14
Sep
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If you head over to FOSSPatents this morning, you'll find a rather lengthy article about Google's acquisition of Motorola that ends with the following conclusion:

Google bought MMI to prevent the worst for Google's strategy, not to make things better for everyone else.

In a way, the $12.5 billion price represents protection money. But not in the way most people seem to think.

FOSSPatents

This statement is obviously contrary to the heaps of coverage the Motorola-Google deal received from  major news outlets, blogs, and Android enthusiasts. Us included. This deal was to protect Android from the evils of Apple and Microsoft, with patents. Lots of them. In fact, well over 17,000 of them. Right?

There's been plenty of speculation that only a very small number of those are actually of interest to Google, and that many of Motorola's pending patents (which are not publicly available) contain even more goodies to keep Android a legally tenable product. On the magic "18," a patent lawyer from Alabama chimed in and was quoted at news outlets around the world like the end-all authority on the patents in question.

But the fact is, not everyone's so convinced. Motorola's patent portfolio has been called "crap" by founder of patent consulting firm M-Cam, declaring that even of the 18 "magic bullets" Google gets from Motorola's portfolio, 9 of those are subject to major licensing impairments reducing their strategic value in litigation as negotiation tools. This includes things like RAND licensing agreements, meaning the holder of the patent is forced to enter into a reasonable licensing agreement with any entity that requests one.

On the 18, M-Cam concluded with this point:

In addition, M∙CAM DOORS™ has identified 34,529 documents in the innovation space that may contain critical elements of technologies of the patents in suit and that may be of material importance to the litigation.  Close to 5,000 of these represent uncited precedent innovations, a sample listing of which can be found in Appendix A. [Source]

In short, M-Cam is basically saying that there's potentially a lot of "prior art" (one second on that) out there that could be used to invalidate Motorola's MVPs (most valuable patents, duh).

Prior art is a way of saying, to do little justice to the actual legal definition, "someone else invented this before you did." Prior art doesn't need to be patented, just published and publicly available. Prior art is the bread and butter of any defense in a patent infringement suit, and if prior art is found to exist covering claims (claims are just the individual "pieces" of a whole patent) that are part of the patent in suit, those claims are invalidated - often resulting in the invalidation of the entire patent on review.

The point I'm getting to here is this: Motorola's patent portfolio may not be all that valuable. And since Google conducted a due diligence on Motorola's IP portfolio before entering into the purchase, they probably knew this before buying the company. It's possible Motorola has a slew of pending patents that could be seriously awesome, but that's totally unfounded speculation.

Google didn't enter into talks with Motorola until after the Nortel auction, in which Microsoft, RIM, and Apple (among others) jointly acquired rights to the bankrupt telecom giant's many patents. A lot of Nortel's patents were subject to licensing encumbrances, but since the company went bankrupt, the presumption has been that those encumbrances have been destroyed - giving the new holders full strategic use of this patent arsenal.

Motorola, rather than a bidder, was an objector to the sale in part - the part where those licensing encumbrances would no longer exist. Microsoft and Apple bought the Nortel patents. Both of those companies are currently litigating with Motorola in various states. The deal with Google expressly forbids Motorola from settling any of these lawsuits - something it seems Motorola was very much considering in recent months:

Motorola Mobility has certain potential near-term intellectual property (“IP”) licensing opportunities and certain IP litigation risks that without the merger may have been able to be settled on favorable terms to Motorola Mobility and may be more difficult to settle on such terms after entry into the merger agreement. Further, if licenses are not entered into and litigation is not settled, Motorola Mobility’s position in these matters may be prejudiced if the proposed merger does not close.

Motorola SEC Merger Filing

After the Nortel purchase, Motorola went from having a "questionable" IP portfolio against Microsoft and Apple, to having one that was a downright liability. Google now owns that liability. And make no mistake, even if Motorola has a fighting chance in its cases against Apple and Microsoft, all it takes is one federal court declaring some of Motorola's patents invalid to start a snowball effect in terms of litigation.

The fact is, there's a lot of uncertainty, and that's what Google's $12.5 billion is buying right now: unanswered questions and unresolved disputes.

Finally, going back to the FOSSPatents article, Mueller makes a few excellent points about what might have happened if the Google-Moto deal didn't happen (aside from the settlement options with Microsoft and Apple):

MMI is the only major smartphone maker to build exclusively Android-based devices. However, there were some rumors about MMI developing a mobile operating system of its own. Those were denied. But on August 9 (I'll get to the importance of that date further below), MMI's CEO described Windows Phone as "an interesting option for us to consider" under certain circumstances.

This, I think, is a very hard point to avoid. Google has a major interest in Motorola remaining an Android-only smartphone vendor, especially in the US. If Motorola started building Windows Phone 7 handsets, that love triangle could get messy, and fast. Such relationships have already forced companies that produce both Windows and Android handsets, like Acer and HTC, into licensing deals with Microsoft to retain friendly relations with the company

For Google, a major Moto-Microsoft licensing deal (whether for WP7 or for infringement royalties on Android) would reduce manufacturer confidence in the ability of the Android OS to protect itself from patent predators. There's also the fact that Motorola expressed interest in its own licensing opportunities:

August 9th ... MMI's CEO talked about IP as being "very important for differentiation among Android vendors" and differences in terms of "potentially being able to collect royalties"

Now, whether Motorola was interested in going after HTC, Samsung, LG, or other Android vendors, wasn't made explicit. But it sure wasn't discounted as a possibility. The last thing Google would need was its 3rd biggest partner for Android handsets in the US to start turning its guns on the "friendly" competition.

Finally, there was ample evidence Motorola was considering selling Motorola Mobility with or without Google, even as a piecemeal patent auction, when major Moto stakeholder Carl Icahn told the company in meetings that it should "explore alternatives regarding its patent portfolio to enhance shareholder value." In other words: sell it to whoever's going to give us a good price. That could have been Microsoft, or Apple, or RIM. They certainly would have been, at least, interested in such an opportunity.

It's very possible that in order to avoid Motorola getting in bed with the real competition, Google seized the moment with little respect for the strength of Moto's IP portfolio in the legal sense - knowing full well that it was buying a less than game-changing set of patents.

Not to mention, Motorola Mobility isn't exactly bad at what they do, and it was a golden opportunity to fast-track Android hardware by cementing into perpetuity an already strong hardware-software relationship between the two.

The patents are still a very important part of the deal, but I tend to agree with Mr. Mueller on this one: they're not as central to it as everyone seems to think.

Most quotes from FOSSPatents

David Ruddock
David's phone is whatever is currently sitting on his desk. He is an avid writer, and enjoys playing devil's advocate in editorials, and reviewing the latest phones and gadgets. He also doesn't usually write such boring sentences.

  • herby

    FOSSPatents is a scam. Mueller poses as a insider, but he has no knowledge whatsoever in this space. You better check what Groklaw writes.

    • David Ruddock

      Thanks for your opinion on Mueller. There's nothing in his post that we hadn't already heard, and the conclusions he draws are sound.

      I don't always agree with him, but I think he's taken a level-headed approach on this and makes some excellent points.

      Feel free to disagree.

    • https://plus.google.com/110746473358992960621 DarthSpacegrass

      Agreed - and furthermore, since when was Motorola, Google's biggest partner? Wouldn't that be spelled Samsung?

      • David Ruddock

        You're right, they've slipped to 3rd. I was looking at an old stat. Fixed.

        • Larry

          Florian Mueller is a paid Microsoft hack. A quick Google search will prove it.

          Also, I had pasted a bunch of articles that proved this, but your spam filter ate it.

  • L boogie

    Good post David, there's always gonna be more than meets the eye as far as the google-Motorola deal is concerned and until light is shed upon the full nature of the deal, there's gonna be countless speculations whether it involves patent portfolio acquisition, hardware manufacturing, OEMs and their views about the deal and android etc.

  • Chris

    Motorola is not as successful as HTC and Samsung are, both of which use other operating systems besides Android. So why would Google care so much about Motorola being Android only in that context? It makes even less sense when you consider Motorola's downward trajectory and presence outside the US.

    As for Motorola's IP, its contradictory to say that its useless against Apple and Microsoft, and at the same time is powerful enough to extort money from HTC and Samsung. Its either a good portfolio or it isn't. As far as I know, there are several patents in Motorola's litigation against Apple and Microsoft that are very problematic. As the previous poster mentioned, Groklaw is a better resource. Mueller's articles are completely dismantled every time they make it onto Slashdot.

    • David Ruddock

      "It's either a good portfolio or it isn't."

      That's total reductionism and makes the situation sound far more simple than it is.

      SOME patents could be used against other Android device makers, because Motorola has cross-licensed on those patents previously with some companies but not others. Microsoft is a licensed partner. Those patents makes up a small portion of the "18" cited. Just because you have one good patent doesn't mean it's going to stop litigation on countless others, and it doesn't mean that one good patent somehow becomes a viable weapon in litigation against other parties who are suing on completely unrelated patents.

      It's the fact that Moto might have *tried* enforcing them that matters. Litigation costs money, and it would have caused an uproar among other Android manufacturers, reduced confidence in the OS and Google, whether or not the suit was actually successful or for a particularly large amount of money.

    • John

      Somehow, it seems reaonable to assume that two giant companies who have created comprehensive software platforms including desktop and mobile operating systems might have patents in the smartphone space that are more effective against Motorola than, say, HTC or Samsung can muster.

      Just a hunch.

      And invoking Slashdot as an authority on business/legal matters strikes me as unconvincing.

      • Chris

        Well, despite having probably never even stepped foot into a courtroom, Mueller is somehow referenced as an authority on business/legal matters.

        The Slashdot commentary on his articles is intelligent, read it for yourself. We're on pins and needles to know if you're still struck as unconvinced afterwards.

        Despite Mueller's best attempts to portray Google as helpless victim of Oracle and Android vendors as pigs ready for slaughter, Android phones will still be made.

        Just a hunch.

        • John

          I stopped reading Slashdot years ago, when an analogy from Torvalds' turned into a "Linus says OpenOffice should create a proprietary document format" article or something similarly stupid. The site had been going steadily downhill, and that was the last straw.

          I don't deny that Slashdot attracts (or used to, can't claim any knowledge these days) an intelligent crowd, but between the willfully blind and the genetically obtuse, the signal to noise ratio in the comments was ridiculously weak, and when the posts themselves were a mockery of journalism, what point remained?

          So, no, I'll pass on your invitation. Life is too short for /.

  • Andrew

    Android was more of a hobby for Google than a core business just a few short years ago. It shows both Android's potential and value to Google that the company parted with so much cash to protect its position. As far as Motorola or anyone else developing their own OS (at least for the US and Europe), don't count on it. All these patent wars will close off any development as most of the relevant patents will be in effect for years and there is simply no space to develop a litigation-safe OS. This, and expect to see Android taking over the feature phone market space (this is already happening with 'mid-range' Android devices).