Why Patents Are the Tech Homecoming King and Queen

July 9, 2011

Patents are king because they are content. Patents are queen because they have value. Put the two together and you have a high stakes game between Oracle and Google. I just read “Oracle Win Would Strain Android Growth.” I agree.

Android is an interesting business because it is decidedly non-Googley. Following in the path worn by Treo and Apple is not too tough conceptually. I knew how to get from my home to my grade school without much mental effort. So we have a me-too play.

The article adds some spice to my view with this passage:

If Oracle wins the lawsuit that it brought against the software giant, the consequences for Google and the entire Android market could be dire, analysts say. Oracle likely won’t settle for a lump payment but instead will want a cut of each phone sold. That added cost changes the economics for handset makers such that many will take a second look at their commitments to the Android platform. While manufacturers are unlikely to abandon Android for a couple dollars per handset, they might begin to find other platforms, like Windows Phone, more attractive and begin to reduce the number of Android phones they make in favor of other platforms.

So a free mobile OS adds some costs. Let’s assume that the Oracle Google legal hassle fizzles out and neither side gets what it wants. Then what?

First, Oracle is not likely to give up. So Google is going to be looking at more slogging through the courts as Oracle grinds through every patent in its portfolio to find the garlic ball that drives away the Mountain View vampire.

Second, Microsoft is going to keep finding ways to slap fees on anyone using an Android device. This way of making money has to be more satisfying that punching out Zune MP3 players and Microsoft home wireless hardware that doesn’t work very well.

Third, Google is going to have to find a way to cope with the margins that Apple is managing to squeeze from its gizmos. Apple may not sell many units, but it sure does get a lot of dough from what it does sell.

Fourth, with open source Android in the clammy R&D facilities in far off places, I think there will be some “partners” who go Android without involving the Google. Whatever fragmentation exists in the Google “an Android in every pocket” approach will look like a sheet of Inconel 235 compared to off the reservation Android devices.

So what’s the deal with patents? The battle for the next MS DOS and Windows type franchise is going to be fought over intellectual property. Bottom line: If you want to double date to the mobile prom, go with the king and queen: Patents.

Here’s the dilemma that Google must resolve:

However, Oracle may not be alone in asking OEMs to pay to use technology in Android. Microsoft, which also says it has technology used in Android, has announced licensing deals for technology in Android devices with HTC and a few other smaller names. It is also reportedly asking Samsung for $15 per handset for Android phones. While Microsoft could find a healthy revenue stream from Android, it most likely would instead prefer success of its own Windows Phone platform, which offers more potential for revenue from services. That means Microsoft doesn’t have the incentive Oracle does to keep the Android licensing fee affordable for OEMs.

The Android OS is free from Google which needs the “advertising tax.” But companies like Oracle and Microsoft will work to get dough from each Android gizmo sold, which may make the free Android OS too expensive for some. With a free and semi open source OS floating around, variants may emerge, producing a fragmented mess for customers. How will Google manage this situation? Maybe controlled chaos will be the only Googley attribute of a business sector that is definitely not algorithmic in nature?

Stephen E Arnold, July 9, 2011

I had hoped to get this write up sponsored by the world’s leader in agile and scalable patent research, ArticleOnePartners.com. I find the firm’s service quite useful for patent research.


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