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Attendees chat at Google's IO Developers Conference in San Francisco this past May. Google is buying cell phone maker Motorola Mobility Holdings Inc., for $12.5-billion in cash. (Marcio Jose Sanchez/AP)
Attendees chat at Google's IO Developers Conference in San Francisco this past May. Google is buying cell phone maker Motorola Mobility Holdings Inc., for $12.5-billion in cash. (Marcio Jose Sanchez/AP)


Google's Motorola deal 'by and large a defensive play' in patent wars Add to ...

Google Inc. is writing the biggest cheque in company history to save its Android operating system from a slow, litigious death.

The Web search giant, which earlier this summer lost a high-stakes battle for Nortel’s 6,000-patent portfolio to rivals Apple, Microsoft and Research In Motion, will purchase handset manufacturer Motorola Mobility for $12.5-billion (U.S.). The acquisition target’s primary asset? An arsenal of 17,000 existing and 7,500 pending patents.

“It’s a huge deal,” said technology and intellectual property lawyer Arshia Tabrizi. “Everyone thought Google was dead in the water after their Nortel bid fell through. But it turns out they had a very nice plan B.”

Google’s big bet appears to be one of necessity. The company’s Android operating system, which powers 150 million mobile devices from almost 40 different manufacturers, is the subject of hundreds of patent infringement cases worldwide. Increasingly, those cases aren’t going Google’s way, raising the prospect that the company’s most successful product since its core search engine may be wiped out from many, if not all, major markets. Last week, Apple persuaded a German court to ban new shipments of Samsung’s Android-powered Galaxy tablet throughout much of the continent, potentially crippling future sales. Apple alone is involved in dozens of similar cases against HTC and Motorola, the vast majority being Android-related patent infringement claims. Microsoft is also involved in legal action against Android device-makers. Additionally, Google and Oracle are locked in a court case of their own. All those claims are seen as proxy legal challenges against Google itself.

For years, Google has chosen to protect its innovations using trade secrets rather than patents. But in the past couple of years, companies have decided to lean heavily on legal action in such cases, where Google’s trade secrets are far less effective because infringement in those cases requires that the offending company willingly obtain and copy the trade secret. Patents, on the other hand, can be infringed upon even if the offending company develops the same technology without ever having heard of the patented innovation.

With Motorola Mobility’s patent chest – which includes many key pieces of intellectual property dating back almost 80 years – Google now has a means of settling at least some of the cases against Android by offering to license some of its own patents.

“This is by and large a defensive play,” Mr. Tabrizi said. “Now Google can look at cross-licensing, so when Apple comes after them they can say, ‘Well, you’re infringing on this, this and this.’ ” The extent of Google’s concern about its patent vulnerability is readily apparent. In a note announcing the proposed Motorola Mobility acquisition, Google CEO Larry Page accused rivals such as Microsoft and Apple of “banding together in anti-competitive patent attacks on Android.

“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.”

Last month, after losing the Nortel auction, Google quietly bought a suite of more than 1,000 patents from IBM. Although the price tag was not disclosed, it is likely that, between the IBM deal, the Nortel auction and the Motorola Mobility acquisition, three of the biggest deals in the technology world this year have revolved around the transfer of lawsuit bargaining chips.

Indeed, for weeks investors had speculated that Google would next make a run at patent-holding firm InterDigital, according to Frost & Sullivan analyst Ronald Gruia. Following today’s acquisition news, however, InterDigital shares plummeted more than 14 per cent on the Nasdaq.

RIM shares, on the other hand, jumped nearly 10 per cent on Monday, closing at $26.59 (Canadian) on the Toronto Stock Exchange, at least partially as a result of speculation that the Motorola Mobility purchase may push Microsoft to make an acquisition of its own.

“Whenever something like this happens,” Mr. Gruia said, “it makes you think, ‘Okay, who’s next?’ ”

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