Google’s £7.5bn ($12.5bn) acquisition of Motorola Mobility is the price of access to the mobile telephone patent-sharing pool dominated by Nokia, Ericsson and Qualcomm and is aimed at lowering the search giant’s risk and cost of Android product development, believes John Strand, head of mobile industry analyst Strand Consult.
Strand believes most analysts have focused, wrongly, on the so-called patent wars between Apple, HTC, Samsung and others. ‘Everyone is forgetting that Nokia, Ericsson and Qualcomm between them own the essential patents to mobile telephony, in particular, the radio side of it,’ Strand told Mobile.
Strand reckons this is an historical accident due to the development of GSM, largely paid for by the European Commission, and its descendent technologies such as HSPA (high speed packet access) and LTE (Long term Evolution). This gave Nokia and Ericsson first bite at the resultant intellectual property for GSM technology. Qualcomm, with its patents in CDMA (code division multiple access) and latterly in wideband CDMA, which is widely seen as a stepping stone to LTE.
‘Basically no-one can make a mobile phone without using one or more of their (100,000+) patents,’ Strand said.
Strand said firms were using the patent system to build legal monopolies. This was to keep competitors out by ensuring that market entry costs were very high and to monetise their R&D investment.
Strand said patent holders used their patent rights as bargaining chips in product development. Some would “pool” or allow limited sharing of their patents to ensure that they had lower cost access to pool partners’ technology. Licence income among pool partners usually was netted off and settled annually, he said.
The key was a patent portfolio strong enough to force the pool partners to give you a seat at the table, said Strand, hence the acquisition of Motorola’s slate of some 17,000 patents plus 7,500 outstanding applications. ‘Google needed the bargaining power,’ he said.
This also gave Google a forum to talk to other patent holders outside of courts in an increasingly litigious marketplace. This alone could be worth the price Google paid in terms of savings in legal costs, reduced time to market, and lower R&D costs, he said.
Strand predicted that Google would soon sell off the hardware side of Motorola Mobility. ‘What would Google want with a division that makes Bluetooth headsets?’ he said.
Meanwhile, InterDigital, a Pennsylvania, US company with 8,800 3G and 4G/LTE mobile phone patents, has put itself up for auction. It estimates roughly half the 3G phone makers have licensed its technology, including Samsung, BlackBerry maker Research in Motion (RIM), Apple and HTC. Google previously said it would bid for the firm, but its participation is in doubt after the Motorola Mobility deal.
The acquisition of mobile phone patents has become a race following last month’s $4.5bn purchase of bankrupt Nortel Networks’ patent portfolio by a consortium led by Apple and Microsoft, which excluded Google.