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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

March 15, 2010 at 10:13 AM

Microsoft getting closer to Apple, more clues

(Today’s column …)

Every time I turn around, I’m hearing Microsoft’s top brass praising Apple.

It’s like seeing a big, white rabbit. Can’t everyone see it, right over there?

First it was Steve Ballmer at the University of Washington, praising iTunes’ App Store.

Then a few days ago it was Brad Smith, the company’s general counsel and senior vice president.

Smith gave more definition to this new alliance I’m seeing between Microsoft and Apple, united against Google.

It came out of the blue, during a speech he gave to intellectual-property and copyright lawyers meeting at the Washington State Convention Center on Thursday.

After explaining how crucial patent protection is to innovation and progress, Smith gave a nod of support for Apple’s patent suit against HTC, the Taiwanese company that makes most of the Google-powered smartphones.

Apple is going after HTC for alleged patent infringement, but the suit is widely seen as an attack by the iPhone maker on Google’s surging phone business.

Smith suggested taking a broader and more sympathetic view of Apple’s case, saying “the fact that there’s litigation in this area is not necessarily a bad thing.”

It’s getting hard to keep track of who is a friend and who is an enemy here.

HTC has long been a close partner of Microsoft and produced the first Pocket PC and Windows smartphone. It even located its U.S. headquarters in Bellevue, largely to be near the Windows phone team. Just last month, HTC was at Ballmer’s side in Barcelona, pledging to support the upcoming Windows Phone 7 platform.

Smith welcomed Apple’s lawsuit as the opening salvo in a bigger effort to sort out who owns the technology used in smartphones and start collecting a standard set of royalties. License holders have been talking about this behind the scenes for some time, and Apple brought it out in the open, he said.

This gets more interesting when you think about how Google made its phone software open source, suggesting to phone makers that it’s a free alternative.

Smith said royalties already have been sorted out with the radio technology in phones. About 5.5 percent of a smartphone’s wholesale cost now goes to license this technology, most of which was developed by Qualcomm. Another 1 to 2 percent goes to license the media software.

“Now the question of the day is, how will patent licensing work for the software and other information-technology layers that actually make up an increasingly large percentage of the value of a smartphone,” Smith said.

His prediction: Royalties on these technologies will contribute 5 to 10 percent to the price of a smartphone within three to five years.

Then he went on to thrash Google’s copyright settlement with book publishers, saying it gives Google unfair advantages and is “not the way litigation is supposed to work.”

No wonder Microsoft – a company built on licensing – thinks Apple’s suit is a positive step.

Will Microsoft go further and get directly involved in Apple’s suit against HTC? Smith wouldn’t say when I asked after his speech.

“I think it’s premature to endorse or offer any other reaction to it,” he said. “But as I mentioned, the fact that there are efforts to sort out these issues are on balance a positive development for the market because they typically take an important role in sorting this kind of issue out.”

Smith said Microsoft has “always worked closely” with Apple lawyers and knows them well, especially since former Intel lawyer Bruce Sewell became Apple’s general counsel.

“We have a lot of close ties and good relationships,” Smith said. “It doesn’t mean we always agree on everything. But it means we have the ability to talk and understand what we’re each trying to accomplish.”

There’s that darned white rabbit again.

Comments | Topics: Apple, apple, brad smith

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