How Google can do more than beef about patents

Rather than complaining about rivals ganging up on it, the search giant is going to need to play the patent game better, even if it's loathe to do so.

Google kicked up a dust storm this week, publicly whining about Microsoft, Apple, and others ganging up against it to pursue patent violations by its Android mobile operating system.

It's hard to be too sympathetic to Google. While there are few who don't believe that patent reform is desperately needed, Google is a giant company with deep pockets that has tried to play the same patent acquisition game as the companies it criticized. It just hasn't played the game as well.

The problem for Google is that it has few alternatives to carping about competitors. Android has had remarkable success since debuting in 2007, becoming the most widely used smartphone operating system in the United States. But because Google entered the smartphone market so late, its patent portfolio, relative to rivals, is thin.

Just look at the numbers: According to MDB Capital Group, an investment banking firm that focuses on intellectual property, Google has applied for or been granted 317 mobile device patents in the United States. Microsoft, which is something of a patent factory, has 2,594 patents or patent applications for mobile device technology. Microsoft's new partner, Nokia, has applied for or been granted 2,655 patents.

That's left Google vulnerable to the current state of patent litigation. Typically, a company with a patent threatens to sue, or actually sues, another company that it believes has infringed on its innovation. The common defense is for the accused company to find one of its own patents that the accusing company has infringed upon and threaten a counter-suit. That gives it the ammunition to propose cross-licensing deals that keep both companies out of court.

But with so few mobile device patents, Google is hard-pressed to do that kabuki dance. Its senior management is clearly frustrated to have to play the patent game in a system that so many--even some of the companies that are playing--believe is broken.

"That's why they're crying," said MDB chief executive Christopher A. Marlett. "Google is really in a bad position. They're going to have to fight like hell."

Google's David Drummond Google

That frustration led its chief legal officer David Drummond to blog on Wednesday about "a hostile, organized campaign against Android by Microsoft, Oracle, Apple and other companies, waged through bogus patents." That post sparked a tit-for-tat between the company and Microsoft, each denying the other's claims and raising new charges.

An accusatory missive from Google's chief legal officer isn't going to alter those dynamics. But Drummond did hint at other options.

"We're also looking at other ways to reduce the anti-competitive threats against Android by strengthening our own patent portfolio," Drummond wrote.

CNET has learned that the company is exploring ways to create incentives for employees to add patents to its portfolio from work done internally. But that only helps so much.

Google also seems likely to become more aggressive in buying up patents, much the same way its rivals have. As much as Google appears to loathe playing the patent game, spending money to prevent litigation rather than innovating, it may have come to realize that it has no other alternative. And with $39.1 billion in cash as of June 30, it certainly has the financial wherewithal to bid against Microsoft, which has $52.8 billion in cash, and Apple, which has $75.9 billion in cash.

Already, the company has dipped into its coffers. Late last month, Google bought 1,000 patents from IBM , covering a broad swath of innovation from Web-based querying to servers and routers. And the company bid earlier in the year for some 6,000 patents and patent applications held by Nortel Networks. It ultimately lost that battle to a $4.5 billion offer from a consortium that included Apple and Microsoft.

Sources say that Google is now eyeing wireless technology developer InterDigital , after the King of Prussia, Pa., company hired investment banks in July to consider bids. But so are Apple, Samsung and others, according to reports. Even as the stock market has tanked, InterDigital's shares have climbed 62 percent since it put itself on the block, giving the company a market capitalization north of $3 billion.

MDB's Marlett thinks that Google may need to act more boldly. Eastman Kodak recently said it's considering selling some 1,100 patents related to digital imaging, important technology for mobile phones. He expects Google to bid aggressively for those, competing against Apple, among others.

Marlett thinks it might even make sense for Google to bid for BlackBerry-maker Research In Motion, which holds 3,134 patents and patent applications for mobile devices. The company's stock has soured since the beginning of the year as it's struggled to compete with Android and the iPhone, so much so that it now has a $12.3 billion market cap.

"Google has got to make a strike," Marlett said. "They need to fortify their defense."

 

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