Microsoft has announced that it has entered into a patent licensing agreement with Dell for intellectual property relating to Android, Chrome OS devices and Xbox gaming consoles. Before you do a double take, yes you read that right, Dell and Microsoft are swapping patents about Android and Chrome OS, two operating systems that neither company produce. So what is going on here?
Basically Microsoft claims that Android infringes its intellectual property. The company has currently locked horns with Google to try and get royalties for the parts of Android and Chrome OS which it claims infringes its patents. Google is fighting back and has itself a sizable patent portfolio which it could use against Microsoft. So while all this is going on (and these things take years and years), Microsoft decided to go knocking on the door of handset manufacturers and ask for some money.
Most of the larger handset makers, such as Samsung, LG and HTC, are already paying Microsoft a royalty fee on every Android smartphone sold. At the end of last year it was reported that Microsoft could be making almost $2 billion per year from Android patent fees. It is estimated that Microsoft makes around $5 per Android device sold and that about 70 percent of Android devices sold are covered by patent agreement.
Dell will pay Microsoft royalties for every Chrome OS or Android device it sells.
Under the new deal, Dell will pay Microsoft royalties for every Chrome OS or Android device it sells. However it isn’t all one way. Dell will license back some undisclosed patents that would affect the Xbox console. So the maths works like this: Dell owes money to Microsoft for any Android devices it sells, but Microsoft owes money to Dell for sales of the Xbox. Unfortunately for Dell it isn’t a balanced equation and Dell still has to give money to Microsoft.
Through this arrangement, Microsoft and Dell have agreed to license each company’s applicable intellectual property related to Android and Chrome OS devices and Xbox gaming consoles. Under the terms of the agreement, they agreed on royalties for Dell’s products running the Android or Chrome platforms and on consideration to Dell for a license for Xbox gaming consoles.
It now looks like Microsoft’s near $2 billion of indirect Android revenue will rise. Ironically when the purchase of Nokia completes, the software giant will also receive direct income from Android device sales. Now what is needed is for some big tech company to sue Microsoft/Nokia over its use of Android.