Last week, Google announced its £7.6 billion acquisition of Motorola Mobility.
Before the ink had dried on the acquisition, there was a burst of speculation as to why Google decided to acquire Motorola, and much disagreement in the technology space as to the future of the mobility industry as a result of the deal. It is clear that the main driver for the Google-Motorola deal is Motorola’s patent portfolio, which will increase Google’s control of both the hardware and software it offers, putting it in a better position to compete with the likes of Apple and Microsoft. However, this points to a broader trend for the industry, a trend that focuses on the collection rather than the creation of innovation.
Google and Motorola are not an obvious partnership, but if we dig deeper we see that included in the purchase are 17,000 patents the company acquired along the years. This patent portfolio will make Google stronger against competitors and will help it to protect its Android operating system by giving the company more ammunition in patent disputes. We have seen a steep incline of patent disputes in the past couple of years – Apple vs. Nokia, Sony vs. LG –because the rise in legal disputes associated with filing a patent has made the whole process more expensive. To get around this issue companies have started collecting patents for their strategic desirability rather than any other measure of value.
With this acquisition, Google has prepared itself for battle with a new set of companies. As a result, there was a sharp rise in Nokia’s share prices almost immediately after the deal was announced, as was the case with Research in Motion and Microsoft. But is all the hype justified?
Some would argue that this fixation with patent buying could be laying the foundation for a new ‘patent bubble’. For example, of the 17,000 patents that Google acquired from Microsoft, Bloomberg has reported that only 18 of these are actually valuable. As a result, many are wondering whether all this patent buying will result in over-valuing of companies based on patent volume rather than quality of product or innovation. In a runaway scenario this could lead to a patent bubble, removing the stability the technology industry has maintained so far during the economic downturn.
The technology sector in general, and the mobility space specifically, are in flux but the end goal of this evolution is still very unclear. The nature of innovation is changing and we anticipate this battle will rage on. Just today it was announced that Microsoft has brought a claim against Motorola Mobility alleging the infringement of seven patents and asking for an injunction on several Motorola devices – so the plot thickens!