Google's Legal Headache Over Android

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- It's funny how Android has turned into a cash cow for so many companies, except the one which created it --- Google ( GOOG).

Microsoft ( MSFT) is set to make close to a billion dollars in patent licensing revenue from Android device manufacturers, thanks to its licensing deals with HTC, Samsung and others. Meanwhile Apple ( AAPL) is currently suing HTC, Samsung and Motorola for copying the design of the iPhone and iPad, and patent infringement.

Oracle ( ORCL) has filed a lawsuit against Google too, claiming that Google copied certain patented parts of Java in Android, including the Dalvik virtual machine. It initially demanded up to $6.1 billion from Google in damages and royalties, but has since decreased its demands to around $1.16 billion following a second round of talks.

We currently have a $40 Trefis price estimate for Oracle, which is more than 30% above its current market price. It could see some significant upside depending on how much Oracle wins in damages from the lawsuit against Google.

Oracle is claiming $202 million for patent infringement and as much as $960 million for copyright infringement by Google. Google is under fire from all sides and its $12.5 billion Motorola acquisition doesn't seem to be helping it so far. While it is clear that Google did indeed use patented Java technology in Android, the damage estimates by Oracle and Google differ wildly. Google wants to pay only $100 million in estimates, while Oracle is demanding almost $1.2 billion.

Google is under pressure to settle soon because if the case goes to trial in October and Oracle wins, it may get an injunction to ban the sale of all Android devices in the United States. Alternatively, it may get a fixed royalty for every Android device sold, which could add up to a significant number itself. In any case, its Java related revenues will likely get a huge boost in the coming year. Tweak the chart above to see how it could affect its stock price.

Check out our complete analysis of Oracle here and here for Google.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.