Will Apple's Patent Win Doom Android?


Although the U.S. International Trade Commission's preliminary finding that HTC has violated two of Apple's patents is serious stuff , it may be that all Android vendors will be affected by the ITC's final ruling. That's because the infringed patents cover functions that are said to be at the heart of the mobile operating system; press reports this morning speculated that hundreds of millions of dollars could be at stake, when similar lawsuits filed by Apple against Motorola and Samsung are factored in.


It's true that nobody likes to write checks for eight or nine figures. But this is the sort of cost that will inevitably be passed along to the purchaser, even if it takes a little while to be figured into the manufacturer's cost of doing business.Let's say that a final decision by the ITC leads to a premium of $10 per device; that's twice what HTC has agreed to pay Microsoft under their recent licensing agreement. Now double it again, and you have what is commonly referred to as the "yuppie lunch coupon" - or $20. I don't know about you, but as cheap a skate as I am, I rarely let $20 get in the way of getting a device I want, and since I'm likely to pay $50-60 in sales tax on that device, another few bucks isn't going to slow me down at all.

For a specific example of this, let's consider the Samsung Infuse 4G - because AT&T doesn't carry an HTC-built Android device that's anywhere close to the iPhone 4. AT&T sells these for $549.99 under its "No Commitment" model; even if I purchase an Infuse under a 2-year contract, I have to pay California sales tax on the $549.99 base price, rather than the $199.99 discounted price. The difference in tax is around $25-30, depending on where in California I live. In other words, I pay far more in taxes on the device to Sacramento than I would ever pay to Cupertino.

Now, if the notional premium I suggested is applied to Samsung's Android devices, guess what? Either the company makes less per device, raises the price by $10, or - the most likely solution - wrings most of that $10 back from its suppliers. Maybe that means Samsung doesn't get to put every last geegaw in the device; although it would be nice to have a hygrometer every now and then, I'd be just fine without one on board.

No, what this preliminary finding really means is that Apple's going to get paid even if you don't buy its devices. That, my friends, is the best of all business models.