Google's interest in Nortel's patents became known in May when Nortel announced that it had obtained court approval for a $900 million baseline bid from a Google subsidiary. Google and its Android hardware partners have been plagued by patent infringement claims. Buying Nortel's patent portfolio would have made Google, with its relatively modest patent assets, far more formidable in court.
For Google, losing out on this opportunity clearly stings. "This outcome is disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition," said Google SVP and general counsel Kent Walker, in an email statement. "We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers."
Google for years has called for reform of the patent system. Reform of a sort now appears likely: The Senate in March passed the "America Invents Act" and the House passed its own version of the bill in June. The lawmakers must now reconcile the language in the two bills before it can be passed on for Presidential approval.
The changes in the patent system that have been put forward, such as shifting from a first-to-invent system to first-to-file, appear to tilt the landscape against small investors, which could help Google and other large companies accused of infringement. But the proposed changes also appear likely to encourage more patent filings.
"This invention-date focus will likely drive more provisional patent application filings for U.S. entities," observed Dennis Crouch, associate professor at the University of Missouri School of Law in a blog post.
However, moving to a first-to-file system, common in other countries, may lead more foreign companies to invest in the U.S. to protect innovations here.
Florian Mueller, an intellectual property activist and widely-read blogger on intellectual property issues, found it surprising that Google allowed itself to be outbid. Google, he wrote in an email, "needed to bolster its patent portfolio and wasted a first-rate opportunity to do so. It was in the pole position when the auction started but lost when the bidding was for real."
With Google's Android business bringing in around $1 billion annually, the company may simply have decided that $4.5 billion was too much. But Google may end up paying still, in terms of partner and developer confidence.
Mueller believes that Google's failure to win the auction could weaken commitment to Android among Google's partners. "Google leaves its ecosystem in the lurch," he said in his email. "That's its strategy for Android. It's also its strategy for the WebM codec, by the way. It's like 'heads, I win, tails, my partners lose.' Google doesn't indemnify. Google just rakes in advertising revenues. The strategic problem for Google is that Android's patent situation is such a mess that device makers and other potential partners will be increasingly skeptical of anything Google says or does."
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