Here are what some respected news sources wrote today about the patent based motivation for this huge deal:
Google Primes Patent Pump-
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.
In the World of Wireless, It’s All About Patents
That intellectual property portfolio is a treasure trove for Google because the battle in wireless is one that is increasingly being fought in court.
Corporate warfare over patents is not new. Companies historically preferred to reach truces, choosing to cross-license their intellectual property rather than risking bigger losses in court.
But patent battles are no longer waged between just two competitors, like Intel and Advanced Micro Devices. Platforms like Android and Windows Phone 7 are built upon a handful of device makers, adding more players with different stakes at risk.
That has changed the calculus of settling, as product makers have become increasingly willing to sue rather than reach peaceful settlements.
“Now you’re seeing more suits being brought by product companies willing to step up and say we will defend our patents,” said Colleen Chien, an assistant professor at the Santa Clara University School of Law.
Apple has sued important Android phone makers like HTC and Samsung, while Oracle has taken Google to court. The fighting has been likened to a “patent arms race.”
“The best way to fight a big portfolio of patents is to have your own big portfolio of patents,” said Herbert Hovenkamp, a law professor at the University of Iowa. “That appears to be what Google is doing here, arming itself with patents to be able to defend itself in this fast-growing market.”
Large sums hang in the balance, especially if phone makers are forced to pay out royalties for each handset they make. Microsoft has already persuaded HTC to pay a fee for every Android phone manufactured, and is seeking to extract similar royalties from Samsung.
If left unchecked, such payments could make creating new devices for Android prohibitively expensive for manufacturers, forcing them to turn to alternative platforms like Windows Phone 7.
“With a slim patent portfolio, Google is especially vulnerable to lawsuits against its Android licensees, if not itself,” Charlie Wolf, an analyst with Needham, wrote.
By acquiring Motorola Mobility, Google is seeking to ensure that growth in the Android market will not be choked by the burden of royalties.
The importance of bulging patent portfolios became clear this summer after a consortium led by Apple, Microsoft and Research in Motion, the maker of the BlackBerry, paid $4.5 billion for some 6,000 patents held by Nortel Networks, the Canadian telecommunications maker that filed for bankruptcy.
Google, which initially offered $900 million for the collection, fell short after several bids. Shortly afterward, Google executives complained that the company’s rivals had banded together to smother its Android system with patents.
“We’re determined to preserve Android as a competitive choice for consumers, by stopping those who are trying to strangle it,” David Drummond, Google’s chief legal officer, wrote in a blog post earlier this month.
Mobility’s Benefits for Google Not Patently Obvious
Google is hoping to secure the long term future of its business—by turning that business on its head. With its proposed $12.5 billion acquisition of Motorola Mobility, Google is jumping into a lower-margin, cut-throat hardware business. Even for a company with as varied ambitions as Google, this is a risky deal.
Google’s willingness to buy Mobility highlights how much it needs to protect its Android mobile operating system, now caught up in a raging patent fight. Along with other Android-powered handset makers such as Samsung and HTC, Mobility has been sued for patent infringement by Apple and Microsoft.
Google’s purchase of Motorola Mobility was cheered by the street, as Google looks to control more of its handset maker of its Android phones. The deal also gives Google access to a library of patents, which can be used to protect the Android operating system
Even settling the patent lawsuits could be harder, argues patent expert Florian Mueller. Google may want to use Mobility’s patents to negotiate a settlement that covers all Android handset makers. For Apple and Microsoft, agreeing to an Android-wide settlement may be unpalatable.
In a sign of how badly it appeared to want Motorola Mobility’s patents, Google offered $40 a share, a rich 63 percent premium to Motorola’s closing price on Friday. Analysts at Jefferies calculated that, of the $12.5 billion offer price, Google was essentially paying $9.5 billion for the patents.
Google, until now largely on the sidelines of that fight, has good reason to get directly involved. As an increasing portion of people’s Web surfing shifts to mobile devices, Android gives Google a vital position in mobile advertising. Having snared 47.7% of global smartphone shipments by operating system in the second quarter, according to Strategy Analytics, it is clear why Android threatens rivals like Apple and Microsoft.
Google’s Motorola deal seen as Cold War arms race
Open warfare between technology giants is nothing new, but when Google this week announced it was acquiring Motorola’s mobile division, the conflict over mobile phones went nuclear.
Behind the headlines of the $12.5 billion deal, say analysts, is a Cold War-style arms race, with leading firms racing to stockpile the patents that will serve as weapons of mutually-assured destruction.
But as Google squares off against Apple, Microsoft and the creators of BlackBerry, the question is: will anyone benefit from this escalation in potential hostilities or, like the standoff between America and the Soviet Union, will it ultimately prove futile?
Industry observers say Google’s latest deal, which saw it pay a 63% premium on shares, is primarily aimed at laying its hands on Motorola’s arsenal of patents — legally protected innovations built up over years at the frontline of cell phone development.
Most of these estimated 24,000 patents have little intrinsic value, says Lee Simpson, a London-based analyst at Jeffries International, but a core 500 or so represent the mother lode, giving Google ownership of key cellular communication technology.
And it is these patents that Google will turn to should it be accused of stealing Apple’s own legally-protected iPhone innovations to enhance Google’s Android operating system — a software now used on many popular handsets.
Verizon Says Google Deal May Stabilize Patent Fights
Verizon Communications Inc. said Google Inc.’s $12.5 billion bid for Motorola Mobility Holdings Inc. was a welcome development because it may bring “stability” to a recent slate of smartphone patent disputes, though it stopped short of totally endorsing the proposed acquisition.
Patent Wars and Blackmail in Silicon Valley
The U.S. Justice Department’s Antitrust Division is investigating another possible conspiracy among Silicon Valley companies. This one arises out of the collective bid in the late spring of nearly every wireless phone operating system manufacturer, except Google, for a portfolio of 6,000 cell phone patents formerly held by bankrupt Canadian company Nortel. Simply put, Google started the bidding at about $1 billion, but the others joined forces to lift the price to an astounding $4.5 billion and win the prize.
That’s the legal background to Google’s just-announced Motorola Mobility acquisition, and it’s one that could have serious anticompetitive consequences. If the curiously named “Rockstar Bidco” consortium — which includes Microsoft, Apple, RIM, EMC, Ericsson and Sony — refuses to license the erstwhile Nortel patents to Google for its Android wireless operating system, they will be agreeing as “horizontal” competitors not to deal with a rival. Classically such group boycotts are treated as a serious antitrust no-no, and a criminal offense. If the group licenses the patents, on the other hand, they could be guilty of price fixing (also a possible criminal offense), since a common royalty price was not essential to the joint bid and would eliminate competition among the members for licensing fees.