(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Reynolds Holding
NEW YORK, May 2 (Reuters Breakingviews) - Google (GOOG.O) is
shooting blanks in the smartphone patent wars. Buying Motorola
Mobility and its cache of inventions was meant to shield the
search giant's Android operating system from legal attack. But
judges and regulators are defusing the patent arsenal, saying
the underlying technology must be licensed on reasonable terms.
While bad for Google shareholders, it's a bonus for innovation.
The Motorola deal was born of necessity, if not desperation.
An Apple-Microsoft (AAPL.O)(MSFT.O) consortium's $4.5 billion
purchase of Nortel NRTLQ.PK patents in 2011 meant rivals could
extract steep royalties from Android device manufacturers - and
possibly block the gadgets altogether. So Google, with few
patents of its own, shelled out $12.5 billion for Motorola and
its 17,000 patents.
It seemed a smart acquisition at the time. The portfolio
consisted largely of standard essential patents, rights so
important to the industry that their holders agree to share
them. Motorola had done so at lofty prices, giving Google a tidy
revenue stream along with a stout defense.
But a shift in the law and some weaker-than-expected patents
prompted a losing streak. The rights weren't powerful enough to
dissuade Apple from successfully challenging two in a federal
trial last August, or the U.S. International Trade Commission
from invalidating several last month. And with prodding from
Apple and Microsoft, jurists and regulators started questioning
Motorola's licensing practices.
In 2012, the European Union and then the U.S. Federal Trade
Commission began investigating whether the practices were
anticompetitive. The EU probe continues, but in January the FTC
made Google promise to stop seeking court orders essentially
blocking use of its patents.
Meanwhile, a Chicago federal judge slapped down Motorola's
request for such an order, as well as royalties, against Apple,
while a U.S. court in Wisconsin affirmed that those royalties
must be reasonable. The latest blow came last week: A Seattle
federal judge slashed Motorola's royalty demand of Microsoft
from as much as $4 billion to less than $2 million.
It's a stretch to call the Motorola deal a bust. The patents
have probably boosted leverage in licensing negotiations and
smoothed Android's path to operating-system dominance. But
Google might have anticipated that courts would bristle at
Motorola's royalty overreach, which can stifle technology
innovation and, ultimately, consumer choice. That's not only bad
legal strategy, but an affront to Google's aspirations not to be
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- A U.S. district judge in Seattle ruled on April 26 that
Google's Motorola Mobility deserved only a small fraction -
about $1.8 million - of the $4 billion it had demanded for use
of its wireless and video technology in Microsoft's Xbox
console. It was the latest of multiple legal setbacks for
Google, which in 2011 paid $12.5 billion for the smartphone
maker largely to acquire its patents. The decision lowers the
value of those patents as bargaining chips in negotiating
licensing agreements with Apple, Microsoft and other rivals.
- Reuters: Microsoft gets upper hand in first Google patent
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(Editing by Rob Cox and Martin Langfield)
Keywords: BREAKINGVIEWS MOTOROLA/PATENTS
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