Windows Phone 7 Rumors, Android Lawsuit, Reorg Marked Microsoft Week

By Nicholas Kolakowski  |  Posted 2010-10-03

Windows Phone 7 Rumors, Android Lawsuit, Reorg Marked Microsoft Week

Microsoft's busy week centered on mobile-not only its upcoming Windows Phone 7, but also legal action related to one of its biggest rivals: On Oct. 1, the company announced it had filed a patent-infringement lawsuit against Motorola over the latter's Google Android smartphones.

"The patents at issue relate to a range of functionality embodied in Motorola's Android smartphone devices that are essential to the smartphone user experience," Horacio Gutierrez, Microsoft's corporate vice president and deputy general counsel of Intellectual Property and Licensing, wrote in an Oct. 1 statement, "including synchronizing email, calendars and contacts, scheduling meetings, and notifying applications of changes in signal strength and battery power."

The lawsuit suggests that Microsoft is becoming more aggressive about its patents with manufacturers of Android phones. In April, HTC acknowledged it would pay royalties to Microsoft in exchange for the use of "patented technology" in its Android-powered devices.

When news of the HTC agreement first went public, a Microsoft spokesperson wrote in an e-mail to eWEEK, "Microsoft's policy is one of mutual respect for IP and we are committed to licensing our IP on reasonable terms." Phone manufacturers such as HTC, the spokesperson added, "are sophisticated businesses that have a track record of licensing patents to secure the necessary IP rights for their products."

For Microsoft, such intellectual-property battles offer two potential benefits. First and foremost, it earns royalties from a rapidly expanding Android market. Second, it could theoretically slow manufacturers' rate of producing Android-powered devices, an important strategy when you consider that Microsoft's own Windows Phone 7 is due to hit the market in October. 

And Microsoft is gearing up to push those Windows Phone 7 devices in a major way. On Oct. 1, the company announced that Andy Lees will remain in the top spot of the company's Mobile Communications Business and Don Mattrick will remain head of its Interactive Entertainment Business-formalizing the men's roles originally established back in May. Microsoft's mobile and interactive-entertainment businesses were previously grouped under the umbrella of the Entertainment & Devices Division; the assumption is that, by separating them into two autonomous subdivisions, the two product lines can receive more focused energy and attention.

Given how Windows Phone 7 and Xbox Kinect are central to the company's overall consumer strategy, that move seems logical. (Microsoft also announced Kurt DelBene as president of the Microsoft Office Division.) Microsoft is betting that the smartphone's unique user interface-it aggregates Web content and apps into a series of subject-specific "Hubs," such as "Office" and "Games," instead of the iPhone's or Android's gridlike pages of individual apps-will allow it to regain market share traction against those competitors.

Mobile Misfires Haunt Microsoft


Microsoft's previous misfires in the mobile arena have come back to haunt the company's executives in more ways than one. According to the company's 2010 Proxy Statement, the demise of its Kin phone earlier this year-on top of that eroding smartphone market share-prevented Microsoft CEO Steve Ballmer from receiving his full potential compensation for the year.    

Ballmer's compensation for fiscal 2010 could have potentially been $2.01 million, with a "potential Incentive Plan award of up to 200 percent of his base salary for the fiscal year." But the total award eventually came to 100 percent of his base salary, or $670,000, after the board weighed the company's recent successes-the Windows 7 launch and progress in cloud initiatives such as Azure and Office Web Apps-against a handful of fiascos: "the unsuccessful launch of the Kin phone; loss of market share in the company's mobile phone business; and the need for the Company to pursue innovations to take advantage of new form factors." 

The proxy document also called Robbie Bach, the retiring president of Microsoft's Entertainment & Devices Division, to task for the company's underperforming mobile initiatives: "The strong financial performance [of Bach's division] was offset by disappointing performance in the Windows Mobile portion of the business, where the company lost share and continued to have operating losses yet made strategic progress toward the fall 2010 launch of the Windows Phone 7."

The working theory is that Windows Phone 7 will launch sometime in mid-October. Microsoft is hosting its annual Open House in New York City Oct. 11, as well as a party that could double as a smartphone launch event. At least one analyst has estimated Windows Phone 7's rollout-related marketing costs at roughly $400 million-before you factor in expenses related to platform development.

The first Windows Phone 7 smartphones will reportedly launch through AT&T in early November, with three devices manufactured by HTC, Samsung and LG Electronics. Samsung officially announced Sept. 30 that it is producing Windows Phone 7 devices, but declined to specify an exact number or release schedule.

Even as Microsoft prepares to face off against Google and Apple, though, those rivals-along with a handful of other tech giants-decided this week to help Redmond in its long-running patent-infringement battle against Canadian firm i4i. In nine "friend of the court" briefs filed with the U.S. Supreme Court, those companies-along with entities such as the Electronic Frontier Foundation and SIFMA (Securities Industry and Financial Markets Association)-have joined in arguing that the standard for invalidating patents should be lowered.

Under the current terms of the U.S. Patent Act, the burden of "establishing the invalidity of a patent" rests with "the party [that is] asserting such invalidity." In addition, the party must provide "clear and convincing" evidence about that invalidity. Microsoft hopes that, if the court lowers that standard, it will give the company a legal advantage against i4i, which has won several lower-court rulings.

Those rulings found that Microsoft Word 2003 and 2007 violate i4i's patents for custom XML. An in-depth breakdown of i4i's patent by eWEEK can be found here. In April, a federal appeals court rejected Microsoft's request for a multiple-judge review of the lawsuit, which resulted in a nearly $300 million judgment.

Microsoft's latest petition is Microsoft Corp. v. I4I Limited Partnership, 10-290, U.S. Supreme Court (Washington).

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