Live

Watch CBSN Live

Memo to Google: Buying Motorola May Not Protect Android

Google has been hunting for patents, and, regulators allowing, it's about to get a mother lode. The company plans to buy Motorola Mobility (MMI) for $12.5 billion. That's a hefty price tag, but Google is playing for big stakes -- the ability to keep Android the top flavor of smartphone so Google can make oodles from mobile search ads.

Google CEO Larry Page believe Motorola's patents might be useful bargaining chips for fending off lawsuits from the likes of Apple (AAPL) and Microsoft (MSFT). But success is hardly guaranteed.

"It's not fair!"

Android has been a mobile patent whipping boy for some time, at least to judge by the dozens of patent infringement lawsuits filed against Google and its hardware partners. Google wailed, "They're picking on us!" And management was right.

Apple is deathly afraid of Android, given how quickly the operating system gained smartphone market share until it led the pack. It was like the PC wars all over again, when an upstart whose product Apple despised -- Microsoft, in the case of PCs -- worked with many hardware vendors to make its presence ubiquitous. And Android is free, making it an even tougher competitor than Microsoft.

Apple's legal tactics have become increasingly sneaky and desperate, as its (successful, for now) efforts to keep the Samsung Galaxy Tab and Motorola Xoom tablets out of Europe show. Meanwhile, Microsoft has sued Motorola, Barnes & Noble (BKS) and apparently any other Android-based device company that doesn't want to "voluntarily" pay upwards of $10 to $15 per smartphone in software royalties.

Is Google its own worst enemy?
Google has absolutely been a target, largely because it spent too long trying to work in areas of technology where it had no patent protection. No surprise there, as the company has been nonchalant about copyright issues as well. That kind of strategy eventually lands you in court.

Google's been scrambling every since to beef up its own patent portfolio. It lost the bid for Nortel's patents to a combination of Microsoft, Apple, Oracle (which is suing Google over alleged infringement of patents on Java), and RIM. But then it bought a block from IBM.

Jackpot, or wishful thinking

You can understand why Google would be attracted by Motorola's patents, given what Motorola CEO Sanjay Jha said about them during the company's July earnings call:

As most of you know, we own one of the strongest and most respected patent portfolios in the industry. We have over 17,000 patents granted and over 7,000 patents pending with particular strength in 2G and 3G essentials, nonessential patents important to the delivery of competitive products in the marketplace; video, particularly compression, decompression and security technologies; and finally, a leading position in 4G LTE essentials. With new entrants to the mobile space resulting from the convergence of mobility, media, computing and the Internet, our patent portfolio is increasingly important.
Motorola has seminal patent strength in areas where Apple and Microsoft are comparatively weak. However, because of the number of patents in the mobile industry, established companies tend to have cross-licensing deals. Google might find that its adversaries already have licenses to the patents, which would make them useless in court.

However, there may be useful patents that Motorola didn't license. And even if some important patents are currently licensed, as patent blogger Florian Mueller pointed out to me in a Twitter exchange about RIM, they won't necessarily stay that way. Eventually they come up for renegotiation. Then again, as Mueller pointed out, Microsoft and Apple both sued Motorola anyway, so the daunting factor may be limited. Google is still in a better position than it was.

Will it be in vain?

There are still big hurdles in Google's way. One is antitrust review. Another is potential resentment by Google's other Android partners, who will now also be its competitors in the handset market.

But Google management took some smart steps. Google will run Motorola as a separate business and will continue to run Android independently as well. So long as Google doesn't start to charge for Android or give favorable terms to its Motorola unit, that move should help disarm concerns on both fronts.

The Linux factor
Google, however, may have an even bigger problem -- the licensing requirements of the open source operating system, Linux, on which Android is built. It requires that any software built using Linux be released under the same type of license. According to Mueller, few in the Android ecosystem has complied with the underlying license requirements for Linux. That may include Google, at least in the Gingerbread release.

That would mean most Android device vendors might be illegally distributing the Linux portions of Android. The open source community, which has successfully taken legal actions a few times over the last few years, could sue Google and everyone making Android devices. That could in theory shut down Android completely -- no Linux, no Android.

Related: