Think about this from a different point of view: the reason Microsoft is threatening cell phone manufacturers and extracting royalties is because they are trying to slow down the Android juggernaut enough to get traction with WP7. Obviously, has not been effective.

I would posit the reason phone manufacturers are paying royalties as opposed to cross licensing patents is because Microsoft doesn't have enough market share for HTC, LG, (Google?), etc. to make it worth while for manufacturers to trade their patents for.

In other words, phone manufacturers see $10 (a guess) per phone payed to Microsoft today is cheaper in the big picture than licensing WP7 instead of Android on those phones. In addition, it implies they value their own patents more than that amount and thus refuse to cross license their own patents to instead of paying the Microsoft royalty.

The logical conclusion is that phone manufacturers have looked in their crystal balls and bet strongly against Microsoft. They are betting that, in five years (a guess), Microsoft will be out of the phone software business and their patents will be irrelevant because they have either expired or been worked around.

The phone manufacturers are also remembering the iPhone vs. Windows Mobile / Windows Phone timeline and remembering how long they were getting buried by Apple because Microsoft was not able to sell them a credible alternative to the iPhone. Screw me once, shame on you. Screw me twice, shame on me.

Acer, Samsung, LG, ZTE and HTC all make Windows Phone 7 models. That's most of the big Android licensees right there (Motorola being one of the big holdouts in both royalties and WP7 phones). Obviously they aren't so pissed that they won't invest some cash in building WP7 kit.

So Microsoft unleashes its lawyers on Android OEM's and there's nothing Google and all those OEM's could do about it?

Wasnt Google supposed to 'defend' OEM's, specially after Motorola deal?

And, on a totally unrelated note, Microsoft does all the bad practices to gain profit; and it has an XBox with a camera connected to internet with closed source software which updates itself, on millions of houses across the globe? And we're supposed to trust them because...?

Maybe Microsoft's requests are legitimate? Maybe the OEM really infringe on patents? Maybe Microsoft provide support for the technology in exchange of money?

We have little or no information, let's just not jump to conclusions.

Thankfully the veil is likely to start getting lifted with the Barnes and Noble lawsuit and anti-trust complaint.

"and it has an XBox with a camera connected to internet with closed source software which updates itself, on millions of houses across the globe" :)

Most of them pay nothing at all. Samsung, HTC and LG made a deal where they agreed to make a few Win7 phones in exchange for patent freedom from M$. Part of the deal is to still claim that they are paying royalties in order to uphold this FUD. M$ hopes that this way they will make some money via Win7 phones.

Look at B&N, they are fighting M$ in court because they cannot make a deal like the phone people did.

Can you please provide a source for your information?

"HTC Pays Microsoft $5 Per Android Phone, Says Citi": http://www.businessinsider.com/htc-pays-microsoft-5-per-andr...

There is no official source on that which I could quote. But it is what I have been told by people involved.

There is another aspect, a lump sum of 5-15$ per unit might look like a lot of money for M$, but over a 2y period thats not much. All that such a deal would do is to make the phone a bit more expensive, same as if another earthquake hit and some parts like CPUs or RAM became more costly. Carriers would easily swallow that for subsidized phones. All the search revenue, App store revenue etc. would still go to others like Google. And most important, the customer would be lost to M$ - If M$ wants to take a significant market share in mobile, collecting royalties on Android is not the way.

I do not know the licensing fee involved with WP7, but demanding higher royalties on Android devices might be a way to push vendors into switching.

Also, 5-15$ is significant when comparing it with the manufacturing costs of the device (the iPhone 4S CPU is estimated at 15$ by iSuppli (http://www.isuppli.com/Teardowns/MarketWatch/Pages/For-the-i...).

Vendors have to make sure they build phones that they can sell, the phone being simply $15 cheaper won't do that. Apple sells more 4S than 4 and more 4 than 3GS, so it cannot be that the price is the only decision point

The Citi claim is based upon absolutely nothing. For that matter every single "Microsoft makes $X from Android" are based upon nothing but speculation.

Show me a line item in either HTC or Microsoft's quarterlies validating that?

It is interesting that virtually every agreement that Microsoft has achieved has been with vendors that sell Microsoft products.

At first, this really pissed me off -- Microsoft sticking it to everyone with Android.

But 11 companies with Android products on the market are paying licensing fees to Microsoft? That's way too many lawyers in agreement for this to something superficial.

Where the hell is Google in all this? I thought they were going to defend OEMs? Honestly, I can't say that I'm surprised. Google might be a big force in the industry, but in old-school software licensing, they're noobs.

It's too bad that even though most of those patents could be invalidated in Court, these companies fell one by one and started paying Microsoft royalties for all the claimed infringements.

I'm pretty sure most of the big companies like Samsung and LG didn't even agree to do this for nothing, though. They most likely got a discount deal for Windows licenses, or some similar deal. Both of them make Windows laptops.

I'm interested to know where this certainty that these patents wouldn't hold up in court comes from.

Yeah, I second this point. I don't know much about the situation between Microsoft and Android's OEMs, but to me, it seems like a simple case of "I've invested money in research, came up with some useful technology that you [the OEM, that is] are paying to use".

I don't see where the controverse is (other than the more general and complex debate about what should be free, etc..)

Consider that Apple own patents for pinch-to-zoom and the use of a gyroscope to control the rotation of a screen (turn the phone sideways, get landscape view). Given the thousands of patents all of the big companies own it becomes very believable that Microsoft would own a bunch of patents that many phones infringe on and that it would take Microsoft time to even realise it owned them (a possible reason for the delay in going after phone companies).

Patents that are essential to the phone being popular (can you imagine a smart-phone without the two above features).

Patents that would force most suppliers to just pay up.

EDIT: Just to confirm, I am agreeing with you, I just figured I'd explain why I think their claims are likely valid. This is not to say I agree with these patents being given but I've seen so many comments that seem to assume this is all a big con that will fall apart at the slightest scrutiny.

That does not make sense to me. If they get a discount for Windows licenses they would have bought anyway, then they are not paying anything at all effectively.

But it means a higher cost of entry for competitors in the mobile space; something that seems like a good thing for both Microsoft and the Android makers.

Google not only makes money off of Apple products but pretty much any product from where one can search. That includes all the android devices as well. Which makes you wonder why are they pushing android at all. People are used to using Google so no matter what OS, they are going to use it anyways Why spend billions of dollars developing and defending it?

Google doesn't just make money off both iOS and Android - they make MUCH MORE money off iOS than Android, at least twice as much. [1]

But they don't control iOS, so all Android is is a hedge in case Apple tries to disrupt mobile search somehow. I honestly wonder if there's any tension at Google between the search team and the mobile team, since at the moment Google is flogging something directly against the interests of their cash cow (search).

[1] http://9to5mac.com/2011/09/21/google-23rds-of-our-mobile-sea...

Microsoft is Google's direct competitor in regards to mobile search...or search in general for that matter. As for Apple, I don't see them entering search because search, in general, suffers from the level of curation Apple tends to association with its brand.

That and software-as-a-service just isn't Apple's business model. They just want to sell you stuff.

I think that having their own mobile os lets them keep the status quo. If apple changed google for bing, even when a lot of people would change back to google search, i bet that a big percentage would simply use the default (think about ie8). Also, it lets them refine and make more relevant their search results, collect geodata for other services (transit for example), expand their services, etc. its not like th ey are mother theresa. And above all, it helps them expand their core business, letting every device maker use a smartphone os that doesnt suck, all with google as default search engine.

What are you talking about?

Could someone enlighten me what all those vendors licensed from Microsoft?

No. Seriously. The people that know are bound by nondisclosure agreements that exclude you (and me). Everybody else is just speculating.