A consortium led by Apple (s AAPL), Research In Motion (s RIMM) and Microsoft (s MSFT) have snatched up Nortel’s 6,000 patents for $4.5 billion in an auction that could lead to further trouble for Google (s GOOG), which was outbid for the trove of intellectual property.
So now the winners, which also included Sony (s SNE), EMC (s EMC) and Ericsson (s ERIC), have access to a cluster of patents that cover a wide spectrum of communications and Internet services, from wireless and 4G to data networking, semiconductors and social networking. RIM came forward and said it paid $770 million for its share of the bid while Ericsson has said it contributed $340 million. Nortel said the deal must still pass Canadian and U.S. Court approval, which will occur at a joint hearing scheduled for July 11.
The deal represents a big set back for Google, which initially pursued the patents and won a stalking horse bid for the IP, setting the low bar on the auction at $900 million. The company had said at the time that while it was looking to enact long-term patent reform, it was bidding to shore up its smaller patent portfolio and provide a disincentive for others to sue the search giant.
The mobile industry is currently in a state of patent warfare, perhaps best likened to the Cold War strategy of building up an arsenal so huge that to attack it assures mutual destruction. In this game, Google’s lackluster patent portfolio makes it a small player whose “do no evil” motto makes it seem naive at best and weak at worst.
Competitors and other companies have sought to capitalize on Google’s weaker IP position. Oracle (s orcl) has filed a copyright and patent infringement case against Google for its use of Java in the Android operating system. Other mobile competitors, notably Apple, have gone after Android manufacturers for their use of disputed IP. Microsoft this week announced three Android manufacturers have agreed to pay patent licensing fees for their use of Android.
Obtaining Nortel’s patents would have provided more cover for Google and its partners. And it would have signaled how robust a defense Google was prepared to mount on behalf of Android and Chrome and other products. But now, if the auction proceeds, Google could face even more of a squeeze without the cache of patents it can offer for cross-licensing deals. Some, like IP expert Florian Mueller, have already called Android a “suit magnet” and that moniker might be even more apt now. And Google’s promise of a free operating system continues to get undermined as more and more manufacturers now feel the need to strike licensing agreements.
Google said in a statement to Bloomberg: “This outcome is disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition. We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers.”
Google is aware that we’re in an era of patent wars as competing companies look to establish their ground in the exploding mobile space. Apple’s recent deal with Nokia showed the environment is heating up and Nokia is likely out for more targets after extracting money from Apple. Google can hope for patent reform and that may eventually come. But for now, it needs more muscle and it lost out on a big chance to beef up in the Nortel auction.