Microsoft files against Barnes and Noble: The hidden cost of Android

Posted by Rob Enderle

It is interesting how much more active Microsoft has become with regard to protecting its intellectual property in the last 5 years.

True, there wasn’t much activity in the first half of last decade but since 2006, this is the seventh such action (as the recent TiVo litigation was a countersuit).  

Of the seven lawsuits, four have been settled, three are pending and none have made it through the court process.  

Microsoft files against Barnes and Noble: The hidden cost of AndroidOf the three pending, two relate to Android and negotiations are ongoing with most all of the other major Android users who face similar litigation if  negotiations stall.  

While there have certainly been other settlements, only HTC has been formally announced.

This is clearly the hidden cost of Android which apparently may by violating the Linux license and is also facing litigation from Apple and Oracle.
 

The Hidden Costs of Android
The problem with Android appears to be that it is on starvation funding from Mountain View. This was to allow Google’s executive team to claim it was cash positive even though it generates little direct revenue and largely lives off of a slim advertising revenue stream.  

This decoupling of revenue from the product has led to a number of problems, not the least of which is a rather impressive amount of charges of infringement from companies and the open source community.  Microsoft bears the not inconsiderable costs of their platforms; Google appears to pass those costs on. Let’s go through each and end up with the most visible litigation problems. 

Customers as Dependents: At the core of OEM dissatisfaction with Google and Android appears to be the expectation of these vendors that they will be treated as customers but the reality that Google treats them as dependents. 

Think about it, the OEMs don’t contribute funds to Google like they do to Microsoft, Google gives them technology for free and Google gets their money from advertisers.  

The OEMs would like to share in some of that money and this makes them much less like a business partner and more like a charitable contribution. Google’s attitude towards them appears to be connected to a belief that these companies should appreciate what they get and stop complaining because it is free.

Marketing MIA: The vendors are used to a Microsoft or Intel model where the technology provider kicks back some money to be used to market the related product.  Marketing programs are generally funded largely from these kickbacks. But with Android there are none, which explains why few of the Android vendors do much marketing. The heavy lifting comes from the carriers, like Verizon, who fund it from the annuity revenue they receive from their customers.  
OEM DOA: Verizon demonstrated the problem with this because under their ‘Droid brand they swap out Motorola and HTC basically turning those companies from OEMs to ODMs (ODMs or Original Design Manufactures) are the firms that typically build hardware for a number of the brands and Verizon, at some future point, could declare HTC and Motorola redundant by going directly to the firms that actually build the devices. The Android model could eliminate the existing phone brands replacing them with Carrier brands tied back to ODMs.  
Litigation: As this current news points out Google cannot protect, and may not control, the intellectual property they provide. They give it away pretty much for free but, given the settlements, that may be because Google doesn’t own it in the first place.  

This means the hardware companies selling the related products have to license the technology from the companies that own it and while Microsoft will license, firms like Apple and Oracle may not. The total cost of the effort, including litigation, could easily exceed the cost to license a viable product; as the Motorola action demonstrates

This goes a long way to explain why HP bought Palm and why RIM could become an acquisition target.   Windows Phone 7 is limited to phones, Windows isn’t ready for iPad like tablets yet, and there is no other hardware independent platform that is close to being able to take on Apple.  

Wrapping Up:
Google has repeatedly avoided the opportunity to invest in and protect Android which largely exists because of the short term gap Microsoft and Nokia/Symbian left in the market and the promise of "free stuff."  

The last opportunity was when Novell’s intellectual property went on sale and went to a consortium of folks who are suing Google.  

While Android looks healthy to consumers, Android tablets aren’t performing well in market, OEMs are becoming disenchanted, and costs to these OEMs, which may include their very existence, are becoming excessive. Google had better step up or their platform may not survive into next year.