Microsoft licenses second huge handset maker in a week, China’s ZTE

For several years now, Microsoft has been asserting that any company making Android phones owes it money, because Microsoft has patents that cover various aspects of those phones.

Last week, the company said that the Taiwanese contract manufacturer Foxconn, which makes 40 percent of consumer electronics worldwide including a variety of Android and Chrome-powered products, had agreed to license its patents. Today, the company announced a patent-licensing deal with another huge Asian electronics company: Chinese telecom ZTE. 

ZTE has its origins as a Chinese state-run enterprise, and today it is one of the world's largest handset makers—the fourth largest producer in the world. The company makes a whole lot of Android-powered smartphones and tablets. It's also an enthusiastic gatherer of patents, and has been listed as the world's #1 patent filer in 2012.

For all its growth, ZTE struggled financially last year, as US lawmakers expressed concerns about the security risks of doing business with Chinese companies.

The licensing agreement with ZTE marks a major advance in Microsoft's quest to extract patent payments from all its competitors making Android phones. With the ZTE deal in place, a full 80 percent of Android phones sold in the US have taken a license to its patents, reports Microsoft. One of the few holdouts is Google-owned Motorola, which continues to fight Microsoft in court.

While its licensing program is flourishing, Microsoft's quest to be a competitor in its own right in the cell phone market is flailing. One recent study suggested that Windows Phones comprise just more than 4 percent of the US market.

Unlike the press release regarding Foxconn, the official announcement regarding ZTE does not explicitly say that Microsoft is getting paid. A Microsoft spokesperson declined to say anything about the terms of the ZTE deal but said the company's patent agreements are "generally royalty-bearing."