Microsoft FAT patent loss endangers its Android revenue | Hacker News Reader

Microsoft FAT patent loss endangers its Android revenue

zdnet.com

95 pointstanglesome48 comments

My speculation from previous report (note: All involved contracts are still secret.)

Microsoft's earnings from Android trolling are not a matter of public record. Each agreement M'soft has made is secret.

In fact, there is no strong, solid evidence that M'soft is making any money at all off Android. When Barnes and Noble's Nook refused to pay the danegeld, M'soft sued and then settled to avoid discovery. Nook actually got paid by M'soft in the settlement, though M'soft ended up with considerable control of the unprofitable Nook in exchange.

Speculation is that HTC agreed to make and market Windows Phone phones instead of paying royalties. If that kind of agreement was common, it's no wonder that all the non-Nokia Windows Phone phones were garbage: They were produced under duress.

Also, my Android 4 devices no longer support any kind of FAT filesystems the way my Android 2 phones did. I think Google already started making FAT optional just so as to avoid paying for patents like this one.

sources close to Google that cannot be named confirm that e.g. Samsung or HTC paid nothing to Microsoft. or rather got all license fees back in terms of Windows Phone marketing kickbacks

Do you have an actual source, a newspaper story or something?

I personally believe this to be true, it's how Microsoft often does these things and the fact that a bookstore stood up to them and won makes me think the agreements with Samsung etc. are more about showmanship.

But I've never seen this side of the story repeated anywhere with quotes from sources, even anonymous ones.

I'm curious, as a publicly traded company, why are these specific earnings not public? Presumably this would be a crucial element in any valuation of Microsoft shares, since it would affect the future value of Microsoft in relation to Android market share.

Forgive me for my ignorance, but what determines the level of scrutiny that a publicly traded company has to make available, in terms of its sources of revenue? How far do they get broken down, either by law/regulation or by custom?

You can read Microsoft's SEC filings.[0] As is typical for large public companies, nothing very useful can be gleaned from these filings about any business smaller than Windows or Office licensing (maybe XBox?). Everything else is buried in noise.

And the SEC is really more interested in seeing the regular boilerplate than informing investors. It would take extraordinary leadership to make any large regulator operate in a more truly informative way.

[0] http://www.microsoft.com/investor/SEC/default.aspx

If investors really wanted to know, they could make a big stink about it and MS would release more detailed numbers. But the investors have (quite rightly, imo) decided the precise breakdown doesn't affect the quality of the investment. On the other hand, announcing to all of your competitors exactly how you make your money and from which products seems like a poor strategy.

> Forgive me for my ignorance, but what determines the level of scrutiny that a publicly traded company has to make available, in terms of its sources of revenue? How far do they get broken down, either by law/regulation or by custom?

Companies are only required to provide an aggregate financial statement. They are not required to provide a line-item breakdown. They're not even required to provide a breakdown by division, although companies usually supply that.

There is no convention. Two different companies in the same industry may provide different breakdowns. Typically, companies provide the same breakdown that they have historically provided in the past. However, as they grow, they tend to roll things up into ever-larger chunks. So you lose some granularity.

'danegeld' - what a wonderful word. I didn't realized the vikings invented trolling.

Bloody vikings! Stop singing!

Given the history of man is several hundreds of thousands of years old, I doubt the invented it.

However, it seems they might have innovated and popularized it.

It's not unlike the mafia "protection" model, though, is it not? Take a look at the Crassus model of firefighting [1] which predate the Danes' innovation, for example.

[1] http://en.wikipedia.org/wiki/History_of_firefighting#Rome

http://www.poetryloverspage.com/poets/kipling/dane_geld.html

Wait, seriously? That's it? that's the patent MS uses to force cellphone manufacturers to pay them for Android? The Dos 8.3 / long filenames thing? That's insane. It's the obvious solution and not terribly hard to implement in the first place. The pseudocode for this would be like 5 lines.

Most amusingly, it was Linus Torvalds who published the same solution in a mailing list 4 years before the patent was filed: https://groups.google.com/forum/#!searchin/comp.os.minix/lon...

What is even more strange, is that modern Android phones (at least the Nexus line) don't support mounting the internal memory as a fat-32 device -- they use MTP or PTP for file transfers. So as far as I can tell, there is no reason for them to use fat-32 internally anymore. Or am I missing something?

Of course, they still need to implement FAT-32 if they ever want to mount SD cards that are interoperable with other phones, cameras, etc.

Recent Nexus devices are incapable of this because they lack an SD card slot.

Which is one reason why the entire Nexus series, Moto G/X, HTC One, etc don't support SD cards. That and Google wanting everyone to use the cloud.

What happens if you plug in an SD reader or a FAT-formatted USB stick into the USB port via OTG? That would still require support for FAT in the OS.

It would, but on a default, non-CM Android-build it would also require you to run StickMount or OTGHelper to mount it somewhere where the apps and OS will be able to use it.

And for that you may or may not need root. And if you're already there, why not just use a custom kernel (with FAT support) while you're at it?

Pretty big leap from root to a custom kernel. But on my Nexus 7 with root and stickmount, the stock kernel does support mounting FAT drives. So support is baked in there.

I guess it comes down to, when you have to jump through enough steps, some of them unauthorised and requiring the user to install additional software, in court you can make a reasonable argument that you are not selling the device with that functionality enabled, therefore you aren't liable for patent infringement.

Is this why a lot of phones stopped having sd card slots? That is probably the single most frustrating regression in tech for me ( I use my phone as an MP3 player).

There's actually a couple other reasons, in addition to the unstated reason of avoiding the FAT patent. First, if you put in a cheap (yet large capacity) SD card in a device, then it will take an extremely long time to index the files on it (such as getting the id3 tags out of the mp3 files). That in turn makes the phone appear to be a low-quality device for a lot of users. Now add onto that the current trend that the user doesn't need to know where files are stored (they aren't stored on devices or file folders, they are associated with specific applications), then you have a usability problem.

> Wait, seriously? That's it? that's the patent MS uses to force cellphone manufacturers to pay them for Android?

No, that is not "the" patent. That is one patent. Microsoft has more. They also have patents that they're not even revealing, because they like to do blanket cross-licenses.

One could argue that it is Microsoft's strongest patent, and therefore its loss puts their patent revenues at risk. This is a version of the Oracle/Google scenario, but for patents rather than for copyright.

On the other hand, one could also argue that it is Microsoft's weakest patent, which they threw out there as a sacrificial lamb. Any patent that they revealed would be subject to intense scrutiny. Thus, it's safer to use a large number of trivial patents rather than a small number of more involved patents. (Especially if the legal system is so broken that both types of patents have an equal chance of prevailing. If it's totally random, then you don't gain anything by using a stronger patent.)

This would be the IBM/Sun scenario. IBM went to Sun and claimed that they were violating a patent. Sun replied that the IBM patent was obvious, so it would easily get struck down. Then the IBM lawyer pointed out that IBM had tens of thousands of patents. If Sun could get this one patent struck down, then IBM could just repeat the process with another patent, and they'd never run out. So in the end, Sun ended up buying a blanket license for all of IBM's patents.

Each glaring victory in these patent battles are only eclipsed by the crushing defeats of losing a patent lawsuit.

New Egg losing one case and potentially having to pay out millions is devastating.

What do you do as a startup if one of these companies targets you? What do you do as a company that's been around for a while? Amazon pays out. You would have to as well. What if you can't pay? America will lose its foothold as the place for software companies to be grown and nurtured if parasitic behavior isn't removed from the tool belt of its own corporatations.

Let's wait for the appeal before we declare any crushing defeats, but you aren't wrong that software patents are killing innovation.

I think if you're a startup and you don't plan to do VC funding, don't incorporate in the US. I guess the US courts could enforce an injunction against your company if you sell to their citizens, though.

If you do business inside the US then incorporating outside of it will not protect you.

Ultimately, the only way to avoid these lawsuits in the US is to not do business in the US.

Would the US actually be able to enforce a court decision beyond injunction against a foreign business located abroad?

France and Germany do it all the time against Google/MS.

Google and Microsoft have local offices and funds in France and Germany. That makes them soft targets.

A troll is unlikely to go to the effort to chase a foreign company with no local presence. They'd probably have to go after your customers one by one if they could find some way to even identify them.

Which is true, but then most international corporations, in other words the ones with money, tend to have local offices in country's with big markets.

But, you have to think long term, you sue the company with no local presence. If the court goes along with it and you win then that company will have problems waiting for it if an attempt is ever made to incorporate within the country.

Doubtful, unless there is some sort of agreement with the host country. But that wouldn't necessarily stop the troll because if that company ever wanted to expand into the US, which is still a big market, then they'll have to deal with the troll sooner or later.

I would abandon the US market until I had the funding to fight trolls or they get responsible legislation going. Once foreign corp. X have got the funding I don't know what would stop a mysterious new US corp. Z from buying access to the X userbase and APIs with the express purpose of doing the exact same thing as X but domestically. And then, once the patent business has been cleared up, merge them. It might have to be as convoluted as X -> unsullied foreign corp. Y -> Z to launder the relationship but I bet it's possible.

New Egg losing one case and potentially having to pay out millions is devastating.

Worse than that, winning a patent lawsuit costs NewEgg about a million dollars. There is no loser-pays rule in the USA and you have to fight your case in both district court (probably the inconvenient and biased East Texas district) and appeals court in DC. Losing costs that million dollars and whatever penalty and fine they are assessed.

What do you do as a startup if one of these companies targets you?

If they want cash, you pay it. If they want you out of business so that they can have the field to themselves, you either quit or sell out to a larger company that can fight.

What's more hilarious is that Microsoft make more money from that patent than their entire revenue from Windows Phone:

http://www.forbes.com/sites/timworstall/2013/12/06/german-pa...

"we’re all pretty sure that the Android royalties are larger in that division than the Windows Phone revenues." -Forbes

Please don't incorrectly paraphrase a speculative comment.

"On the grapevine we’ve been told that HTC pays $5 a handset, Samsung perhaps as much as $10."

The grapevine, eh? That's where I go for all my fact needs.

While this is an important patent I believe MS went after Android manufacturers for around a dozen patents[0] so I'm not convinced this ruling alone is going to have a large impact on the royalty agreements.

[0] http://www.networkworld.com/news/2011/070611-microsoft-andro...

Does this mean MS must pay back royalties? To whom?

Not automatically, no. And I'd bet that the contracts (i.e. 'licenses') that they've agreed to thus far have a clause that prevents the licensee from seeking a refund should the patents ever be found invalid.

Not only that, I'm willing to bet they would have to continue paying the royalties unless they can get out of the license contract by some legal means.

> And I'd bet that the contracts (i.e. 'licenses') that they've agreed to thus far have a clause that prevents the licensee from seeking a refund should the patents ever be found invalid.

The licensees probably get a blanket license to all of Microsoft's patents. That's what the lawyers always demand in any patent settlement.

Thus, the loss of this one patent is immaterial anyway.

This is the interesting question. I think they don't have to.

This headline almost makes it seem like this is a bad thing. How about: "FAT patent invalidation saves Android OEM's from Microsoft's illegitimate rent-seeking?"

"FAT patent invalidation reduces Android OEM costs by $3.4 billion globally"

More and more, Microsoft are starting to look like "80's IBM" ..

Here's the patent for anyone interested:

http://www.google.com/patents?id=cLAkAAAAEBAJ&dq=5,579,517

So, do they have to refund the billions they gotten illicitly from trolling?

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