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Google Cries Foul Over ‘Bogus’ Patents

The ink wasn't even close to drying on my last blog when executives at {complink 2294|Google} cried out about the barrage of lawsuits they've received for allegedly violating patents held by Apple, Microsoft, Oracle and a group of companies seeking to clip the wings of its Android operating system. (See: Brawling OEMs & a Broken Patents System.)

David Drummond, Google's chief legal officer, complained in a blog on the company's site that rivals were trying to impede the growth and adoption of Android, not through normal market dynamics as one would expect, but through an “organized campaign” that includes “bogus” patent violation lawsuits and, more importantly, by banding together to pay inflated prices for IP held by other companies.

This was an unusual step for a senior corporate executive, especially for a firm's top counsel. While Google did not explicitly express concerns it might not be able to successfully defend itself, it's obvious the company is worried the legal wrangling could hurt adoption of Android. Here are the key points of Drummond's argument:

  1. The alleged patent violations are a ruse.
  2. Drummond insists Google's rivals have dragged the company to court, not because they really believe it has violated their patents, but because they want to curb Android's rapid growth. “Android is on fire,” Drummond said. “More than 550,000 Android devices are activated every day, through a network of 39 manufacturers and 231 carriers.”

  3. It's a conspiracy.
  4. Google is charging {complink 379|Apple Inc.} and {complink 3426|Microsoft Corp.} especially with conspiring to cripple Android because they are worried the operating system could decimate their market shares if left unchecked. Aside from the legal filings, Drummond points to actions by a group of companies that teamed together to acquire patents held by Nortel. “I have worked in the tech sector for over two decades. Microsoft and Apple have always been at each other's throats, so when they get into bed together you have to start wondering what's going on.”

    He has a point; Apple and Microsoft cannot really be called two jolly friends. Yet they submitted and won a joint bid with other companies (excluding Google) to acquire patents held by Novell via a consortium known as CPTN Holdings LLC. The consortium is controlled by a group of tech companies that includes Apple, EMC, Oracle, and Microsoft. Even the US Justice Department was concerned about the transaction and imposed several conditions that forced Novell to alter the terms of the deal.

    One could overstate the significance of the alliance between Apple and Microsoft, however. The two companies have collaborated in the past — and will most likely do so in future. Furthermore, they are still fierce rivals today in the wireless handset market, with Microsoft teaming up with Apple rival Nokia to offer its Windows operating system for cellular phones. Still, it boggles the mind to see the close cooperation between Apple and Microsoft in the handset sector. It would be interesting to see how the companies explain this to regulators.

  5. Higher patents costs now and in the future.
  6. Google is also alleging that by pooling resources to bid for patents, Apple and its corporate partners have been driving up the cost of patents. (Now you know why Apple isn't too keen on paying dividends, buying back shares, or finding other ingenious ways to transfer some of its $75 billion cash to shareholders.) “The winning $4.5 billion for Nortel's patent portfolio was nearly five times larger than the pre-auction estimate of $1 billion,” Drummond said in his blog.

    OK, he may have a point, but Google could have submitted a higher bid or teamed up with other bidders. And, with $39 billion in cash and short-term investments, Google is certainly not short of funds. So, why didn't it try to outbid Apple and Microsoft? Because “the law frowns on the accumulation of dubious patents for anti-competitive means — which means these deals are likely to draw regulatory scrutiny, and this patent bubble will pop,” according to Drummond.

Google isn't standing still. The company said it is working on acquiring patents that would help “preserve Android as a competitive choice for consumers.” The company has the financial muscle, the managerial savvy, and enough OEM and telecom service partners for its Android system to withstand the Apple-Oracle-Microsoft pressure. However, it would also be naïve to ignore the forces allied against it and the enormous firepower they are bringing to the battlefront.

Drummond's outcry might be unconventional for a corporate lawyer, but I agree with him that if OEMs using Android are forced to pay punitive licensing fees, “consumers could face rising costs for Android devices — and fewer choices for their next phone.” What do you think?

12 comments on “Google Cries Foul Over ‘Bogus’ Patents

  1. Nemos
    August 4, 2011

    and our competitors want to impose a “tax” for these dubious patents that makes Android devices more expensive for consumers. ” From David Drummond blog.

    So Apple and Microsoft instead of trying to improve their software or to innovate new technologies, they are trying to destroy the open-source software platform called Android. Really, for me, it is very difficult to understand how it is that possible. How you can make the competitor to pay for his software 15$ per device.Totally insane ……..

  2. mfbertozzi
    August 4, 2011

    Bolaji, I believe it is not easy to understand where we are approaching this situation: where are benefits from this continuous battle? In line with Nemos's post, primary scope of technology should be to allow job to perform easier making education. For people acting as high-tech entrepreneurs, funds are the way for making better technology following a business strategy. What's the sense of the battle? For US and other countries are, financial default is not definitely away. It's urgent, imo, especially from major high-tech players, a special effort in supporting financial recovery as consequence (for instance) of alliances and/or teaming.

  3. AnalyzeThis
    August 4, 2011

    I think this whole situation is absolutely ridiculous. This is not why the patent system was originally designed and put into place.

    Don't get me wrong, I agree with the whole concept and intention of patents and think they should continue to exist, but I really think some sort of system needs to be put into place to protect companies from patent trolls or situations such as this where companies literally are throwing billions of dollars around for patent portfolios in some sort of attempt to gain a competitive advantage by bogging their competitors down with lawsuits or other concerns.

    This whole situation seems very silly to me. But it's good news for patent attorneys, I suppose!

  4. DataCrunch
    August 4, 2011

    Here’s an interesting tidbit: Microsoft actually makes some really good revenue from Android sales believe it or not.  They make a lot more from Android sales than Windows mobile sales.    Over a year ago Microsoft and device maker HTC got into a legal battle in which Microsoft claimed HTC was violating its patents relating to their Android devices.  The case never went the distance into a formal legal case, but HTC settled paying Microsoft $5 per Android device sold.  HTC has sold over 30 million devices, which adds up to a nice chunk of change.  Microsoft may have similar deals with other manufacturers of Android devices which details have not been disclosed. 

  5. garyk
    August 4, 2011

    This all sounds like some sort of a TAX loop hole, operating cost!

    Google sells the Andriod, internet sale don't pay TAXES?

  6. jbond
    August 5, 2011

    It is amazing at how quickly bitter rivals will jump into bed together to try and take out a stronger competitor. I would seriously question what is going on behind closed doors when Microsoft and Apple join forces. I agree with Google's Drummond. While it seems most of these are baseless claims used to damage Android and Google's reputations, they need to be taken seriously to avoid sales damage. It will be interesting to see what the government says about the stock piling of patents. It used to be they were very tough on this practice and one wonders if they will continue or turn a blind eye.

  7. stochastic excursion
    August 5, 2011

    When the stakes are high, losing the edge in technology can be devastating to a company.  Going through the courts allows a company to regain at least some prestige and limit the erosion to their bottom line. 

    The weakness in the patent system is ripe for exploitation.  Today's patents are notorious for being overly broad.  The patent office cannot keep pace with the sophistication of technology, especially nuances that give companies a competitive edge.  Patents should really be issued by professional societies, much like written material is registered with the writers guild usually before a copyright is assigned. 

  8. itguyphil
    August 5, 2011

    “I would seriously question what is going on behind closed doors when Microsoft and Apple join forces.”

    jbind,

    Remember not too long ago, Microsoft did lend Apple a good maount of $$ and resources to stay afloat in the computing space. So I do not think they are AS BIG a rivalry as some will frame it as being.

  9. JADEN
    August 8, 2011

    I wonder what Apple and Microsoft are up to, because android has the largest growth, because of android success prediction to dominate the global smartphone markets.   Their lawsuit is to kill android popularity among consumers, if android or google lose on patent rulings it will make their device more expensive.

  10. UdaraW
    August 9, 2011

    A patent is a document that provides you with the right to exclude others from manufacture, use or sale of the protected technology. Therefore, by definition, the patents exist to out-pace your competition in the market place.

    At present, the patent strategy is a significant component of ones business strategy. In short, maneuvering of ones patent portfolio in a competitive manner is just another way that companies seek to win the edge over their competitors. In executing their patent strategy, a company or a consortium of companies decide to go to war (i.e., to enforce their patents in court) over the Android patents held by Google. What is so evil in that? In my view, it is open competition and it is healthy and it is fair. 

  11. Anand
    August 20, 2011

    “if OEMs using Android are forced to pay punitive licensing fees, “consumers could face rising costs for Android devices”s

    @Bolaji, can it be one of the reasons why Nokia didn't opt for Android devices ? Since Nokia opted for Microsoft as its OS, Microsoft would do everything it can to curb the rising popularity of Android.

  12. Anand
    August 20, 2011

    I would seriously question what is going on behind closed doors when Microsoft and Apple join forces.

    @jbond , this clearly shows that both Microsoft and Apple are worried about growing androids popularity. I feel the phrase “the enemy of my enemy is my friend” perfectly suits this situation.

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