Android: The new Microsoft mobile revenue source

Litigation targets to create a licensing bonanza

When Microsoft announced Monday that it would be launching a patent infringement suit against Nook-makers Barnes & Noble, Foxconn, and Inventec, there was the usual press release and a companion blog entry on TechNet from Horacio Gutierrez, Microsoft Corporate Vice President and Deputy General Counsel.

In his article, Gutierrez argued the reasoning behind Microsoft's decision to sue these three companies over alleged infringement in Android, the operating system used by the Nook eReader. It was the usual "we must protect our IP from companies that refuse to license with us" line of reasoning, which you would expect.

But Gutierrez made an interesting statement in the course of his blog entry.

"Microsoft is not a company that pursues litigation lightly. In fact, this is only our seventh proactive patent infringement suit in our 36-year history. But we simply cannot ignore infringement of this scope and scale," he wrote.

Seventh? Really?

At first blush, that seems rather small, and certainly runs counter to the notion in the open source community that Microsoft will sue you at the drop of a hat. Gutierrez is clearly using this fact to counter any statements to that effect, and paint Microsoft as the reluctant victim.

Gee, one is supposed to think, if they've only started seven IP lawsuits, maybe they're not so trigger happy after all. Maybe there's something to this lawsuit.

Actually, that low number is more telling than anything else in Gutierrez's blog. It doesn't tell me that Microsoft is a company that litigates hesitantly. It tells me Microsoft is very smart about when and who it litigates.

Very, very smart.

I pinged Groklaw editor Pamela Jones yesterday, ostensibly to confirm that low seven-lawsuit number. She agreed with Gutierrez's assessment: technically, Microsoft has indeed only brought seven IP cases like this to court. But she continued with her explanation, essentially confirming what I and a lot of other people already know about Microsoft: litigation is not the first resort in Microsoft's plan, but the last.

"However, [the seven lawsuits] leaves out of the equation that what they do is bully people into signing up so as to avoid litigation," Jones replied to me. "As in HTC last year. Novell in the infamous patent peace. Amazon. Whoever they can muscle. That is the business plan. Microsoft tries to avoid suing, because it's costly and there's the real risk that your stupid patent will be shown up as invalid."

Jones reminded me that this is exactly the sort of model The SCO Group tried with its licensing division SCOsource: provide people a license opportunity to use Linux, and if they ignored it, sue a few customers to make an example out of them.

Microsoft is simply trying to use this same method with Android, Jones argued.

"Microsoft sues Barnes & Noble, who have less money than Microsoft, and if Microsoft outlasts them or they cave in, Microsoft doesn't have to sue anyone else. If you recall, [Microsoft] hired the guy who came up with IBM's patent portfolio. How often do you see IBM sue anyone? They don't have to. They show their patents and people pay to avoid litigation they figure they'll lose," she wrote.

Sadly, this is pretty much what industry observers have figured out, so Gutierrez's blog entry is just playing to the potential Android users, reminding them that licenses are available for anyone who wants to avoid the pain of litigation.

In my blog Monday, I speculated that one reason Microsoft doesn't just go directly after Google is because Google has too many patents of its own and too much of a legal warchest for Microsoft to go head to head. (Florian Mueller, who's apparent mission is to make Android look as unappealing as possible of late, sent me a note arguing that since Google has only around 500 patents in their possession, that's hardly enough to use for defense.)

Mueller seems to be right in correcting my perception that Google has a big patent portfolio, but my original argument still stands: Google has lots of money and frankly, it only takes one patent to bring any competing product to a screeching halt. Heck, with its ginormous patent portfolio, Microsoft just chose to use five patents. And, let's not forget, Google seems to have pretty smart lawyers, too.

But the point I was trying to make Monday on why Google is not a target may be wrong, given this broader context. With the probable licensing/litigation model Microsoft could be pursuing here, it may not be any fear of Google that's keeping Microsoft from launching a head-on legal attack.

If enough potential large-scale Android users cave in to Microsoft licensing demands, the rest will follow, giving Microsoft a tap into revenue from the mobile market it can't seem to successfully break into on its own.

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