Microsoft, Barnes & Noble Partnership Is A Bad Deal For The Mobile Industry

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Photo: Illustration: Ellis Hamburger

Microsoft’s $300 million partnership with Barnes & Noble wasn’t about e-books. It was about Android and Linux and preserving Microsoft’s ability to be a patent bully.In 2011, Microsoft strong-armed more than a half dozen Android/Linux device makers into paying it royalties on every device they made. Microsoft claimed Linux and Android violated its patents and threatened to sue.

It had won a big licence deal with HTC in 2010 which gave Microsoft about $5 for each HTC Android smartphone sold, one analyst says.

In 2011, Microsoft reportedly earned more from Android than it did from Windows Phone 7.

All of that was threatened by Barnes & Noble.

Microsoft and Barnes & Noble were duking it out in court because the bookseller refused to pay Microsoft. Barnes & Noble was exposing the undisclosed details about Microsoft’s Android shake-down including: the amount of money Microsoft was demanding for each device ($5 – $15), which patents Microsoft claimed were infringed, how its plans with Nokia were involved and other stuff.

With Microsoft’s $300 million investment in a new subsidiary, the two companies have ended their patent litigation. Barnes & Noble has also agreed to pay Microsoft royalties for Android devices.

We can’t blame Barnes & Noble for making a smart business decision. It’s got bigger business issues what with Amazon eating its lunch and e-readers killing the printed book business. Ending expensive litigation and gaining a powerful partner like Microsoft was a good move.

Still this is disheartening because it leaves Microsoft with its power to keep bulling device makers. Had Microsoft lost the court battle, those days would have ended.

It would be far better if Microsoft could compete by making Windows Phone 7 and Windows 8 so fantastic and affordable that every device maker wanted it.

While Barnes & Noble investors are celebrating, in the long run this isn’t good for innovation in the mobile market. If you’ve got a great idea for a mobile device and want to tap into what was supposed to be a free open source operating system, you’ve got to watch your back for a knife from Redmond.

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