Microsoft set to lose $2b in annual Android royalties

Microsoft royalty payments from Android manufacturers are under threat after a German court stated that one of its patents doesn’t conform to European patent law.

Foss Patents reports that Germany’s Bundespatentgericht [Federal Patent Court of Germany BPatG] held an invalidation trial in relation to EP0618540 on a “common name space for long and short filenames” that cover’s Microsoft’s FAT volume.

“…the court found that all of the elements distinguishing the patented invention from the prior art (which includes a Linus Torvalds post to a mailing list) did not satisfy the technicity requirement under European patent law,” said the post of Foss Patents.

Microsoft is likely to appeal the decision at the Federal Court of Justice, the country’s highest court and if the ruling is upheld it will have widespread implications for Microsoft that could easily become applicable across the whole European Union [EU].

If that were to happen it could also have implications on the other side of the Atlantic as well with moves to unify patent rulings across the EU and US reportedly being talked about, according to NDTV.

Microsoft has been collecting royalty payments from the likes of Samsung, LG, Acer and HTC based on Android devices for some time and Nomura analyst Rick Sherlund reported that it was garnering the company some $2 billion [£1.2 billion] per year in revenue. The firm estimates that around 80 per cent of Android smartphones sold in the US are covered by the agreement and most Android devices sold around the world.

Google’s challenge, which forms the crux of this case, only came to light after Microsoft attempted to charge Google royalty payments in relation to its Motorola Mobility subsidiary.

If Microsoft loses the appeal hearing then it will lose access to FAT patent royalties across the entire EU that will mean no royalties from devices sold in a market of some 500 million people.