Oppenheimer analyst Yair Reiner reports that Microsoft has been quick to take advantage of Apple’s attack on the open source Android operating system.

Yair, who has performed some industry checks, report that the Apple suite has had an extremely disruptive effect on handset development in the mobile industry.

"Our checks also suggest that these warning shots are meaningfully disrupting the development roadmaps for would-be iPhone killers. Rival software and hardware teams are going back to the drawing board to look for work-arounds. Lawyers are redoubling efforts to gauge potential defensive and offensive responses. And strategy teams are working to chart OS strategies that are better hedged."

"Until recently, most high-end smartphone programs were focused primarily on trying to match the iPhone’s user experience, and secondarily on avoiding any egregious violations of Apple’s patents.

"We believe this order of priorities has temporarily changed — along with the industry’s appreciation for how far Apple is willing to extend the fight. Few OEMs believe that simply staying clear of multi-touch can, on its own, avert Apple’s wrath. We believe a lot of software and hardware is being sent back to engineering departments for work-arounds.

"It’s too early to know how Apple’s legal action against HTC will ultimately play out, or whether Apple will have the appetite to launch additional battles with other OEMs. But in the near term, Apple’s legal actions appear to have temporarily left competitors playing catch-up with their shoelaces tied."

Reiner reports that even before the lawsuit, handset makers were having second thoughts about Google, following the release of the Nexus One, when Google became a direct competitor. Now their faith in Android as the easiest and cheapest way to counter the iPhone has been shaken, says Reiner. The unintended consequence, he suggests, is to send them into the arms of Microsoft (MSFT) and Win7 Mobile.

"Our checks," writes Reiner, "indicate that Microsoft has been quick to sniff out this burgeoning opportunity and has begun to aggressively promote the strength of its own IP portfolio, as well as its willingness to join battle with customers that come under IP attack."

Microsoft provides IP protection that includes the defence of OEMs and distributors against IP claims in every country Microsoft distributes or markets its Windows Embedded and Windows Mobile products; protection of patent, copyright, trademark and trade secret claims based on that software; and the removal of the monetary cap related to defence costs. This means an OEM who directly implements Windows Phone 7 without much modification (about the only way to implement Windows Phone 7) should never suffer any loss related to patents on the software itself, unlike HTC, who is currently facing having half of its shipments banned by the fast-moving ITC, and eventually massive fines by the US federal courts.

In 2006 Jason Stolarczyk, marketing manager for Microsofts Windows Mobile and Embedded group said:

"I think of a device maker building a device with software that is not indemnified is like building a boat without life preservers,"  "This is an extra level of insurance from us for folks to feel confident in building devices that meet the requirements of their customers." "They were now being offered the assurance that there is a single point of responsibility, and that is Microsoft,"

Rob Enderle, the principal analyst for the Enderle Group, said that Microsoft’s indemnification was one of the most comprehensive in the market and set a high bar for competing platforms.

"Intellectual Property litigation has been increasing steadily for the last several years. As a result, indemnification against this litigation not only has become a requirement for any technology purchase, it strongly pushes companies towards the buy side of the build versus buy decision," he said.

Read more at CNNBusiness here.

Did HTC make a mistake betting on Open Source? Let us know below.

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