Manufacturers building Android-based smartphones, mobile phones, tablets, e-readers, notebooks and other consumer devices have two choices: Sign Microsoft licensing agreements, or risk being sued for patent infringement. Eleven Android device manufacturers representing 70% of the U.S. smartphone market have signed such agreements, which include provisions for per-device royalty payments to Microsoft. Some holdouts—namely Barnes & Noble and Motorola Mobility—ended up being sued. Is Microsoft just protecting its patents, or is it making an anti-competitive play against Android?
Patents, like copyrights and trademarks, are property rights. Patents allow their holders to exclude others from making, selling, using or distributing an infringing product in a particular jurisdiction. In exchange for the limited-time property right (twenty years from filing, although the term can be extended), the inventor must publicly disclose the invention.
Microsoft’s position is that it is simply protecting its property. When Microsoft sued Motorola Mobility, Microsoft’s corporate vice president and deputy counsel Horacio Gutierrez wrote in a blog, “Our action today merely seeks to ensure respect for our intellectual property rights infringed by Android.” Previously, he and general counsel Brad Smith stated, “We are protecting our investments on behalf of our customers, partners and shareholders—just as other companies do.”
Based on its history of aggressive business practices, some, such as Barnes & Noble, have called Microsoft’s tactics “anticompetitive” or “oppressive.” Intellectual property attorneys say Microsoft’s aggressive moves are no surprise for a large company with a formidable patent portfolio.
“[Microsoft] is a mature company with mature technologies,” said Bill Hulsey, principal at Hulsey Intellectual Property Lawyers. “It is a natural progression for them to diligently enforce their patent rights and other intellectual property rights.
“Are they being aggressive in the acquisition of property rights? They probably are. Does that run afoul of antitrust or market control considerations? That’s for the Department of Justice to deal with, and I think they will. Microsoft has a long legacy of how to push and recognize the boundaries of antitrust laws.”
The duty of a public company to protect its patents is greatly overstated, according to Andy Updegrove, founder of Gesmer Updegrove, a Boston law firm that represents technology companies, standards consortia, and open-source foundations, including the Linux Foundation.
“Protecting your patents doesn’t automatically mean asserting them,” he said. “Patent litigation is extremely expensive, so unless the likelihood of success, the cost (in management time as well as cash) and the damages you seek to gain, or damage you hope to avoid, is significant, you’ve got no business proceeding to court.