Google (NSDQ: GOOG) knows it has a mobile patent problem, and addressing that concern could be one of the most important things it does over the rest of 2011. A report that it is considering a bid for InterDigital, a wireless chip design company with thousands of mobile patents, highlights the approach that’s probably the most appealing to senior executives.
InterDigital designs processor cores for wireless chips and software for handling connections in wireless networks, but the majority of its revenue appears to come from licensing the 8,800 patents it has obtained in both the U.S. and other countries, with an additional 10,000 patent applications on file. The company announced earlier this week that it would consider putting itself on the block given that “over the past year we have seen the value of intellectual property rise substantially as major players in the mobile industry increasingly understand the strategic and economic value of this type of asset,” said Terry Clontz, chairman of the company’s board of directors. The Wall Street Journal reported Wednesday that Google sparked that interest in a sale after reaching out about a possible acquisition, and that the companies have held preliminary talks.
After it failed to beat out a consortium of mobile competitors for Nortel’s patent portfolio, Google has been scrambling to come up with a Plan B to protect its woefully under-patented mobile interests. Its Android partners are currently facing numerous legal challenges from both Apple (NSDQ: AAPL) and Microsoft (NSDQ: MSFT) over their use of that software, and Google itself is on the defense in a case against Oracle over Java.
Buying a company that controls patents seems to make the most sense for Google, a notoriously active player on the acquisition front. Interdigital’s stock soared on the news that it was considering a sale and that Google was potentially interested, lifting the company’s market value to $2.8 billion in trading Wednesday. That’s still substantially less than Google’s high-water bid of $4.4 billion for the Nortel patents that was topped by the Apple-led consortium.
Of course, once Interdigital starts shopping itself, there’s no reason to think that Apple and Microsoft, both with substantial cash reserves, wouldn’t start getting in on the action: if for no other reason to drive up the bidding price.