Why Did Google Buy Motorola Mobility?
Today's big story—both locally and in both business and tech news—is that Google is buying Motorola Mobility for $12.5 billion in cash.
The initial focus, as the Trib's Wailin Wong points out, has been on patent issues:
Google executives said the acquisition was important for its intellectual property strategy, as the company has been engaged in legal battles with Microsoft and Apple over patents. In July, Microsoft and Apple joined with several other technology companies to pay $4.5 billion for more than 6,000 patents formerly owned by bankrupt Canadian telecommunications equipment maker Nortel.
The patent wars are heated in the mobile-device sphere. As veteran tech writer Tim Widstrom put it in a piece arguing for a mobile-device patent pool:
Most of the creative energy in the smartphone industry seems to be going into lawsuits, with just about everyone claiming that everyone else is violating their patents. In addition to keeping a lot of lawyers in work, the disputes are having real world consequences, with, for example, Apple blocking the sale of Samsung Galaxy Tab 10.1 in the European Union. It’s time to stop the madness, but any solution is going to have to come from the industry itself, not from Congress or the courts.
There are so many patents covering so many aspects of the hardware and software that it appears to be all but impossible to build a phone that doesn’t infringe on something. And right now, it looks like the big long-term winners will be the lawyers.
Mark Cuban is so frustrated by the ongoing and expensive legal warfare—Apple blocked the sale of the Galaxy because it's shaped like a tablet—came out and argued for a ban on software patents. But as Nilay Patel points out, patents actually promote open tech discourse:
Because getting a patent means accepting a time-limited monopoly on your invention, anyone will be able to use this specification to build their own search engine when the patent expires in 2018. In the meantime, you’re free to look at Google’s work and attempt to design around the specific claims in the patent. That’s an important way the patent system encourages innovation, actually: it forces inventors to build alternative ways to do things.
Patents publicly disclose some of the most advanced work ever done by some of the most creative and resourceful people in history, and it’ll all be free for the taking in several years. Stop offering patent protection and there’s no more required disclosure — all this stuff stays locked up as trade secrets as long as it offers a competitive advantage, after which point it may well be forgotten.
In short, patents are a balancing act: if you have a really great idea—Patel singles out Google's PageRank algorithm and Apple's touch-screen software—you get a running start, but future innovators get to learn from your work. Patel's piece is a great rundown on the history of patents in relation to both hardware and software, and how we got to this point: specifically, the increasingly hectic cycle of patent fights in recent years. It's become so mainstream that This American Life devoted an (excellent) episode to Intellectual Ventures, a company run by former Microsoft CTO Nathan Myrvold, which is either a patent-trolling chop shop or invention department store, depending on who you believe:
At the same time Crawford's patent was being prosecuted, more than 5,000 other patents were issued for "the same thing," Martin says.
Crawford's patent was for "an online backup system." Another patent from the same time was for "efficiently backing up files using multiple computer systems." Yet another was for "mirroring data in a remote data storage system."
And then there were three different patents with three different patent numbers but that all had the same title: "System and method for backing up computer files over a wide area computer network."
What does this mean for the consumer? I own a G2, an Google-branded smartphone manufactured by HTC that runs on the "free" Android system. Since 2010, there have been 37 patent-infringement lawsuits over Android. But Android isn't free as in free beer. Ina Fried reports:
For the past several years, Microsoft has claimed that Linux-based products infringe on its patents and sought out licensing deals with those making devices based on the open-source operating system. The company has signed scores of such deals, however, this is the first one covering Android.
That was in April of last year. Fried continues, presciently:
"Google is really unable to protect HTC because they don't have any portfolio of patents in this area," said Gartner analyst Ken Dulaney. Microsoft, by contrast, has a broad portfolio and a patent cross-licensing deal with Apple that probably covers HTC's use of Windows Mobile, though perhaps not other things that HTC has done on its Windows Mobile-based phones.
"Motorola could probably be a different story because they have more patents that they can bring to the table," Dulaney said.
When I bought my phone, five dollars of the purchase price went to Microsoft as a result of the HTC license. In Q2 of this year, Microsoft made three times as much money on Android licensing as it did on its own Windows mobile-phone platform. Now, assume that other companies strike similar deals, or win lawsuits that are tantamount to licensing fees (Oracle is suing Google for more money than Android has earned to date). Then the prospect of offering a smart phone for, say, less than $100 becomes increasingly less likely.
So when you read that Google is buying Motorola for patents, the theory is essentially that it's a legal backstop. Above Wong mentioned that they're trying to fight off Microsoft and Apple... but those companies are fighting their own battles, for example against Lodsys. And as Jon Gruber points out, it doesn't necessarily mean that Google are the good guys:
Google seems to feel entitled to copy whatever it wants. Android copies the UI from the iPhone. Places copied data from Yelp. Google+ copies from Facebook. Their coupon thing is a clone of Groupon. And yet it’s Google that acts as though it has been offended when these competitors fight back.
Danny Sullivan has much more on Google's tendency to copy other business models; Gruber notes that before the iPhone, Android looked more like Blackberry and Windows Mobile.
So that's the main theory for Google's purchase of Motorola Mobility: as a giant bulwark for fighting the patent wars. But there are others. One is that it gives Google more momentum, or the possibility of a different approach, to the television market by acquiring the biggest (by revenue) set-top box maker. Google took a run at TV with, well, Google TV, and it seems to have sold like lead hotcakes. At least, it wasn't terribly well received, as I learned when researching set-top box replacements. I settled on the simple, tiny, inexpensive, energy-efficient Apple TV; even having a very high tolerance for messing with home network stuff, Google TV sounded like more trouble than it was worth:
If you don't have Dish Network, your experience will be far less integrated -- typing "Modern Family" into the Google TV search box will bring up future program listings and web results for the show, but won't show you that you have a local recording sitting right there on your DVR. You also won't be able to schedule recordings -- selecting a future episode of a show brings up a box instructing you to... program your DVR! It's an extremely disjointed experience, to say the least.
And at the time it was two and a half times the cost of an Apple TV. Meant to integrate with cable, it didn't do so very well. Picking up Motorola Mobility might give Google TV—the idea, the platform, or both—much greater integration into the cable market than the piecemeal approach they previously tried.
(Update: If it helps, think of it like the Cold War: Google had a patent gap between it and its main competitors, and this is a step towards mutually-assured patent destruction, making patent-infringement lawsuits somewhat more pointless than they were before today.
And if you really want to get deep in the weeds about licensing, Brown Rudnick lawyer Edward Naughton has been doing some fascinating if complicated blogging about whether most uses of the Android system are properly licensed at all:
Not long ago, open source advocates sued more than a dozen major consumer electronics manufacturers, claiming that the manufacturers had lost the right to use GPL’d software in their devices. It looks like the same could be said of Android: virtually every one is unlicensed.
In short, Android is based on a Linux kernel, and Linux is distributed under a General Public License that makes its use free, but does carry with it certain requirements. Not everyone agrees, but it's an interesting look into the complexities of software licensing.)