Google's open source Android operating system is not as free as it seems, Microsoft argues, because it infringes a number of patents. When asked whether open source models created problems for vendors with licensed software, the software giant went on the offensive. "It does infringe on a bunch of patents, and there's a cost associated with that," Tivanka Ellawala, Microsoft financial officer told MarketWatch. "So there's a... cost associated with Android that doesn't make it free."

Android may be free to manufacturers—a fact that no doubt makes it attractive—but Microsoft's point is that adoption is not without its own risks. The Apple versus HTC case is a good example. Apple claims that HTC's Android (and Windows Mobile) handsets violate a number of Apple patents—claims that could potentially put HTC and other Android OEMs at risk. So far, Google has only given HTC moral—not legal—support. Keen to avoid a similar fight with Redmond, HTC has paid Microsoft for patent licenses. Regardless of the outcome of the case with Apple, Android has clearly incurred costs for HTC, in spite of its free licensing.

Microsoft's controversial comments come just weeks before the software giant launches Windows Phone 7. As we wait for its official launch, Android-based smartphones are quickly starting to dominate, with Google set to pass both Apple and Research in Motion worldwide by year end.

Android has already eclipsed Windows Mobile, which OEMs have to purchase licenses for. Microsoft is planning on selling Windows Phone 7 in the same manner, betting that OEMs will find that Windows Phone brings more to the table than Android, making it worth the price. Microsoft's strategy is a long-term one, though. With Android expected to dominate over the next couple of years (at least), why not plant doubts about possible legal costs in the minds of Android-enamored manufacturers?