Google's Motorola Acquisition May Spark New Apple Patent War

by chenodeu1 on 2012-02-16 14:27:53

On the same day, Jha spoke and said thoughtfully that Motorola will sue other brands of Android phones very publicly for infringing on its patent portfolio, and proposed the possibility of cooperating with Microsoft rather than Google, and adopting new Windows Phone software instead of Android. According to the acquisition agreement after being filed with SEC by Motorola, Google indicated that it would be interested in purchasing the company - two weeks later, on July 20th, the famous "corporate sniper" Carl · Icahn, who then held approximately 11% of the company, said that Sanjay · Jha, the CEO of MMI, should "explore alternatives for the MMI patent portfolio". In other words, Icahn said: sell. (Icahn's suggestion was revealed on the same day as the filing.) After approving the acquisition, Almunia added that this decision "does not mean that the Commission is blessing all past or future actions by Motorola or Google." Any action regarding "[the] question whether Motorola's or Google's conduct is compatible with EU antitrust rules" will be taken separately. The approval paves the way for a standoff between Google and Apple, as Motorola, a subsidiary, tries to force the iPhone manufacturer to pay up to an iPhone chip supplier, chipmaker Qualcomm, which says it has been authorized by patents,www.wangji.cc.

If Apple can show that the FRAND patents have been abused in cases involving human-machine interface, Joaquin · Almunia, the EU competition commissioner, who warned in a speech last Friday, said that owners of standard-essential patents are granted power in the market that they cannot be allowed to abuse."

Google has said that it is the human-machine interface, making phones because its portfolio of 17,000 existing and 7500 pending patents covers a wide range of basic standards in the wireless and mobile fields, and patents in other areas. This acquisition will enable Google to provide patent protection for device manufacturers using its Android mobile operating system, which are facing legal attacks over patents from companies like Apple and Microsoft.

Apple is seeking to expand the case in Germany, where it is fighting Motorola's attempt to impose a ban on the sale and use of its iPhone 4S phone and iCloud web storage and synchronization services.

Almunia could also fine companies up to 10% of their global turnover for abuses - among them, post-merger, reaching billions. Google's largest fine was $500 million, levied by the US government last August for its role in illegally selling internet drugs from Canadian sites to the US.

MMI was spun off from Motorola in January 2011, but has struggled financially ever since, recording net losses each quarter, losing funding and market share in its mobile phone business. Although its revenue of around $3.4 billion per quarter is small compared to Google's expected $10 billion in the fourth quarter, it is expected to bring tax benefits, meaning it will have no net effect on profitability.

A week later, Google said it was considering buying the company at a "price high of $20 or low $30s".

On August 1st, Google made its first formal bid at $30 per share - valuing MMI at $9.4bn.

It pulled a trick: By the end of the day, Google had raised its price to $40 per share - enough for Jha and the MMI board. They squeezed Google into a $12.5 billion deal; Icahn's stake rose from $750 million when Google first approached MMI, to $1.34 billion when the deal closed. Icahn owes Jha a big favor - if, as some expect, CEO Arora steps aside when the merger is completed, Icahn may be in a position to repay him.

Motorola's bid rose 33% last July after Larry · Page, Google's CEO, contacted Motorola Mobility following the loss of a series of patent bids at a bankruptcy auction of Canadian telecom company Nortel Networks. Having dropped out of bidding against Intel, Google, Apple teams, Microsoft, and BlackBerry maker RIM at $4.5 billion - its Motorola bid will far exceed that.

Apple last week sued in the US, potentially setting off an explosion, claiming MMI is abusing its ownership of basic patents used in phones after writing to Apple and chipmaker Qualcomm in January. In the letter, the human-machine interface revoked Apple's ability to use two patents embedded in Qualcomm chips used in the iPhone. This specific revocation generally would not be allowed under "essential" patent licensing terms: if Motorola is found to have violated "FRAND around its patent licensing rules" (fair, reasonable and non-discriminatory), then it may face sanctions from standards bodies and damages from Apple.

Microsoft has already been forced to make nearly all Android phone makers, such as Samsung and HTC, sign patent ownership deals, claiming a royalty per phone transaction. Such deals cover 70% of Android phones sold in the US - it claims, like China's Huawei, other Android phone makers. Microsoft is also locked in a patent battle with MMI.

The EU has issued similar warnings. Extending its review of the proposed merger, the two companies waved goodbye in August, and the EC announced on Monday evening that it had decided the deal would not affect the supply of Android software to other handset manufacturers. However, EU Competition Commissioner Almunia warned that "the Commission will continue to closely monitor all market players in this sector, particularly the increasing use of patent strategies."

Almunia's team has not ruled out an independent investigation into Google's behavior in Europe, deciding whether to launch a full antitrust investigation into advertising and search practices. A decision is expected in March.

But across one clear shot at Google, the US Department of Justice said, www.wji.cc, accompanying its approval, while Apple and Microsoft have made clear commitments over "standard essential patents" (SEPs) used in smartphones, Google's commitment statement is more ambiguous and does not provide the same direct confirmation of its SEP licensing policy.

For this reason, the DOJ will continue to monitor the market and "will not hesitate to take appropriate enforcement action to prevent any anti-competitive use of SEP rights."

But Jha held firm, by August 7th, Google's chief negotiator Nikesh Arora - who is now whispering advice to Jha in the merged company - asked him to offer a bid at $37.

Google acquired MMI's portfolio of 17,000 existing and 7,500 pending patent applications. Photography: Robert · Galbraith/Reuters

The European Commission and the US Department of Justice have cleared Google's $12.5 billion (10.4bn) acquisition of Motorola Mobility (MMI), a US-based mobile phone and set-top box manufacturer - a move that could open a new and potentially explosive chapter in the smartphone patent wars.

Google has repeatedly stated that it will run the MMI business at arm's length, which will not favor it over other handset manufacturers using Android software. But analysts suspect that it will increasingly seek its affiliate to showcase new versions of Android handsets as it attempts to exert greater control over the rapidly growing use of the software.

China must also do the same before the merger can be completed.