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8/15/2011
12:59 PM
Fritz Nelson
Fritz Nelson
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Google's Motorola Mobility Buy: Patent Power Shift

Patents have become the nuclear threat in the mobile wars, and Android device makers needed cover. But protected doesn't guarantee happy.



The ongoing patent litigation lunacy (Apple-Samsung, Apple-HTC, Samsung-Apple, Microsoft-Samsung, Oracle-Google, etc) has featured Google's chief counsel criticizing the frivolity of innovation-stifling patent claims, despite the company's nearly $4 billion bid for Nortel's patents. Late last week, InformationWeek.com's Eric Zeman slipped in a story about the long history of Motorola, which holds a significant share of patents, and how Motorola might start flexing its own patent muscles.

And so here we are days later, Google says it will acquire Motorola for $12.5 billion, getting not only Motorola's substantial patent portfolio (17,000 patents, 7,000 patents pending), but also a somewhat-revived mobile device manufacturer and TV set-top box maker.

Make no mistake, this is all about the patents. Everything else is either frosting on the cake, or partner complications Google doesn't need right now, depending on where you sit.

GigaOM posted a look at patent portfolios, and it shows the just-acquired Nortel patents tallying about 6,000; Apple, meanwhile, has about 10,500. Motorola's 17,000 look like a hefty lot. It isn't just a numbers game, of course--Apple, with its puny amount, is going head-to-head with Samsung, which holds about 100,000. It is, however, about simply having the ability to protect an ecosystem.

Consider that last week, industry watchers noted that for a time, Apple was jockeying with Exxon for world's largest company, measured in market capitalization. Note that Google is climbing up the ranks at number 16. Last week, Gartner estimated Android's mobile phone market share at 43.4% vs 18.2% for Apple's iOS, and that Google's year-over-year share gain was 26.2%, vs 4.1% for iOS. In other words, there is not only an all-out war to win at mobile, but winning in mobile propels companies to untold value.

Patents have become the nuclear threat in these wars, and the company with the best weapons stands to be the superpower. Consumers can only feel safe if there is "mutual assured destruction." Every company must have an adequate number of patents to sue each other for years to come, with little apparent gain. Otherwise, all of those extra licensing fees get passed along to the buyer.

Noted patent blogger Florian Mueller, who has often derided Google's weak patent portfolio, noted on Sunday, eerily absent the impending Google-Motorola news: "[Motorola Mobility CEO] Dr. [Sanjay] Jha says between the lines that Android device makers without a strong patent portfolio aren't going to have a viable business in the long run. Patent licensing costs will adversely affect their competitiveness."

Many investors and experts had been calling on Motorola not necessarily to flex its patent muscles, but to sell off those patents, Mueller wrote, then added, presciently: "Some believe that Motorola Mobility may threaten with patent enforcement against Android in order to pressure Google to buy it. I don't know, but it's possible that this is one of the intended effects. But even if Google doesn't buy Motorola, it should at least ensure that its license terms will prevent internecine patent wars between Android device makers to the greatest extent possible."

In buying Motorola, Google helps itself, and helps protects its OEMs. That's why it was able to line them all up--Sony, LG, HTC, Samsung--to lavish praise on the deal.

But while this deal may indeed provide a level of comfort to Android device manufacturers, somewhere down the road those very same players will have to start questioning how well they can compete against a Motorola in the comfy confines of Google, as Light Reading's Sarah Reedy notes. Despite Google's pledge to keep Motorola a separate company, Google has favored Motorola all along, providing it with the first available version of Honeycomb, for instance.

That relationship is bound to be even tighter, and the very same companies that feel a sense of relief today, may start whispering in the ear of someone like Microsoft, master of the all-too-cozy relationships.

Wouldn't that be the ultimate irony?

Fritz Nelson is the editorial director for InformationWeek and the Executive Producer of TechWebTV. Fritz writes about startups and established companies alike, but likes to exploit multiple forms of media into his writing.

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