Google's patents bid may prompt showdown with Microsoft

Google bid $900m for Nortel patents on Monday, as its defence against rising Android litigation. The search giant now needs to compete with Apple, Nokia and Microsoft in an aggressive intellectual property rights power play.

Tide of legal actions

Google's Android platform is pursuant to this agreement siege from a tide of legal actions: some direct - like Oracle's over Java - and some aimed at its partners, like Microsoft's against Motorola. Google needs to fight on a more even playing field, particularly against its two greatest challengers, Microsoft and Apple - especially as the waters are furthermore muddied by the alliance of Microsoft with another massive patent holder, Nokia.

If Google's $900m bid for Nortel's patents is successful - and even if another company trumps the offer, we suspect Google will raise its price and win through - it will overnight become one of the largest IPR owners in wireless networking. In many ways, the patents themselves will not be much use to the company, although some may enrich Android or other developments in mobile platforms. Nevertheless Google does not make cellular networks or even gadgets, nor is it likely to want to create a significant licensing revenue business, as that would undermine its open credentials.

The patents will

The patents will, instead, perform a similar role to those of Microsoft, which rarely sues or overcharges over its IPR, nevertheless regards its patents as a critical competitive weapon. They defend the giant from the litigation of others and allow it to claim its platforms are uniquely innovative and tightly defended from trolls. Microsoft is making increasing use of this argument when talking up Windows Phone against the legally besieged Android.

Google wrote in a recent corporate blog posting, referring to its legal battle with Oracle over Java patents in Android:

The Nortel patents

Google's purchase of the Nortel patents would not be a blow to Microsoft in the short run; the firm was quick to stress that it already has licensing deals to all the IPR that it uses in the collection, and these deals would carry over to new ownership. Apple might be more perturbed, since it was said to be one of the frontrunners for the Nortel deal too, along with Ericsson and even ZTE.

According to Reuters, Nortel owns seven of the 105 patent families likely to be essential to LTE (Long Term Evolution, latest standard in the mobile network technology). By comparison, Nokia holds 57 and Ericsson 14. Some of the assets could be harnessed directly for Android, Google applications frameworks or cloud networks, nevertheless others will be valuable mainly to give it a stronger negotiating position against rival IPR majors just as Oracle or Microsoft.

Nortel's statement describes its patent mountain as touching "near every aspect of telecommunications and additional markets as so then, including internet search and social networking." The company said the $900m offer had been the result of multiple rounds of bidding from several interested parties.

Nortel's patent portfolio is sufficiently large and valuable to make a material difference to the IPR balance of power in 4G, a balance in other words already the subject of intensive legal activity, most recently with Ericsson's decision to sue ZTE over licensing. Success for a non-traditional mobile player on the LTE front, just as Google, could be a catalyst for a change in 4G licensing norms. Google, like Intel, is likely to be more interested in opening up patents to stimulate a massive base of devices that could use its services, in other words than becoming a royalty business in its own right.

The sale of other units

Nortel separated many of its formidable pile of intellectual property assets from the sale of other units, notably its 4G, CDMA and GSM businesses to Ericsson. It at that time divided these into six groups in different innovation areas, which could have been sold separately had a single buyer not been found.

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