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8/15/2011
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Google-Motorola Deal: Apple Outsmarted On Patents?

With its $12.5 billion bid for Motorola Mobility, Google tries to outmaneuver Apple in the mobile patent wars.

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When Google failed to outbid the Apple-led consortium of companies that acquired Nortel's patent portfolio for $4.5 billion last month, it looked as if the search company had been played. But Google's $12.5 billion bid for Motorola Mobility reveals a player, one that isn't going to allow itself to be steamrolled by patent litigation.

Hints emerged that Google's loss of the Nortel portfolio wasn't a disaster when it was revealed late last month that Google had armed itself with patents acquired from IBM in May, before bidding commenced on the Nortel patent auction.

Shortly after news of the IBM deal surfaced, Google ended its long period of silence about the broad legal assault on Android with a blog post from SVP and chief legal officer David Drummond. Drummond spoke out against the "hostile, organized campaign against Android by Microsoft, Oracle, Apple and other companies, waged through bogus patents."

Earlier this year, Google CEO Larry Page and executive chairman Eric Schmidt acknowledged the patent troubles faced by Android without making specific commitments to defend the company's open source mobile operating system.

On Monday, Page finally confronted this issue directly. "Our acquisition of Motorola will increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple, and other companies," he said in a statement.

Google declined to comment on when it began acquisition negotiations with Motorola Mobility. If it approached the mobile handset maker prior to the Nortel auction, then it was the Apple-led consortium that got outmaneuvered.

Jonathan Goldberg, a research analyst with Deutsche Bank, says the timeline may become apparent when the companies make regulatory filings related to the acquisition.

One possibility is that Motorola Mobility leaked word that it was working on an alternative to Android in order to accelerate negotiations with Google. It's not clear what Google will do with an alternate mobile operating system, now believed to be related to Motorola Mobility's acquisition of Azingo in April.

In any event, Google's offer for Motorola Mobility, which will have to be approved by regulators, will bring as many as 25,000 patents--17,500 already granted to Motorola Mobility and 7,500 patent applications seeking approval--to the defense of Android.

And those patents will be needed. Google has bought its way into being sued by Microsoft, which is presently suing both Motorola Mobility and Barnes & Noble over alleged patent infringement related to the use of Android. Google also is defending itself against Android-related patent claims from Oracle and Skyhook Wireless. Several of Google's Android hardware partners have signed patent licensing agreements with Microsoft while others--HTC and Samsung--face patent lawsuits from Apple.

With a stronger patent portfolio, Google will have more ammunition for counter-claims. That threat is likely to result in more favorable settlements of existing patent claims and to deter future lawsuits, at least from companies that actually ship products--non-practicing entities that sue for patent infringement, like Lodsys, generally don't fear counter-lawsuits because they don't offer products that can be blocked with an injunction.

Ed Black, CEO of the Computer & Communications Industry Association, says that patents clearly play a major part in the Motorola Mobility acquisition and characterizes the deal as a defensive move. He noted in a phone interview that while the patent system produces a lot of lousy patents, Motorola has been around for long enough that it has a lot of solid patents.

"This gives Google a pretty strong portfolio that could be useful in a defensive way," he said. "At the same time, the deal shows that companies have to make huge investments to compete. It reveals the system is broken."

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