Free Android OS? Think Again

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When Google first raised the curtains to its Android operating system, it also delivered the promise that Android would remain a low-cost option for both users and device manufacturers. True enough, the free-to-use Android has enabled Nokia to create its economical in-house OS Asha, which gained a significantly wider customer base than its Lumia line of Windows 8 products. A series of licensing deals and recent litigations in the IP realm, however, may surprise you with Android’s high potential cost in royalties and patent agreements.

This February, Microsoft announced another patent licensing agreement with Android device manufacture Voxx Electronics, adding yet another name to the list of manufacturers that have agreed to “pay its due” to the Washington company. While its own mobile business may be crumbling, Microsoft has enjoyed success in pursuing Android patent licenses with over 20 companies, including the world’s second largest mobile manufacturer Samsung. Financial service provider Nomura Holdings has estimated that Microsoft generates $2 billion each year purely from its Android patent royalties, with a 95% profit margin.

From device manufacturer point of view, the Android operating system has become increasingly expensive to use, and many earlier adapters of the system have found themselves stuck paying for a growing number of licenses and lawsuits. Samsung Electronics, for example, is estimated to have agreed to a two-digit royalty to Microsoft for every Android-based device it produces (prior to this eventual settlement, Microsoft was demanding a $15 rate from the Korean manufacturer). Moreover, Microsoft is far from the only company on the other side of this formula. Patent-holding entity Rockstar Consortium, jointly owned by Apple, RIM, Microsoft, Ericsson, and Sony, has initiated a first round of lawsuits against Google and various other Android manufactures. Among these defendants, Huawei has already agreed to settle with what’s likely a royalty-bearing patent agreement.

The Android operating system no longer takes on “free riders” in the mobile world as people might have believed. Part of it reflects Google’s struggle at defending its products in the intellectual property court, when its Motorola patent portfolio performed way below expectation. The Silicon Valley giant, however, does not have as much to lose as many other Android-dependent manufacturers. While Android remains to be one of the most popular and powerful operating systems available, adapters of Android need to be fully aware of its vulnerabilities and plan accordingly. A preventative portfolio of IP assets, along with a smart IP strategy, would pave the road for any corporates in the tumultuous mobile market and so-called “smart phone war”.

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