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Microsoft patent loss kills fatted Android cash cow

Big FAT profits could evaporate
Tue Dec 10 2013, 16:37
Judge's gavel

PATENTS PROFITEER Microsoft has been dealt a legal setback that could see it lose a significant revenue stream.

A German court has found that the European patent on its File Allocation Table (FAT) file system is invalid. The Bundespatentgericht or German Federal Patent Court has ruled that European Union (EU) patent EP0618540 is complete hogwash.

The repercussions of this on Microsoft will be, to put it bluntly, huge. When Microsoft started enforcing its FAT patent, it was essential for competitors to have some level of compatibility, and as a result many licence agreements were put in place to allow Linux and Android to use the floppy disk file system technology.

The upshot of this is that with the meteoric rise of Android, Microsoft has benefited hugely, to the point where its profits from Android dwarf its profits from its own mobile operating system, at an estimated $8 per device.

Therefore, if and when the inevitable appeal fails, Microsoft could find itself significantly out of pocket.

It is estimated that Microsoft will extract $3.4 billion in licensing from Android in 2013, and with device numbers still rising faster than you can say "the Surface 2 isn't too bad", the loss of this revenue in the future could represent a huge blow for a company already feeling the effects of the end of the PC era.

Microsoft will appeal. The court's decision might be overturned. But then again it might not.

Patent litigation is running amok in the information technology industry at the moment, and the danger for Microsoft of relying on such dubious patents to gain revenues is a reminder of its fundamental vulnerability and a demonstration of the uncertainty inherent in a volatile marketplace. µ

 

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