Google's New Patent Armor

Google's bid for Motorola puts the value of large patent portfolios in the spotlight

Photo: Tim Boyle/Bloomberg/Getty Images

17 August 2011—How many patents does it take to stay afloat in the smartphone world? It seems Google has pegged it at around 20 000. Its proposed acquisition of Motorola Mobility for US $12.5 billion, announced on August 15, would add 17 000 patents to its previously meager stockpile.

"What the [Google] deal really highlights is that the driver of patent value now lies in aggregating them," says Michael Burstein, a patent law professor at the Benjamin N. Cardozo School of Law, at Yeshiva University, in New York City.

Motorola’s patents (with 7000 more pending) presumably cover most of the inner workings of the Android operating system and give Google much more leverage to defend its other mobile technologies. According to Burstein, before this acquisition, "Apple could threaten massive patent litigation." Such legal actions could potentially prevent companies dependent on Android from using certain technologies or force them to pay licensing fees. But now Google can call on a new arsenal of patents to head off those kinds of threats, he says.

Google’s move to acquire a big pack of patents, together with last month’s $4.5 billion acquisition of Nortel Networks’ patents by a consortium of tech companies including Apple and Microsoft, represents a paradigm shift in the world of technology intellectual property. "There are thousands of patents for a cellphone," Burstein says, "and if you have to engage in cross-licensing for every feature, it could take years to negotiate." With a large trove of patents, a company could skip cross-licensing, as well as the petty lawsuits, and rely on the mere threat of counterattack.

Of course, $12.5 billion—60 percent more than Motorola’s closing value on 12 August—is a lot to pay for a defensive strategy. The high price tag acknowledges Google’s weak position in the patent game, but it also indicates that Google is likely to become more involved in the escalating legal actions that Apple and Microsoft have brought against Android. Those attacks have drawn return-fire lawsuits from handset makers that depend on Android, such as HTC and Motorola. The Motorola patents, backed by Google’s tremendous financial resources, could change the outcome of future legal battles, says Bill Morelli, research director for mobile technologies at IMS Research.

Google has at times appeared reluctant to engage in this war, which is primarily being fought over increasingly exasperating software patents. But it’s no surprise that Google is finally diving into the patent game, says Morelli. He points out that Google is a company that was built on a software patent, one for ranking search results. Florian Mueller, a consultant who has followed the legal challenges to Android, echoes this sentiment. He writes in his blog on FOSS Patents that Google’s critique of the software patent world goes against its roots.

Still, Google’s bet on Motorola is risky. For one thing, the acquisition turns its partners into its competitors. While Samsung, LG, HTC, and others publicly responded favorably to the acquisition, many speculated that the responses were less than genuine. The possibility that Google could provide Motorola devices with additional Android features or other advantages is very real, says Morelli. For instance, he says that Google could provide ways to enhance Motorola’s interface technology, known as Motoblur—code that wouldn’t be advantageous to other manufacturers running Android.

Google says it’s committed to keeping Android open, but "not because Google executives wake up every morning with a high-minded allegiance to open-source ideals," says Morelli. It’s because "having an open platform is their strategy for getting Android in front of as many eyeballs as possible." At the end of the day, being "open" is really a technique for generating money, he says.

The challenge for Google will be to find a balance between using Motorola’s patent portfolio without sabotaging its partnerships with other device manufacturers, says Morelli. It’s possible that companies like Samsung could turn to Microsoft in reaction to the merger.

Nokia has already forged a partnership with Microsoft, and Nokia’s share price has soared since Monday’s announcement. Google’s Motorola bid may turn into an inadvertent boost for both Nokia and Microsoft. At the very least, it brings attention to the potential value of Nokia’s patent portfolio, which is larger than Motorola’s, and could attract patent hoarders.

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