Google's CEO, Larry Page, wrote that the acquisition "would enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies." A similar statement was repeated in a press release. Motorola had 17,000 patents and 7,500 more patents pending.
We know that Google wants to build a defense against Apple, Microsoft, and perhaps Nokia. Arguably it also wants an incentive to cross-license with Oracle. It desperately needs patents. It has bought over 2,000 patents from IBM. (IBM has been granted the highest number of U.S. patents each year for the past 21 years.)
But were the patents worth it?
At the time of the acquisition, Motorola was in litigation against two companies: Microsoft and Apple.
In 2013, a judge ruled that Microsoft would pay under $1.8 million in yearly royalties for Motorola's standards-essential patents on H.264 (video format) and 802.11 (wifi). Standards-essential patents must be licensed to other parties at a so-called "reasonable and non-discriminatory" (RAND) rate. In this case, the judge ruled that Motorola was not acting reasonably. Instead, the appropriate royalty rate for H.264, for example, was 0.55 cents. That's not a lot of money compared to how much Google paid for the patents.
The litigation against Apple has turned sour. Apple has already been issued rulings in its favor. Other cases have dismissed. A judge described Motorola's demands as "crazy".
Google may have thought that patents required for widely-used technologies like wifi or a common video format could be used as a powerful weapon (or powerful defense), but judges don't that's reasonable.
From FOSS patents:
Motorola's strategy of demanding prohibitive royalty rates (only to have an excuse for seeking injunctions) and bringing out-of-this-world damages claims over FRAND-pledged SEPs has failed all the way, and the Federal Circuit ruling on the Posner appeal will be yet another blow to Google's strategy relating to the patent portfolio that was the primary reason for paying $12.5 billion for Motorola Mobility. Google is free to pay crazy prices for patents. But it can't expect companies like Apple and Microsoft to be crazy enough to accede to its demands, and it's been unsuccessful so far to find crazy judges to side with it.
However, standard-essential patents still have important uses: they put their owner in a better position to negotiate cross-licensing agreements and can be used against others who don't have standard-essential patents. Google probably wants to encourage its competitors to cross-license.
I think Google bought Motorola for its patents because the value of a patent is unpredictable; even the most ordinary of Motorola's patents could one day become the center of IP litigation. In essence, Google is investing in an uncertain future by stockpiling patents that are potentially invaluable.
ReplyDeleteAgreed. As I found out while responding to another comment, some patent analysts believed that Motorola's many standards-essential patents made it more valuable. But some other patent analysts called Motorola's patents "crap". These deep disagreements suggest that even the experts are uncertain.
DeleteNice analysis. The points you brought up were mentioned in several articles I read over as well. But what I found interesting from many articles was that Google bought Motorola at significantly less price than one would expect. Although the total cost was $12.5 billion, it translated to approximately $4 billion after counting all the money that Motorola had and counting the money that Google made by selling subsidiaries and ultimately Motorola.
ReplyDeleteAgreed, I also found that interesting and mentioned it in my other post on why Google sold Motorola.
DeleteOn top of the incurred revenue of Motorola, they also held a research facility that will enable Google to spread more into hardware. Have yet to see any breakthroughs come out of it, but interesting that Google has taken a recent interest in the hardware market.
DeleteI agree with Luke that the purchasing of patents is an uncertain business and doesn't always pay dividends for the buying company. As we can see with how much money they lost with this whole ordeal. It's refreshing to see that many judges didn't let vague patents hold water during litigation.
ReplyDeleteI think that as the patent war develops, judges have to become more and more up to date on technology advancements. I'm sure years ago, vague patents like these would fly under the radar but because they become more and more contested, judges are forced to look into the tech more
DeleteIt's interesting to note that William Alsup, the presiding judge over Oracle v. Google, learned to code in Java specifically for the trial and used that knowledge to challenge one of Oracle's claims.
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