In August, Oracle sued Google, saying that the way Android handles Java infringes its patents. While the suit could take years to settle, it has some people worried about whether someone -- Google or handset makers -- will ultimately be on the hook for licensing intellectual property.
Oracle isn't the only company threatening Android. Earlier this year HTC said that it had licensed patents from Microsoft for use in the phone maker's Android products. Microsoft said that it was talking to other vendors too about its concerns related to the use of Android.
It's not clear how much IP indemnification is worth to handset makers. Microsoft declined to reveal how much it charges to license its mobile OS. Hazelton has seen estimates as high as US$12 per phone for previous versions of Windows Mobile. "That's quite a bit of money when you're talking about a handset where margins may be pretty thin," he said.
But current market circumstances and other factors could be forcing that fee lower, he said. Microsoft could offer vendors discounts for preventing end-users from switching the default search engine away from Bing, for example.
Other factors could ultimately impact the licensing fee too. "It may well be that Microsoft has to tinker with these fees over time as its monetization strategy becomes more sophisticated around apps, content, advertising, mobile payments, etc.," Hilwa said.
Despite the benefits, some handset makers may think twice about releasing lots of Windows Phones because of the fee.
"The fact that device makers have to pay for [Windows Phone 7] OS licenses is definitely going to give some pause," Hilwa said.
Motorola, which has used Windows Mobile in the past but has most recently focused almost exclusively on Android, sounds unlikely to make Windows Phone 7 devices. In response to questions about plans to make Windows Phone 7 devices, Motorola said that it remains focused on Android.
Motorola has built on top of Android in an effort to differentiate its products, something handset makers can't do with Windows Phone 7. "If you want to differentiate, the issue is you can't build on top of Windows Phone 7," Hazelton said.
The benefits of paying the licensing fee don't appear to be clear to Motorola. "Microsoft has a value-based model. Their perception is that they create value in the OS and people will pay. That's a fine point," said Sandeep Sinha, a director at Motorola, at the TechNW conference in Seattle on Monday. "Right now, I don't know the value between Windows Phone 7 and Android."
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