Android - beginning of the end

Yesterday Google was in the news directly and indirectly for multiple reasons. On the positive side, the stock shot up 12% as Google reported record Quarterly Earnings, and over $9B in revenue. However, there were couple of news items that were major negatives as well.

Firstly, a judge of the ITC ruled against HTC in 2 patents - in a complaint that Apple had filed against HTC over a year back. These 2 patents are fundamental to computing in general, and do not just target HTC, but literally every other Android phone maker. Both these patents are crucial to smartphones - so it is unlikely that HTC/Google can work around these patents easily.

But the other news, is possibly much more significant. Oracle filed a notice seeking to depose Larry Page as part of Oracle's law suit against Google. The reasoning Oracle put forth, was that Larry Page led the team that was negotiating with Sun regarding licensing Java for Android, and later on decided to go ahead without a Java license when they realized that it would be quite expensive. If Oracle's claims are true, it opens the door for triple damages - if Oracle can show that Dalvik/Android violate any of Java's patents, they can also show that Google was fully aware of this right in the beginning, but decided to chance its luck and not get a license, just to save costs. This is the sort of willful violation that can cost Google real bad.

Getting a sworn deposition from Larry Page strengthens Oracle's case massively - Larry Page cannot afford to lie about events that he was part of - because the consequences of that would be bad, not just legally, but even in the court of public opinion. Now the only hope for Google is that they can place some sort of procedural obstruction and hope that the judge decides against allowing Oracle to depose Larry Page - or just play innocent victim and drum up support from the open source community.

Also, a few weeks back, Apple was granted the "iPhone patent" - a massive patent covering several of the technologies that made the iPhone unique when it was launched in 2007 (before everyone copied those technologies). This patent has opened Google and its Android partners to significant risk. Even before this patent, HTC agreed to license several OS and smartphone technologies from Microsoft. After this patent was granted, several other companies have agreed to pay Microsoft between $5-$15 as "protection" money - hoping that Microsoft's massive patent pool and its cross licensing deal with Apple back from 1997 would protect them from Apple.

However, it is dubious whether Apple's cross licensing deal with Microsoft covers iPhone patents. The terms of that deal covers all past technologies, and going forward 5 years. So very likely that the iPhone patents are not covered by that deal. Secondly, even if the iPhone patents are covered, it is extremely unlikely that Microsoft would have the rights to sub-license Apple's technology. So in all likelihood, Apple could still go after these companies for violating iPhone technologies.

Google has made it a habit of skating on thin ice when it comes to IP/copyright issues. Whether with respect to Google Books, or Google News, or Youtube, or Dalvik or WebM, Google has always paid scant regard to the underlying IP issues. Even the recent launch of Google Music subscriptions went ahead without the approval of the music industry. At some point, such behavior would have consequences, and it looks like the time has come.

Google could have protected itself well if they had succeeded in buying Nortel's patents. However, they failed on two counts - on the one hand, they could not stop Apple from consolidating all the anti-Android forces into a formidable coalition, and more importantly, they could not forge a coalition of their Android partners to fight against Apple's coalition. Even Sony and Ericcson, who are Android partners, decided to team up with Apple rather than Google.

Not just Sony Ericsson, other Android partners are also showing worrying signs over Android. Motorola is rumored to be working on an secret project to come up with an alternative to Android. Samsung, the most important Android licensee is already hedging its bets on Android with its Bada OS. Even the geek/developer community has become frustrated with Android - for small developers, making money from just ads is proving to be difficult - and the combination of piracy, and the ease with which Ads can be blocked (just a simple change to DNS servers can block all ads on Android), makes it difficult to make money on Android Apps. The cost of building for Android is also relatively high, because of fragmentation. Also, despite ever increasing activations/day, it is becoming clear that only the top 10% or so of Android phones have the ability to run complex apps. Most of the Android phones actually cannot run complex games, etc. So even though Android has massive marketshare, the addressable part of the market is much lesser than that for iOS.

Back in the nineties and early noughties, Microsoft was the common enemy for all IT companies - and companies like Sun, IBM, Google, Oracle, banded together to support open source initiatives to fight this common enemy. Today, it has become obvious that Google is the common enemy - they have even managed to bring Apple, Microsoft and RIM into the same bed, something that was unthinkable even 5 years back!