Microsoft decision to license Nokia patents is about Android

Microsoft didn't get Nokia's patents in its acquisition, but this is a good thing for all parties – bar Android

On Monday when Microsoft shocked the tech industry announcing it is buying Finnish phone maker Nokia for $7.2 billion there was one thing about the deal that wasn't widely reported. Though Microsoft bought Nokia's hardware operations, including the Lumia brand, it did not buy Nokia's patent portfolio outright. Instead it leased Nokia's existing patents for a period of 10 years.One would think hat it would be to Microsoft's advantage to buy Nokia's entire patent portfolio instead of leasing it for ten years, but Reuter's now point out that the deal actually benefits both companies. For Nokia, the company has a steady stream of income without having to spend any more on R&D – part of the deal means Nokia can license its patents to other companies besides Microsoft.But the secret weapon in the deal is that the arrangement actually helps Microsoft fight Google'sAndroid OS. Microsoft already makes about 20% off every Android unit sold thanks to patent licensing deals, but if Microsoft had outright bought Nokia's patents it couldn't charge any more.With Nokia retaining control of the patents, the company can choose to charge additional licensing fees in the future, which would raise the overall cost of Google's Android OS for vendors. This in turn would allow Microsoft to argue that making Windows Mobile devices would in fact have a better payoff as the cost of entry in lower.This strategic patent listening fee move, of course, is contingent on Microsoft increasing the popularity of the Windows Mobile brand to make those handsets popular enough with consumers so that investing in their manufacture would make financial sense for smartphone vendors.