Who Owns Android’s Future? Google — Or Apple?

1Executive Summary

Google’s upstart smartphone OS has taken the industry by storm. Sure, Android isn’t the biggest phone platform, but with 60,000 handsets shipping daily, it’s become a force to be reckoned with. Want proof? A sure sign of success for a product is the point when competitors come after it, and Android definitely has a target on its back.

Apple fired the first shot with its patent infringement law suit against HTC, and Microsoft recently has indicated it believes Android is stepping on its intellectual property (IP). Google had better be preparing a strategy to defend against these and future claims.

Apple and Microsoft vs. Android

The Apple case against HTC is almost certainly a shot fired directly at Android. While Apple could have levied its charges against Google (and Android), the company went after HTC — the largest producer of Android handsets — instead. Apple’s charges force HTC to spend a lot of effort and resources proving that Android does not infringe on Cupertino’s patents. It also forces Google to make a decision whether to back a major Android partner or not, something that hasn’t been made clear yet. It was a brilliant move by Apple, as it has the same effect as suing Google directly, while actually taking on the much smaller company (HTC).

The Apple/HTC front has been quiet since the filing, as both legal teams no doubt get ready for the looming confrontation. But it turns out Apple wasn’t the company’s only concern. In the wake of Apple’s suit, Microsoft announced that it, too, was concerned that Android might infringe on Redmond’s IP; subsequently, HTC and Microsoft signed a broad deal giving HTC coverage under Microsoft’s IP portfolio that applies to the mobile phone segment.

Neither company detailed what specific IP was covered under the license agreement, but the deal will allow HTC to produce Android phones with Microsoft’s blessing. That blessing presumably didn’t come cheaply, as HTC will pay an undisclosed royalty to Microsoft for every Android phone it sells.

(Ironically, Microsoft’s Windows Phone software is a direct competitor to Google’s Android, yet Redmond will now be paid for every Android phone sold by HTC. HTC only sells Android and phones running Windows Mobile, so that means Microsoft gets paid something for every phone HTC sells.)

Android Partners Beware

The most important result of the HTC/Microsoft deal, however, is that — by conceding that such licensing is necessary for Android-based devices — it could push other Android phone makers (such as Motorola) into similar agreements with Redmond. Indeed, Microsoft has stated it is in discussions with other Android partners about that very subject. But even if Android partners sign agreements with Microsoft, the Apple situation is still unresolved.

Microsoft has always been willing to license its IP to competitors, but Apple has not. That could prove a major danger to the future of the Android OS. It’s not clear that Apple would be willing to license its IP to other Android partners should it win (or settle) its suit against HTC. If not, that could force Google to remove any infringing technology from Android going forward. This would affect UI features such as multitouch zooming. Google’s partners would also likely have to change handset designs to eliminate any hardware features that step on Apple’s patents. Depending on exactly what hardware and software is affected, an Apple victory could spell the end for Android.

Even in a less dire scenario, though, the Apple suit could change Android’s outlook substantially. First, the suit could shift the nature of Google’s relationships with its hardware partners. Should Google help HTC defend against Apple’s claims, could all  Android partners expect Google’s aid, too? After all, Apple could easily go after each one of Google’s partners — Motorola, LG and Samsung, just to name a few.

Secondly, should Apple surprise everyone and agree to license its IP to Android handset makers, how would that impact the financial aspect of selling Android phones? Companies would then be paying royalties to both Microsoft and Apple, on top of the cost of producing the phones. For hardware makers, Android could become an expensive proposition compared to other platforms if that were the case.

What can Google do?

I suspect Google is already working closely with HTC to build a defense to the Apple suit; it certainly should be. It behooves Google to defend HTC, and thus Android, tooth and nail against Apple’s suit. If Apple is successful, it will surely try to shut Android down completely, or at least force Google to change the OS so much it becomes less attractive to consumers and partners.

One of the best ways a company can defend against IP infringement claims is with a healthy IP portfolio of its own. This is where Google is exposed, as it is new to the mobile phone business (search excluded) and has not accumulated such a portfolio of hardware and UI technology.

Google has been rapidly buying small companies of late, and perhaps the IP of these companies might factor into the Android situation. I do believe the purchase of Bumptop can play a role, as it brings IP covering touch UI into the Google fold. While Google may be planning to use the Bumptop technology in the design of future tablets, the IP can likely be applied to Android developments. The company should do what it can to build or acquire its own portfolio. (The $1.2 billion HP spent for Palm demonstrates the value a big IP portfolio can bring even to a company like HP.)

Should partners be worried?

Google’s partners in the Android space should be very concerned about the tenuous position in which they now find themselves. The best-case scenario for Android has HTC winning in court over Apple, which lifts a huge burden off all Android handset makers. But the exposure to infringement claims by Microsoft would still exist, and that exposure is great. It’s hard for companies to prove their own Android handsets don’t step on Microsoft’s IP when the largest Android phone maker has basically admitted the platform in essence does.

It may be time for Google and the major Android phone makers to get together to deal with Apple and Microsoft. They will probably eventually have to do so individually anyway, so it may be easier to get together and forge deals with both companies. Google can certainly play a big role in this effort, and it would be wise to fund it. The growth of Android has been phenomenal. It would be a shame to let that momentum stall while Android manufacturers pour their resources into patent fights.

Relevant analyst in consumer electronics
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3 Comments Subscribers to comment
  1. James Kendrick Monday, May 17, 2010

    Microsoft is going to figure in all this too. Android phone makers are going to have to sign a deal with MS and pay them royalties, mark my words.

    We have to remember this is nothing new. Almost every phone maker using GSM pays a royalty to Nokia, holder of patents coVering the radio stack.

  2. You’re absolutely right that Apple’s suit is a big threat to Android, James. But as broad as Apple’s claims are, a big Cupertino win here will have massive fallout throughout the mobile industry.

    HTC’s countersuit may be just a negotiating tactic, but I think it probably indicates we’re in for a very protracted legal battle. And given its high-profile nature, it will be the latest to underscore just how dysfunctional our patent system is.

  3. interesting – could affect the future of android

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