What Google’s Motorola Mobility deal means for its patent war

Google has tipped over the patent-war applecart by acquiring Motorola Mobility for US$12.5-billion. This move by Google will hopefully put the current Nortel patent war with Microsoft and Apple to bed.

The cases arose because of Android’s meteoric growth in the mobile operating space: More than 550 000 Android devices are activated every day, through a network of 39 manufacturers and 231 carriers. Android and other platforms are competing hard against each other, and that’s yielding cool new devices and amazing mobile apps for consumers.

Google Legal Chief David Drummond labelled as “bogus” the move by the opposition consortium (In which Microsoft and Apple were the main players) to buy up a number of patents so that Google couldn’t. Microsoft and Apple were accused of “stifling innovation” and many believe the move would have resulted in it being more expensive for phone manufacturers to license Android. As Drummond says:

A smartphone might involve as many as 250 000 (largely questionable) patent claims, and our competitors want to impose a “tax” for these dubious patents that makes Android devices more expensive for consumers. They want to make it harder for manufacturers to sell Android devices. Instead of competing by building new features or devices, they are fighting through litigation.

So what are the repercussions of this massive industry news? Let’s take a look at some of what Google CEO, Larry Page, has to say:

This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business. Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them to deliver outstanding user experiences… 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.

Not one to mince his words, Page is directly responding to the Nortel auction by saying that the acquisition of Motorola increases Google’s patent portfolio. This can also be seen as a master-stroke with regards to taking Apple’s iPhone on in the war of the mobile devices.

With hardware manufacturers like HTC and Samsung contributing largely to the popularity of Android, though, it seems a bit awkward having a competing hardware manufacturer “in-house”. Page has been quick to dispel any notions that Google was climbing into bed with Motorola Mobility by stating that Android will continue to be an open platform. Motorola will remain a licensee of Android and Android will remain open and Google will run Motorola as a separate business. Still. it seems like a strange relationship – like a newly married couple walking into a swinger’s party.

Bullish Google investors are saying there’s a possibility Google will jettison Motorola’s operating business, a scenario which makes sense considering what the current situation means: Taking on 19 000 new employees and trying to fix the low-margin, flailing hardware side of the business. Such a solution would certainly soothe the savage channel-conflict beast that owning a company like Motorola, while partnering with HTC and Samsung, can create.

The silver-lining message is that this acquisition will “supercharge” Android and will drive competition, creating a greater sense of urgency with regards to innovation and ultimately a better user experience.

So does that mean we should all be rushing to buy Google stocks? Some industry insiders are saying no: While Motorola did have early successes with the likes of the Motorola Droid, its product mix has been uninspiring. There have been some execution blunders which have lead to it being killed in the market by HTC (124 percent year on year growth) and Samsung (400 percent year on year growth).

In fact, the news saw Google stock fall by three percent in pre-trading before rallying later in the day. Interestingly, the stock of beleaguered manufacturers Nokia and Research in Motion (RIM) rose in the wake of the announcement.

Coupled with this kind of data is the fact that the management over at Motorola Mobility was sounding increasingly fatigued in the lead-up to the acquisition, with CEO Sanjay Jha saying that he expected consolidation to occur in the industry and that he didn’t know whether Motorola Mobility could be an independent company or not.

All is not doom and gloom: With 17 000 granted U.S. patents and 7000 pending, Motorola Mobility has a valuable number of patents which could incrementally increase the user experience on Android. Those patents, together with Motorola Mobility’s industry-tested R&D team, could help Google overcome the iPhone monster.

Image: Tsahi Levent-Levi