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German Patent Ruling Threatens Microsoft's Windows Phone Earnings From Android

This article is more than 10 years old.

In yet another round of the patent fights going on over smart phones we find that Microsoft has just been dealt a blow over the revenues it gains from Android hand sets. Yes, read that again, Microsoft makes money out of many to most of the Android handsets out there. It's a substantial chunk of revenue too. On the grapevine we've been told that HTC pays $5 a handset, Samsung perhaps as much as $10. We don't know the total number as Microsoft doesn't break it out in their accounts but books it in the same division as the Windows Phone licence revenues. And we're all pretty sure that the Android royalties are larger in that division than the Windows Phone revenues.

The royalties are actually on the FAT patent. And this is where things might be going wrong for Microsoft:

Today the Bundespatentgericht (Federal Patent Court of Germany, BPatG) held a full-day nullity (invalidation) trial at the conclusion of which Judge Vivian Sredl, who presides over the Second Nullity Senate, announced the ruling that EP0618540 on a "common name space for long and short filenames" is invalid in its entirety (including Microsoft's proposed amendments) because the court found that all of the elements distinguishing the patented invention from the prior art (which includes a Linus Torvalds post to a mailing list) did not satisfy the technicity requirement under European patent law. Microsoft can and presumably will appeal this decision to the Bundesgerichtshof (Federal Court of Justice, BGH), the country's highest court apart from a specialized constitutional court.

The full detail is over there with Florian if you should want more.

Google is stoutly maintaining that the patent shouldn't stand on the grounds of prior art and is therefore refusing to pay anything on that FAT patent. Not that Google itself needs to as it doesn't sell Android, it only gives it away. You can't claim royalties on something that someone is giving away. But Google now owns Motorola Mobility which does indeed sell phones using Android and that's where this case originates from: Microsoft demanding the fees and Google/Motorola Mobility saying no way.

It is true that parts of this patent have been invalidated before and then reinstated. So we won't know the final outcome of this until all appeals have been heard. But there are two further things that increase the danger of this ruling to Microsoft. The first is that we would expect rulings to end up, eventually, being the same in all jurisdictions. US law and European law are not exactly the same, this is true, but there is something of an effort to make patent rulings similar across the jurisdictions. We've seen this just recently as the idea that standards essential patents cannot be used to ask for sales bans takes root.

The second is that we don't really have a German or UK or whatever patent system any more, we have a European Union one. So this German case doesn't apply just to Germany, it applies right across the EU. Even if the US decision doesn't go the same way, if Microsoft does lose the FAT patent in this one case then it will lose it right across 500 million rich world people. And while Microsoft is certainly large enough to survive such a loss it would still hurt.