Google Inc. announced yesterday that it plans to pay $12.5 billion to buy Motorola Mobility, a 63 percent premium on the Illinois-based cell phone manufacturer's closing stock price last week. By Google's own admission, this deal is about more than cranking out cell phones. Google is equipping itself for battle on behalf of its Android mobile operating system, part of the on-going mobile wars that began when, in 2008, Apple's Steve Jobs was reportedly incensed that the touch screen on Google's first cell phone prototype featured iPhone-esque pinch and swipe features. Apple ally Oracle sued Google and Google has struck back against what its legal chief, David Drummond, called "a hostile, organized campaign against Android by Microsoft, Oracle, Apple, and other companies, waged through bogus patents." Microsoft argued that Google was being disingenuous, and that the company had refused an invitation to get in on a plan to buy patents held by an out-of-business Canadian equipment manufacturer. Nokia and Microsoft joined forces. Apple sued HTC. And on and on.
In short, it's a war, or as close as these things get in the technology industry.
Part of the trouble, say many observers, is the American patent scene lends itself to this sort of thing, especially so when it comes to software patents. Their boundaries are fuzzy, their implications are tough to know, and tech company employees are encouraged to patent and patent and patent, and let markets or the courts sort it all out. On a press and investor call yesterday to discuss the deal, Drummond quietly said that having Motorola's reported portfolio of 24,000 active and pending patents under Google's roof is "a good thing." It was false modesty. The radio show "This American Life" recently summed up the U.S. patent scene as one of "mutually assured destruction;" Company A's huge patent caches are meant to dissuade Company B from challenging the first's patents. Patents, meant to encourage innovation, become nuclear arsenals. Google's arguing that in order to keep its Android mobile operating system free and open, it needs threat protection from the likes of Apple. Other Android-dependent players are saying, publicly, at least, that they see it the same way. The statements of HTC, Samsung, Sony Ericcson, and LG all said that Google deserved praise for "defending Android." (Yes, all used the exact same phrase. Let it be said that Google's public relations operations aren't always as elegantly crafted as their website interfaces.)
Google's claim that defending Android requires the protection of Motorola is something of a twist. When Google bought Android in 2005, part of the motivation was, per CEO Larry Page, that "the Internet model" broke down when it came to mobile phones. Google could design its apps and websites one time and, but for minor tweaking, they could run on computers all over the world. Every mobile phone brand, though, was different from the other, and designing for them required tremendous resources. On yesterday's call, Page talked of meeting Android creator Andy Rubin: "Andy had a crazy vision for the mobile industry. He wanted to align the standards across the mobile industry and the Internet. Andy felt it was inefficient for each hardware manufacturer to develop software constantly." To Rubin, the customer got the short end of the stick when mobile software was so closely tied to hardware manufacturers. So, instead, Google's system allowed any programmer to design for it and any phone manufacturer to use it. The Motorola buy is antithetical to that approach, some argue.
Google is making an admission that even for a company with its size and vast resources, coming into the mobile market a bit late and without a patent stash is enormously difficult. That's not to say that Android hasn't done well. Its growth has been phenomenal; Google says that more than 150 million Android-based mobile devices around the world have been activated.
Google's move has its fans in the Android world. Nathan Freitas is a prominent Android developer and the lead on The Guardian Project, an effort to make activist-ready mobile phones. "It may be a boon, ultimately," he writes in an email, "as Google must work harder to maintain the image of Android being open now."
Well worth remembering is that this isn't about just the telephone in your pocket. For one thing, Motorola also manufactures set-top boxes and DVRs, a line of business that Page said he was excitedly eyeing - perhaps not surprising, given the troubles that the company has had getting Google TV off the ground. But more importantly, Google has in its sights everything that connects to the Internet, and, of course, more and more Internet users are getting online using mobile phones, tablets, or some other device not tethered to any one place. This Google-Motorola marriage mimics Apple's partnering of its own hardware with its own software (not to mention its exclusive relationships with AT&T and now, Verizon). Add to that the "market" approach of the App Store and the Android Market, and it's a model that gives companies like Google and Apple tremendous powers to act as gatekeepers whether they want it -- as Apple clearly does -- or not, as Google claims.
Rubin set out eight years ago to make locked-down mobile phones work more like the free and open web. But it seems there's a decent chance that a likely outcome here is that the web starts to work more like mobile phones.
Washington will, nearly definitely, get a bite at this apple, including at the Federal Trade Commission. Drummond says he fully expects regulatory review in both the U.S. and Europe, but argues that he's confident of approval because "we believe strongly that is a pro-competitive transaction." Apple's success as a maker of both mobile hardware and mobile software gives Google some cover. As for the patent race that arguably compelled Google to take this step, Congress will likely go to conference committee in the fall on the America Invents Act, a major reform measure that, says supporters, aims to streamline the U.S. patent process to produce claims that aren't so complicated, flimsy, or indefensible in the end. The Senate passed it 95-5. But critics in both the Democratic and Republican parties in the House charge that moving the U.S. from a "first-to-invent" system to the "first-to-file" system that dominates the rest of the world only serves to further entrench big players, as upstarts lack the resources to beat them to the doors of the U.S. Patent and Trademark Office. Obama has said he'll sign it.
It's not a given that Google's arms-race patent strategy will work. Boston University Law School economics professor and patent expert Michael Meurer argues that the competing patent-caches model seems to work better when you have an industry that's stable and homogenous. "But when you have competitors that have different business models and different business approaches," as Apple and Google historically have had, says Meurer, "things can break down." So peace is no means assured. Though we can pretty much guarantee that all involved will keep stocking up on patents.