Google Primes Patent Pump Looking Out for Android, Search Giant Arms Itself With Intellectual Property AUGUST 16, 2011 By DON CLARK
Google Inc.'s $12.5 billion deal for Motorola Mobility Holdings Inc. provides the latest evidence that patents have become the hottest currency in high technology. Tech companies, particularly in the market for mobile devices, have been furiously snapping up patents to use as weapons in lawsuits and bargaining chips in settlement negotiations. That was a key reason Google cited for buying Motorola Mobility, though some experts disagree about the value of that company's intellectual property. In some such cases, companies buy patents to go on the offensive against rivals, seeking hefty royalties for patent licenses or injunctions that could bar sales of competing products. Google, by contrast, expressed defensive motivations; the company, which has relatively few patents on mobile technologies, could theoretically use Motorola Mobility's patents to countersue companies that sue Google or companies that use its Android software. The dangers seem real. Oracle Corp. has sued Google directly, alleging that Android violates patents covering the Java programming language. In other cases, plaintiffs such as Apple Inc. have used patents to attack companies like HTC Corp. that make smartphones that use Android. "We've seen some very aggressive licensing demands in the Android ecosystem," said David Drummond, Google's senior vice president and chief legal officer. "Having the patent portfolio we'll be able to make sure that Android remains open and vibrant." There is no debate that the patent trove Google hopes to buy is large, descending from Motorola Inc.'s 82-year legacy in radio and other businesses before it split into two companies this year. Motorola Mobility on Monday said it owns 17,000 patents world-wide, plus another 7,500 patent applications under review, covering inventions in such areas as wireless, audio, video, design and user interface technology. That number is substantially larger than the 6,000 patents recently sold in an auction by Nortel Networks Corp., which was purchased by $4.5 billion by a consortiun that included Apple, Microsoft Corp. and Research In Motion Ltd. Google also had recently been negotiating to buy patents from InterDigital Inc., whose shares fell 14% after Google announced its deal for Motorola Mobility. "Certainly Motorola has more and probably better patents than Nortel did, and ditto for InterDigital," says Ronald Laurie, managing director of Inflexion Point Strategy LLC, a Silicon Valley firm that represents tech companies and other investors in buying and selling patents. "It appears to be the premier mobility patent portfolio." Some Motorola Mobility patents have already figured in separate sets of suits and countersuits that broke out last fall involving Apple and Microsoft. Some of the cases are being fought in federal court and some before the U.S. International Trade Commission, which can ban the import of products that violate patents. Motorola Mobility, for example, has accused both Apple and Microsoft of infringing a patent that covers a method for a wireless communication system to control delivery of data to a subscriber's device. The invention allows a smartphone to maintain a list of application software accessible to the device, according to court documents. Another Motorola Mobility patent cited in the ITC case against Apple covers technology that includes a sensor that can indicate the proximity of a smartphone to a user's head, so a touchscreen on the device isn't accidentally activated. Motorola Mobility also alleged that Microsoft's Xbox videogame violates its intellectual property, including one technique for protecting a stream of data using a scrambling process called encryption. But Florian Mueller, an intellectual property analyst who has studied those suits, sees problems with the portfolio Google is buying. For one thing, many of Motorola Mobility's patents are encompassed by technical standards set by industry associations in wireless technologies and other fields. Those groups, he said, require what they call "essential" patents to be licensed on a fair and reasonable basis—which weakens their potency because holders of such patents can't ask for injunctions that would stop use of their technology altogether. "If you have those patents what you get is a parking meter but not a gun," Mr. Mueller said. "You can't seek injunctions and get import bans." Some of the patents Google would acquire will reach their 20-year expiration dates relatively soon, Mr. Mueller said, another factor that would reduce their value for use by Google in suits or counter-suits. Sanjay Jha, Motorola Mobility's chief executive, did not address the age of his company's patents Monday. But he appeared to dispute the idea that most of the patents are weakened by being essential to various technical standards. "We have tremendous strength not only in wireless standards but also wireless non-essential patents which are the patents which are required to deliver competitive products in the marketplace," Mr. Jha said during on a conference call. "And as a result of the combination of these patents we believe we'll be able to provide much better support to the businesses at Motorola Mobility as well as support the Android ecosystem."
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