Microsoft has announced that they have reached a patent agreement with HTC. The agreement provides coverage under Microsoft’s patent portfolio for HTC’s mobile phones running Android.

Horacio Gutierrez, corporate VP and deputy general counsel of Intellectual Property and Licensing at Microsoft, from the press release:

HTC and Microsoft have a long history of technical and commercial collaboration, and today’s agreement is an example of how industry leaders can reach commercial arrangements that address intellectual property.

There hasn’t been any word about how much HTC will be paying Microsoft in royalties. However, Engadget’s Nilay Patel theorized on the most recent episode of the Engadget podcast that Microsoft may be charging a licensing fee per Android device that is higher than what Microsoft plans to charge for Windows Phone 7. This way, even though Google doesn’t charge to use Android, it will still cost handset manufacturers more to use it than Windows Phone 7. For Microsoft, this means that they get a small chunk of cash for each Android device sold. Microsoft can charge practically whatever they want in licensing fees and handset manufacturers are left with no choice but to agree — who wants to fight Microsoft’s lawyers?

I think Nilay Patel’s thoughts are spot-on. Microsoft doesn’t seem like the kind of company that would avoid these types of deals. Making it more expensive to use Android through licensing agreements while threatening a patent lawsuit if the manufacturers don’t agree to the terms is exactly the kind of thing that Microsoft would be willing to do in order to win in the mobile OS market.

It’s certainly not something I condone but I can’t blame them too much. The mobile market is huge and is only going to get bigger, Microsoft wants a piece of that pie and is willing to do anything to get it.