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  • Will Android Survive the Apple and Microsoft Taxes?

    July 19th, 2011

    So you know that the Google Android OS is doing quite well as a smartphone OS, but not so well when powering tablets. Well, amend that. You see there are now published reports that developers have begun to pay less attention to Android and more attention to the iOS. Most likely, it’s due to the simple reason that the App Store is a far more favorable environment in which to make a profit. At the same time, more potential customers have iOS gear in their sites than Android products.

    It’s fair to suggest that many Android developers go to that platform because of the large user base, hoping that it will be enough to ensure decent sales. But so far, that hasn’t been the case.

    But the are other clouds on the horizon confronting Google, which may all conspire to make Android far less welcome by wireless handset makers.

    At it’s core, Android is supposed to be a free, open source mobile OS. Licensees agree to the terms, and they are free to alter the interface to their needs — although Google appears to be establishing some roadblocks on the extent of the permitted changes. However, free isn’t always free.

    Now you do know, I’m sure, that Google earns the majority of its income from advertising. Other than the small amount of revenue received for business versions of Google Apps and other services, the advertisers pay most of the bills. When you click on a link in a Google app or service, such as Gmail or a search window, the cash register rings, so to speak, and the advertiser owes the preset fee for that click.

    All well and good. Whatever works is fine, so long as the customer isn’t inconvenienced, though some of you no doubt wonder just how much your privacy suffers when Google delivers the targeted Web ads you’re most likely to click to learn more. At the same time, it’s not a free ride for the handset makers who make Android gear.

    Take HTC, who just lost the first round in a patent skirmish with Apple. It has been estimated that HTC pays Microsoft — yes Microsoft — $5 for each Android device they sell. The reason is that Microsoft has asserted ownership of certain patents related to the Android OS, and that HTC, and other smartphone makers building Android devices, owe them payments. So far, those companies have acquiesced and are writing hefty checks to Microsoft without protest.

    Now that Apple has a victory in its belt, you have to wonder what’s going to happen next. Will Apple really ask HTC to stop importing Android-based smartphones? That’s what they are requesting, but such a demand could cause the authorities to consider possible antitrust investigations, which isn’t a good thing. But you have to consider such demands an opening salvo. Apple knows full well that no court would sign an injunction stopping the import and/or sale of the infringing gear without considering another option — royalties.

    Can you imagine such an insult to injury? Google creates an open source operating system for mobile devices, for which no royalty or other payments are required. In turn, the licensees have to pay two of Google’s biggest competitors in order to keep building that gear. I suppose Google could call up their legal team and protest, but they have, so far at least, stayed away from the current legal skirmishes. Attorneys for the likes of HTC, Motorola and Samsung have to fend for themselves, and suffer the consequences should they lose their cases. And now, with that recent victory against HTC, the chances that the other defendants might prevail has been seriously hurt.

    However, I do not think Apple is going through all this legal rigamarole to defeat competitors in the courts rather than the free market. After all, the iPhone and iPad remain incredibly successful, and it’s quite likely that Apple will again beat the street when the latest quarterly financials are announced later this week.

    What it’s all about is intellectual property. Apple spends millions to invent things, and they won’t allow other companies to, they claim, just copy their inventions, and that’s their right. Certainly Apple has had to pay other companies large sums of money to gain the rights to use certain features on their products. They recently agreed to pay what is estimated to be hundreds of millions of dollars to Nokia to license key portions of a large patent portfolio.

    Apple also joined several other companies, including, surprisingly, Microsoft and RIM, to acquire thousands of patents owned by Nortel, a bankrupt Canadian telecom company. That multibillion dollar transaction has gotten approval by the courts, but awaits regulatory approval. Google and Intel were on the losing side, and Google might very well be forced to pay loads of sums directly — not through the proxy of a third party handset maker — to continue to use a number of mobile technologies in Android.

    Sure, I agree that patent laws need to be overhauled. Some overly broad patents continue to be granted, but these are the laws we have, and Apple and other companies are going to do what they need to do to protect their intellectual property, and go after violators with a vengeance.

    In short, Google appears to be in a heap of trouble — and I haven’t even begun to address that lawsuit from Oracle over Java patents.



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