Microsoft Corp. had been busy making licensing deals with ODMs using the Android platform. Companies such as HTC, Samsung, Quanta and Compal Electronics are just a few of the companies that signed a patent licensing deal with Microsoft that gives them access to the company’s patents but they have to pay royalties for doing so.
Google Chief Executive Eric Schmidt is displeased with this strategy and believes that Microsoft is not being honest about the deals. You’d think that Google would be the one pursuing legal actions against Microsoft since they own Android and it’s just right to protect their partners if Microsoft is taking advantage of them but they aren’t, someone else is.
Barnes & Noble, the oldest and largest book retailer in the US and makers of Android-based devices like the Nook Color and the new Nook Tablet, asked the US Department of Justice to investigate Microsoft’s patent licensing deals. The company sees the deals as a move to monopolize the mobile market with Microsoft’s demands for patent royalties from manufacturers using the Android platform.
“Microsoft is embarking on a campaign of asserting trivial and outmoded patents against manufacturers of Android devices,” Barnes & Noble said in an Oct. 17 letter to Gene Kimmelman, the Justice Department’s chief counsel for competition policy. “Microsoft is attempting to raise its rivals’ costs in order to drive out competition and to deter innovation in mobile devices.”
Microsoft filed a case against B&N as the company allegedly infringed five of their patents with their Nook devices and aims to have their devices banned from being sold in the US. But Microsoft stated that the problem would be solved if B&N signed a patent licensing deal with them.
“All modern operating systems include many patented technologies,” Microsoft said in a statement. “Microsoft has taken licenses to patents for Windows and we make our patents available on reasonable terms for other operating systems, like Android. We would be pleased to extend a license to Barnes & Noble.”
Acquiring royalties is very beneficial for Microsoft as they earn from ODMs who signed a deal with them plus the royalty fees would result to higher cost of devices to cover the fees, this would drive more consumers to Microsoft’s way since they can sell their products at a lower cost. B&N also stated that Microsoft is demanding the same amount in royalty fees that it would charge users of its Windows Phone operating system.
A letter from Barnes & Noble’s general counsel Eugene V. DeFelice to James J. Tierney, chief of the Justice Department’s Networks and Technology Enforcement Section in the Antitrust Division stated that, “When Barnes & Noble asked Microsoft for more detailed information related to these patents, Microsoft refused, claiming that the information was confidential and could not be shared unless Barnes & Noble first executed a nondisclosure agreement.”
DeFelice also added that, “Microsoft’s assertion of confidentiality is simply a means to cloak its oppressive and anticompetitive licensing proposal and is another element in Microsoft’s larger scheme to restrict competition in the mobile operating systems market.”
“It is Barnes & Noble’s understanding that these licensing fees that Microsoft demands for use of the Android (operating system) are the same, or higher, than the licensing fees that Microsoft charges for its own Windows Phone 7–despite the fact that Microsoft only claims ownership of only trivial and nonessential design elements in Android-based devices, as opposed to an entire operating system,” DeFelice wrote.