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Was Google's Motorola Mobility Acquisition a Mistake?

Posted by timothy on from the press-one-to-find-out dept.

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.

18 of 189 comments (clear)

  1. Everything was fine yesterday.... by ip_freely_2000 · · Score: 5, Insightful

    No one blinked an eye when Google paid what it did for Motorola. Now, one judge has brought out the critics and the second guessing. Unless you have a time machine, or can talk to every judge with a 'what-if', you can only do your due diligence. It's time to move on and look to the next problem, not rehash the past.

    1. Re:Everything was fine yesterday.... by bobaferret · · Score: 5, Interesting

      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.

    2. Re:Everything was fine yesterday.... by Anonymous Coward · · Score: 5, Informative

      Mainly because he is paid by Oracle and Maybe even Miscrosoft and is often biased in favour of his paying masters.

    3. Re:Everything was fine yesterday.... by icebike · · Score: 5, Insightful

      I think a lot of people at the time of the purchase did raise that the price was too high. From other sources, who were also interested in the Motorola IP, the IP valuation I was hearing was ~$3B. Was the rest of Motorola worth $9B?

      The article is one sided, only mentioning INCOME from this IP.
      It hardly addresses the defensive aspect of having this IP in their back pocket.

      Who knows how many billion dollar judgements Apple might have been able to extract for bounce back scrolling or whatever. Having one of you own patents cover what you do pretty much makes it impossible for Apple or some random patent troll (pardon the redundancy) to come after you, saving billions of dollars.

      Patents have value beyond JUST a revenue stream. In fact, only a Patent Troll would think of patents ONLY as a revenue stream. Which makes the whole article somewhat suspect.

      --
      Sig Battery depleted. Reverting to safe mode.
    4. Re:Everything was fine yesterday.... by squiggleslash · · Score: 5, Informative

      You're right, and yes, he's a shill.

      What makes this article particularly unpleasant is the deliberate misrepresentation of Google's reasons for buying Motorola. Google didn't buy Motorola to ensure it made a profit from patent royalties. It bought Motorola so it has a warchest of patents it can use if Android is attacked by a company like Nokia or Apple.

      Microsoft hasn't attacked Android - it's gone to Android phone manufacturers and negotiated patent royalties, yes, but those royalties haven't been excessive and have been comparable to the royalties paid normally by mobile phone makers for key technologies. It hasn't tried to prevent Android phones from being made, nor tried to gouge Android phone makers. So Microsoft's settlement with Motorola was never going to be particularly excessive.

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  2. Stopped reading at Florian by h4rr4r · · Score: 5, Insightful

    I stopped reading when I saw the name Florian.

    He is a professional Troll, STOP POSTING HIS STUPID BULLSHIT!

    1. Re:Stopped reading at Florian by DickBreath · · Score: 5, Insightful

      Florian Microsoft is a paided shill. Don't quote him. He has a considerable record of being wrong. See Groklaw.

      --

      I'll see your senator, and I'll raise you two judges.
    2. Re:Stopped reading at Florian by DickBreath · · Score: 5, Informative

      Do you have any evidence of that? That false accusation has been spouted for years by SCO shills.

      Groklaw is archived by the Library of Congress. That's quite a privilege and compliment. Groklaw has won numerous industry awards.

      Years ago, in court filings, IBM expressly disclaimed any connection with Groklaw. If SCO, or anyone for that matter, had any evidence of this, it would definitely have been pointed out to the court that IBM was making false statements.

      --

      I'll see your senator, and I'll raise you two judges.
    3. Re:Stopped reading at Florian by ebno-10db · · Score: 5, Informative
      It gets worse, the submitter is "Nerval's Lobster", and as a reader wrote the other day:

      [Nerval's Lobster] is a "Senior Editor at Slashdot," Nick Kolakowski [slashdot.org] (Twitter [twitter.com], Literary Gun For Hire [nickkolakowski.com]), who writes articles for Slashdot (and other places [huffingtonpost.com]) and apparently submits them under the guise of a "user" named Nerval's Lobster. Nerval's Lobster's submissions are "accepted" by the editors nearly every day, and always link to Slashdot's "Business Intelligence" or "Cloud" content... effectively passing off paid content as normal, user-submitted content.

      The full post (very interesting) is here.

  3. No. by HaeMaker · · Score: 5, Insightful

    How many lawsuits have been avoided because Google now has a formidable patent portfolio. Was the money spent on a nuclear arsenal wasted because there was no actual nuclear war?

    1. Re:No. by darkain · · Score: 5, Insightful

      Exactly. The portfolio isn't about MAKING money. It is about PREVENTING THE LOSS OF MONEY.

      http://en.wikipedia.org/wiki/Risk_management

    2. Re:No. by DickBreath · · Score: 5, Insightful

      Lots of mostly junk patents can be successfully used to extort money, or even ban competitors products from the market.

      Bouncy scrolling. Rectangles with rounded corners. Slide to unlock. Etc. Obviously these patents must be worth a mint, while Motorola's patents on actual underlying technology, developed by engineers in a lab, are worth little.

      --

      I'll see your senator, and I'll raise you two judges.
    3. Re:No. by Solandri · · Score: 5, Informative

      I would actually chalk this up as a Google win (while simultaneously being a Motorola loss). The reason Motorola was seeking $4 billion was because they were asking a flat 2.25% of the [i]device price[/i]. Products like the Xbox use H.264 as a small subset of their total features, but the norm in the industry seems to be that patent royalties are based on the total device price. This paper on patent royalty rates in the cellular industry puts the total royalty burden of a GSM handset at 10%-40% of the device price.

      The judge here decided that, for FRAND patents at least, basing the percentage off the device price was silly, and reduced it accordingly. Arguably that's a much more sane way to do it, considering that devices are becoming more and more multifunctional. Motorola still gets 2.25%, just of the part of the Xbox which uses H.264 instead of the entire Xbox price. If that becomes the norm in the industry, that would be much better for Google and anyone actually making stuff. The losers would be patent trolls and companies which make most of their money licensing their patents instead of building products which use them.

      The only issue that remains is the discrepancy between FRAND and regular patents. This decision only covered FRAND patents. If FRAND patent royalties get reduced to a percentage of specific features, while regular patent royalties remain a percentage of the device price, then we will have the backwards situation where a patent on bouncy scrolling and rounded rectangles is worth more than a technical H.264 patent. But that should sort itself out in a few years. If regular patents become worth more than FRAND patents, nobody in their right mind will submit their patent for FRAND anymore and there will be compatibility chaos in all industries. Either regular patents will be reduced to a percentage of specific features as well, or this judge's decision will be overturned and FRAND royalties will return to a percentage of the device price.

  4. Florian Mueller is like a Microsoft PR guy by Sushubh8082 · · Score: 5, Interesting

    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).

  5. Beside the point. by OmniGeek · · Score: 5, Interesting

    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.

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    "My strength is as the strength of ten men, for I am wired to the eyeballs on espresso."
  6. Re:I thought it was all about Apple by noh8rz10 · · Score: 5, Funny

    Google bought Motorola for one porpoise: using its patent portfolio defensively.

    baha if that was their goal then they should have bought a whale or penguin instead!

  7. Was reading Slashdot a mistake? by perrin · · Score: 5, Informative

    I've been following this site since before it had user accounts. It has really been a downhill ride in recent years. It is more and more just about click-whoring.

    This article is a case in point. Slashdot editors must know by now that Florian Mueller is a professional troll who is paid to spew FUD about his clients' enemies in the media. That the editors do not care, since FUD articles apparently are click magnets, just makes me feel nauseous about coming back here.

    There are so many more intelligent commentaries about this ruling that could have been posted instead.

  8. Epic fail by Anonymous Coward · · Score: 5, Insightful

    Quoting Florean Mueller that is.