News

Microsoft Inks Android IP Deal with Hon Hai

• By Kurt Mackie
• 04/17/2013

Microsoft announced an intellectual property deal with Taiwan-based Hon Hai, the investment holding company for Foxconn Ltd.

The patent licensing agreement is associated with Hon Hai's production of devices running the Linux-based Android mobile operating system as well as Chrome OS, which is a cloud-enabled operating system used on Google's laptops. However, the agreement covers Hon Hai's "smartphones, tablets and televisions," according to Microsoft's announcement. Microsoft claims that it is getting royalties from the deal, but no specifics were disclosed.

"We recognize and respect the importance of international efforts that seek to protect intellectual property," stated Samuel Fu, director of Hon Hai's Intellectual Property Department, in a released statement. "The licensing agreement with Microsoft represents those efforts and our continued support of international trade agreements that facilitate implementation of effective patent protection."

Hon Hai had revenues of $5.2 billion in 2012, mostly from its mobile device manufacturing business. The company describes itself as the "largest contract electronics manufacturer" in the world. Its Foxconn arm produces Apple iPads, iPods and iPhones at such a pace that some workers have committed suicide or threatened to do so. Foxconn also made Nook electronic reader devices for Barnes & Noble, which was sued by Microsoft about two years ago. The Barnes & Noble dispute was settled in April of last year in an odd royalty plus investment arrangement.

The agreement with Hon Hai represents yet another win in Microsoft's ongoing legal campaign to wrest intellectual property revenues from the Google-fostered Linux-based Android OS. Apple, too, has claimed patent infringements by Android. Those legal disputes are part of the backdrop of a broad platform war that's been occurring for several years in the mobile smartphone space.

Microsoft's Windows Phone mobile OS badly lags behind Android and Apple's iOS. A quarterly report by comScore, including February results, found Google's Android OS leading the pack at 51.7 percent of the smartphone market, followed by Apple's iOS at 38.9 percent, BlackBerry at 5.4 percent and Microsoft's mobile OS at 3.2 percent.

Microsoft may have somewhat made up for the shortfall through its intellectual property deals associated with Android. In the recent past, Goldman Sachs has estimated that these deals may have brought in about $444 million to Microsoft's coffers.

Microsoft has an initiative within the company that monetizes its intellectual property. The company claims to have inked 1,100 licensing agreements since 2003. In past announcements, Microsoft has claimed agreements with about 70 percent of U.S. hardware device makers using Android. Many of the disputes have concerned software usability patents, and only a few companies have resisted in the courts, such as Barnes & Noble and Google's Motorola Mobility arm.

Google recently announced an Android executive shakeup, with Sundar Pichai taking the reins from Android Inc. cofounder Andy Rubin. A Microsoft executive recently called Android "a mess," but it's so far been quite successful. Google makes money off the search advertising dollars associated with mobile device use. It offers Android to mobile device-makers royalty free, but manufacturers don't get legal indemnity protections, too.