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Was Google's Motorola Mobility Acquisition a Mistake?
Nerval's Lobster writes "Even before the Google acquisition, Motorola Mobility was engaged in a major legal battle with Microsoft, insisting that the latter needed to pay around $4 billion per year if it wanted to keep using Motorola's patents related to the H.264 video and 802.11 WiFi standards. (The patents in question affected the Xbox and other major Microsoft products.) Had that lawsuit succeeded as Motorola Mobility originally intended, it would have made Google a boatload of cash—but on April 25, a federal judge in Seattle ruled that Microsoft's royalty payments should total around $1.8 million per year. 'Based on Motorola's original demand of more than $4 billion per year from Microsoft,' patent expert Florian Mueller wrote in an April 26 posting on his FOSS Patents blog, 'it would have taken only about three years' worth of royalties for Microsoft to pay the $12.5 billion purchase price Google paid (in fact, way overpaid) for Motorola Mobility.' This latest courtroom defeat also throws into question the true worth of Motorola Mobility's patents. After all, if the best Google can earn from those patents is a few pennies-per-unit from its rivals' products, that may undermine the whole idea of paying $12.5 billion primarily for Motorola Mobility's intellectual-property portfolio.
You do not take his words seriously. Google has bigger plans for Motorola. Some of which we would see later this year. They need Motorola for a possible situation where Samsung forks Android away. Patents are a big part of the deal but I doubt Google thought that they would recover their investments through royalties. Loads of people said acquiring YouTube was a mistake. Just give it a year or two. Microsoft paid 7 billion dollars for Skype. Around the same for aQuantive which they now admit was a bad move! Google paid same for Motorola Mobility and I am sure it is worth much more (IP and assets).
Two important things are missed here:
1) Google mainly bought the patent portfolio for defensive purposes, not as revenue engines in themselves. The point of the suit is that MS wants to use the patents without paying for them. It's basically a move in the MS-vs-Android war.
2) The judgement doesn't pass the smell test. Read the articles over at Groklaw for the details, but the judge here is ruling that Motorola must accept patent pool rates for a pool they don't belong to, rather than negotiate rates using the methods of the group they are a member of. The whole proceeding has been slanted toward the home team (MS) the judgment seems to be very much an overreach, and probably won't survive appeal.
"My strength is as the strength of ten men, for I am wired to the eyeballs on espresso."
Something in this part makes me twitch... "patent expert Florian Mueller ". I don't know much about Florian except that he gets the word 'shill' used next to his name on occasion, I can't even remember why. Therefor I do apologize if I am mistaken if my mistrust is misplaced.