On April 24, the software giant Microsoft signed a worldwide patent licensing deal with ZTE, a well-known telecommunications equipment provider, providing broad coverage under Microsoft’s patent portfolio for devices running the Android and Chrome OS, including smartphones, tablets and televisions. A week ago, on April 17, a similar deal was concluded between Microsoft and Hon Hai, the parent company of Foxconn.

The exact patents licensed were not revealed, but under the terms of the deal, Microsoft will get paid a flat fee per Android and Chrome-based device that Foxconn and ZTE make. Experts say that by licensing both brand name companies and their contract manufacturers, Microsoft has successfully increased the overall effectiveness.

Microsoft’s commitment to licensing patents

The patent agreement is a good example of the important role IPR plays in ensuring a healthy and vibrant technology ecosystem. Other behind-the-scene manufacturers similar to Foxconn such as Compal Electronics， Quanta and Pegatron also have signed patent licensing agreements with Microsoft. Meanwhile, Microsoft’s such action for Android device makers has resulted in signing licensing agreements with numerous companies including Samsung, LG, HTC, and Acer. As of now, Microsoft has already signing licensing agreements with more than 20 Android manufacturers, and 60% of Android smartphones sold globally are now covered under its various agreements.

In an interview by China IP News, David Kaefer, manager of Microsoft’s IP licensing department, says that most of 20 patent licensing agreements mentioned above cover 50,000 patents on Android and Chrome OS. Meanwhile, Microsoft has cross-licensing with some cooperative partners and detailed deals may vary.

When analyzing the above-mentioned cooperations, an insider says that Microsoft has made a wise decision. Not only the smartphone manufacturers are licensed, but also the OEMs are licensed. Therefore, Microsoft will have a wider scope of patent right. Taking Foxconn as an example, Hon Hai is the world’s largest contract electronics manufacturer, which makes Android devices not only for clients like Acer and Amazon, but also for some niche brands. In this way, Microsoft will receive sizable royalties.

According to David, the deal with OEMs will be more operative and save up time costs. “Generally speaking, the brand manufacturers have straightforward dialogue with OEMs on production flow chart, designing, and the two sides will decide the patent licensing cost all by themselves,” says David.

Teng Fei, an expert from Department of Techno-Economic Research under Development Research Center of the State Council, says that IPR is a substantial part of enterprise strategy and operation strategy. Microsoft’s patent licensing strategy fully reveals that companies are adjusting their development strategy confronting the risks arising from the technology development.

Influence exerted on the industry

Patent lawsuits are commonly seen in the communication industry in recent years. Behind the lawsuits are the wars of benefits between the communication giants. Compared with these companies, Microsoft has chosen a different way, which is to negotiate and to license.

“The first cooperation is the most difficult and the most impressive one. Since there is no previous experience to fall back on, we have to ‘wade across the stream by feeling the way’. It took us three years to finish the first negotiation,” says David.

“As Chinese economy is more integrated with the world economy，the high-tech industry, especially the communication industry, has realized that patent competition and patent licensing are important means of advancing market competition. It’s worth noting that cooperation will produce a win-win situation and could effectively help avoid IPR disputes. As Microsoft signs more and more similar agreements, competition of electronic products will be the IPR competition. Chinese smartphone manufacturers, no matter large or small ones, should put a high value on IPR,” says Teng Fei.

“Size of the manufacturers will not determine the patent licensing fee. We try to bring about the technology sharing through cross licensing when we make deal with the partners with core-technology,” says David.

Insiders say that Chinese smartphone manufacturers now should pay more attention to IPR development. Despite Chinese enterprises don’t have advantages on core-technology of Android and Chrome OS, they will have more opportunities to improve. Chinese enterprises must invest more on R&D, seize the opportunities to develop IPR.

　　(China IP News)