not being transparent at all. Gutierrez had claimed six years ago that Linux violated 235 of Microsoft's patents, but he never publicly identified the patents that were infringed. Google, which gave away the Android OS royalty free to device makers, never provided indemnity to those using it.