News that GOOGLE is selling Motorola has sparked media
commentary that this acquisition was a mistake.
here for just one contribution to that discussion.
The initial price tag for GOOGLE to buy Motorola was US$12.4
billion. It has since recouped US$2.35 billion through the sale of
the set top box business, and will receive a further $2.9 billion
for the hand set business (provided this is approved by
regulators). That leaves a whopping US$7.15 billion between the
purchase price and assets GOOGLE acquired. That figure doesn't
event take into account the hefty losses Motorola ran up while
under GOOGLE's ownership. Those numbers seem pretty damning on
However, GOOGLE is retaining the majority of the patents that
came with Motorola. So why is GOOGLE holding onto those rights, yet
selling the hardware divisions of the Motorola business?
The obvious1 answer is that those patents are seen
internally at GOOGLE as a key strategic asset. There is bound to be
a close connection between the inventions protected by these
patents and the direction GOOGLE will take for its expanding mobile
software business. In addition, there is the potential for the
patents to be used in a retaliatory infringement2
dispute with competitors. That will help to protect GOOGLE and the
cell phone makes using its software, whilst expanding a core aspect
of its business.
The unspoken point is that GOOGLE probably placed a higher
premium on the Motorola patents than many analysts. The company
likely understood that to continue growing in the mobile technology
space it needed a way to fend off restrictive patent3
infringement actions. Given the potential growth and revenue from
that market there was an urgent need to play catch up and prepare
for attacks. These factors all contribute to why GOOGLE was
prepared to pay such a high price tag for Motorola.
The tech giant's rapid expansion shows that it knows what it
is doing. I'd back GOOGLE as having made an informed decision
on the correct price to pay for Motorola; only it knows the details
of the Motorola patent portfolio and how that can be leveraged.
The media focus is now on Lenovo's expansion into the cell
phone market, and it is being lauded as a company to watch.
However, I wouldn't under estimate GOOGLE. Those in the mobile
technology industry should be wary. The cell phone wars are
definitely going to heat up!
Regardless of how the cell phone industry develops, this
scenario highlights how a strategic patent portfolio can provide
1For a New Zealand patent to be valid, it must
not be obvious, and must involve an inventive step, over
known technologies. See novelty, anticipation and
inventive step for further details
2Refers to the commission of a prohibited act
with respect to a patented invention without permission
from the patentee. In New Zealand, the Deed of Letters
Patent confers on the patentee a monopoly to make,
use, vend or exercise the invention in New Zealand.
Performing any of these acts without the permission of the
patentee will amount to an infringement if the patent is
current and in force. Permission will typically be granted in the
form of a license. Remedies for infringement can include an
injunction to restrain further infringement, payment of damages
suffered by the patentee as a consequence of the
infringement or payment by the infringer of any profit he/she/it
made by virtue of the infringement, and legal costs.
3A proprietary right in an invention
which provides the owner with an exclusive right for up to
20 years to make, sell, use or import the invention. In exchange
for this monopoly the patent is
published so that others can see how the invention works
and build on that knowledge. The patented invention may also be
used by the public once the patent lapses.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
James & Wells Intellectual Property, three time winner
of the New Zealand Intellectual Property Laws Award and first IP
firm in the world to achieve CEMARS® certification.
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