Android (OS): Why do mobile phone manufacturers using Android have to pay Microsoft a patent fee?

The simple answer is that Microsoft has built up a giant patent portfolio over the years related to mobile software and touchscreen devices, thanks to both basic R&D and its long history of software development for handheld/portable devices, going back to the first Windows CE devices in the late '90s. They see a chance to make money by using their IP and legal muscle to get Android vendors to pay royalties on device sales, and are taking advantage.

But from a strategic standpoint, there are a couple of other reasons why Microsoft might insist on collecting royalties from Android manufacturers:

• While Android is provided for free by Google, Microsoft reportedly charges a $15 licensing fee for each device running Windows Phone 7. By getting royalties on Android devices, Microsoft can narrow Android's built-in cost advantage. If Apple is also able to collect from Android vendors (it's currently suing HTC, Motorola, and Samsung), the cost advantage might be gone completely.

• Microsoft can use its insistence on high Android device royalties as a negotiating chip to convince Android phone manufacturers to also support Windows Phone 7. This might just be what's happening with Samsung. It was reported last week that Microsoft is looking for a royalty of $15 per Android device from Samsung, and that Samsung is countering with an offer $10 per device in exchange for a stronger alliance with Microsoft regarding Windows Phone 7.

Thus, Microsoft has quite a lot to gain by doing whatever it can to insist on major royalty payments from Android vendors. An interesting question for me is why Microsoft hasn't chosen to sue Apple for anything besides the "App Store" name - if Android violates Microsoft's IP, chances are that iOS does as well. My guess is that this is because Apple could sue Microsoft just as easily in return, given its strong IP position in both mobile device and PC software. It's probably not a coincidence that the one major Android manufacturer that's chosen to challenge Microsoft's attempt to collect royalties by countersuing the company is the one that likely has the strongest patent portfolio (Motorola).