Google-Motorola: Patents of mass destruction

This game isn't new, but the scale and the stake keeps going up.

Shall we play a game? How about global thermonuclear war? Let's build an arsenal that will obliterate the enemy if we use it. Bonus: Just by its existence, it keeps emerging powers hidden in their caves.

And just to make it interesting, how about we give the launch codes to lawyers?

While there are many things Google gets with a Motorola Mobility acquisition , like its own handset hardware manufacturer and a working set-top box market, what Google is really acquiring is a patent portfolio. Google CEO Larry Page, in his blog post announcing the proposed buy , didn't say that Google needs the inventions covered by the Motorola patents. Rather, he said clearly that Google just needs the patents themselves.

The amount of money being spent now on patent armaments is staggering. Google will spend $12.5 billion to acquire Motorola. Earlier this summer, a consortium including Apple, Microsoft, and Research In Motion, bought 6,000 Nortel patents for $4.5 billion .

For the emerging patent superpowers--Apple, Microsoft, Google--the likely end result of this nuclear build-up could be a legal stalemate that may in fact free up the giants to maneuver on the product side. While every launch may carry with it a back-room patent agreement (I'll agree to not sue you on patent X today if you agree to not sue me on Patent Y when I launch my new thing tomorrow), the balance of power could in, in a limited way, work in favor of innovation at the large companies.

That is, if it weren't for Intellectual Ventures, which has a patent portfolio but unlike the superpowers doesn't actually make products. Since I don't think you can sue a company for holding a patent it's not using, that makes IV a major wildcard.

But even if the playing field ends up leveled among the major players, the downsides of this build-up are numerous and expensive: a lot of money and effort goes to lawyers, money that otherwise could have gone to even more development, the acquisition of start-up companies, or perhaps even stock dividends.

Google buys Motorola Mobility

What happens to the smaller companies? Every start-up and small company with a germ of an innovation now knows that a large company has the potential to nuke it from orbit, as it were. Even more than before. Will they? Not when they're small, most likely. It's rarely worth the effort. And deploying a patent attack against a small player tips a hand that might be better concealed for later play against a more serious competitor.

Google's maneuver may yet have a stifling effect, though. It could lead to a growth in patent indemnification. One of the things Google may do with its huger patent portfolio is indemnify Android developers against patent lawsuits, just as Microsoft does for Windows developers when it comes to Linux issues. Again, Intellectual Ventures may also play in this game. This company seems to like getting hooks into growing businesses early, mob style, and the potential threat to IV from Google and other superpower portfolios may lead it to step up its protection business with smaller companies not already under the wing of a superpower.

In other words, smaller companies are going to end up the pawns of the big patent portfolio holders even more than they are already. The big downside to this is that it can lock companies into platform decisions and directions at early stages, when they should be taking bigger market risks.

The accumulation of patent portfolios into a smaller number of bigger players, which themselves are locked in a deadly standoff, has the real potential to slow down the pace of innovation. Which is precisely the opposite reason the patent system was created.

Wouldn't you prefer a good game of chess?

 

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