Google Buys Motorola: The Patent Wars Ramp Up
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Google's purchase of smartphone maker Motorola Mobility for $12.5 billion on Monday marks the latest salvo in the software industry's raging patent war -- a pitched battle that threatens to have far-reaching consequences for American innovation.
In buying the hardware company, Google made clear its desire to acquire the estimated 25,000 patents held by Motorola. Google CEO Larry Page characterized the defensive move as one that would "strengthe[n] Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies."
By gaining dominion over this trove of patents, Google will be better positioned to fend off lawsuits from competitors, including Apple and Microsoft. Both companies have launched several high-profile lawsuits over alleged patent infringements by Google.
Google, for its part, contends that these lawsuits are an attempt to levy a tax for the use of patented technology and, in turn, raise the prices of Android phones, which would make the product less competitive in the marketplace.
According to some industry experts, patented technology is, in many cases, far from original -- but simply by having access to a cache of patents, companies are in a better position to defend themselves against future lawsuits.
Dan Ravicher, the executive director of the Public Patent Foundation, explained that in the tech sector, "There's this notion that even if the Joneses are doing something crazy across the street, the popular perception is, 'We should be doing it, too.'"
And the patents themselves may be of questionable value. "There's a patent bubble -- a lot of speculation and bidding up," Ravicher said. He brought up the $4.5 billion a consortium of companies including RIM, Microsoft and Apple paid last month to acquire 6,000 patent rights from software company Nortel "This reminds me of the housing bubble, the dot-com bubble," he said. "Five years from now, people will realize that they have overbid."
Nonetheless, the market for patents has led to what some experts have dubbed an "arms race," with rival companies stockpiling patents as insurance against litigation.
"[The Motorola acquisition] is really about protecting the Android marketplace from these crazy patent lawsuits," said James Bessen, an expert on innovation and patents and a lecturer at the Boston University School of Law. "It's not like Google needed Motorola."
Patent litigation "tripled" after American patent law was changed in the mid-1990s to allow for a greater number of patents, Bessen said. Though he and Ravicher both pointed out that the biotech and pharmaceutical sectors have benefited from the increase in patents, the software industry has in large part been hurt by the change in regulations. This year, the industry is on track to have nearly 3,000 lawsuits.
"In the tech sector, since the late '90s, losses from litigation have been exceeding the benefits," Bessen said, citing his 2008 study.
And with Google's latest move, the increase in patents shows little sign of slowing down. "There will only be more acquisitions based on patents," Bessen said. "Back in the mid '90s, you had Adobe and Oracle saying, 'We don’t need patents.' Then they got hit with lawsuits -- and now they're suing other people. It's just this escalating arms race."
The endgame for the tech sector may be cross licensing deals, which Bessen described as "five year agreements by companies not to sue each other over patents in a particular field." With more patents in its arsenal, Bessen explained that Google may be able to secure a better cross licensing deal with Apple or Microsoft.
Yet if the patent battle continues unabated, there is always the threat that software companies will take their technology overseas -- simply to avoid a thorny and litigious landscape in the United States.
"With arms races, we can only have peace through a lot of fear," Ravicher said.
CORRECTION: A previous version of this post mistakenly said Apple and Microsoft had launched copyright infringement lawsuits against Google. They are patent infringement lawsuits.
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First Posted: 08/15/2011 7:46 pm Updated: 02/16/2012 4:18 pm