The Android is an open-source operating system which Google offers for free. This allows hardware makers a low cost base on which to build their user interface. However, Microsoft contends that the Android infringes on its intellectual property patents. So far, Microsoft has successfully convinced smartphone and tablet maker HTC to pay a $5 per unit royalty based on its use of the Android OS, according to a Citigroup report on Microsoft. The same Citigroup report cites that Microsoft will be targeting other Android phone makers for a $7.50 to $12.50 per unit license. Reuters is now reporting that Microsoft is demanding a $15 royalty on the Android phones sold by Samsung. Given that Samsung’s Galaxy S II has sold more than 3 million units, this represents a substantial additional payable on what was supposed to be a free use offering.
The benefit to Microsoft is actually twofold. By layering a royalty payment into the actual cost of using the Android system, Microsoft may also drive manufacturers toward use of Microsoft’s own operating system. Either way, Microsoft gets paid.