Today, Google announced its acquisition of Motorola Mobility for not less than $12.5 billion in cash. And I completely agree with Forbes’ contributor Eric Jackson, who states that


Saad Irfan, CC BY-NC-ND

[i]f you think this is about Google getting into the handset business, think again. If Google were to get into the handset business, they would turn their back on partners like HTC, Samsung and others.
Today’s deal is all about acquiring Motorola’s backlog of mobile-related patents. When Google lost out on the batch of Nortel patents, they worried that Android was significantly at risk.

A risk stemming from the fact that, in spite of developing Android under an open source license, powerful patent holders such as Microsoft were able to squeeze out licensing fees from corporate Android users. The bizarre result being that Google, the main developer of Android, gives away its contributions to the operating system for free while its not-contributing competitor Microsoft charged hardware producer HTC $5 for any shipped Android (!) smartphone (see business insider).

At least in high-technology industries patents are all about market power and not a bit about innovation. And Google is quite explicit about their respective motives, while trying to reassure other corporate users that “Motorola will remain a licensee of Android and Android will remain open”:

We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. […] Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.

In effect, this acquisition will allow Google to level the playing field in an increasingly oligopolized market. About ten years ago, Drahos and Braithwaite (2002) in their book “Information Feudalism” already stated that

“[p]atent-sharing agreements did exactly the same things that good old-fashioned cartel agreements did. They divided up territories, set prices and controlled production.” (p. 53)

To play this game, however, you have to own a comparable stock of patents, since “[c]rosslicensing […] was really only a game for equals“.

From a consummer perspective, the most interesting thing will be to observe, how patent licensing fees will develop. Will Google use its new patent portfolio to negotiate a deal with Microsoft to get rid of the $5 toll on Android phones for the benefit of the consumer? Or will it instead charge similar amounts on any smartphone running Windows Phone 7?

In any case, patent laws that grant protection terms of up to 20 years in highly dynamic markets such as the smartphone market seem more and more like an anachronism and a barrier instead of an incentive to innovation and competition.


In the meantime, James Love, Director of Knowledge Ecology International, has commented on the issue over at the Huffington Post and makes his case for compulsory licensing of patents:

The romantic notion of an individual inventor is not appropriate for industries like the computer, software or mobile phone markets, where collaboration and adherence to standards are key to success. What is needed is a 21st century approach to compulsory licensing of patents, that facilitates voluntary licensing, and provides reasonable and fair rewards to patent owners, without becoming a tool for anti-consumer and anti-innovation cartels and monopolies.

Could not agree more.