Google’s Android platform has been a success with consumers, but the mobile operating system has attracted dozens lawsuits alleging patent infringement. Google announced this morning that it was hoping to turn a page on those troubles with its $12.5 billion purchase of Motorola Mobility, the recently spun-off portable device division of the venerable technology company.
The Motorola purchase bequeaths Google with some 17,000 patents and 7,500 filed patent applications. That should help the company fend off dozens lawsuits related to Android from myriad tech companies ranging from Microsoft to Apple to Oracle. While Google itself hasn’t been on the receiving end of many of these lawsuits—plaintiffs have been targeting manufacturers that use the OS instead—the legal challenges have been making the supposedly free operating system a more and more expensive proposition.
“The problem with this litigation for Google is since they are relatively young, they don’t have many patents they can countersue the giants with,” said James Conley, a clinical professor of technology who teaches Intellectual Capital Management (MGMT441 for interested Kellogg School students). “They are not able to play the game of volley and fire with what I call superior counter-battery strength. They just don’t have any counter-batteries,” he added. The Motorola Mobility purchase may change that. “Motorola really knows how to play the IP game.”
Hardware manufacturers that use the Android OS have been seeking reassurance that Google will help them fight patent suits brought by Apple, Microsoft, and others. With Google’s purchase, they got what they wanted, but they also gained a new competitor, one that could have an insider’s advantage. Google claims it will run Motorola as a separate division without any special treatment, but that promise will be hard to back up, said professor of management and strategy Shane Greenstein. It’s “an interesting managerial issue,” he said. “How does Google implement their promise not to play favorites? It is not hard to promise, but how do they guarantee the future?”
Google will have paid around $500,000 per patent if all of Motorola’s pending patents are awarded. That’s quite a deal, given that Google would have had to pay more than $750,000 per patent to top the winning bid for the 6,000 patents from defunct telecom firm Nortel. But with the Motorola deal, the search engine company gets hardware assets and engineering knowhow, too. Those could be a real asset, but Greenstein said that Motorola’s “hardware, organization, employee issues are quite different than anything Google has had to deal with up until this point.”
Beyond the usual integration woes, Google may have a tough time operating as both the Android OS licenser and a maker of Android devices. A number of companies have tried to both license their software while also building their own hardware. Apple was the first that came to my mind. After the success of Windows 3.1 and their own rash of unstable hardware releases, Apple decided to license its Mac OS while continuing to make Macintosh computers. The results were disastrous. The company didn’t make much money on the licensing agreements but lost significant hardware marketshare to the Mac clone makers, who sold their computers on thinner margins. Mac OS licensing was one of the first things Steve Jobs killed when he returned to the company.
Apple wasn’t alone in experimenting with licensing and building, Greenstein noted, nor are they alone in failing to succeed at the enterprise. IBM licensed its early PCs and AS minicomputers, Sun Microsystems tried its hand the late 1980s and early 1990s, and Palm tried the same when it licensed its OS to Handspring. None of these efforts were regarded as successful. “The issue is not with implementation or design, or having them under one roof. That can be done and has been done. The harder issue is managing open systems with multiple assets pushing and pulling in various directions,” Greenstein said.
In the end, we’ll have to wait and see if Google bit off more than it can chew. The patents are a windfall and gives Google a good chance to defend the Android OS market. But buying Motorola Mobility also brings with it a number of challenges that will certainly test the young company.