The main tech news on a slow pre-holiday Friday had Google Inc. losing a high-profile bidding war for a portfolio of wireless patents from the bankrupt Nortel Networks.
So one may ask why Google's shares GOOG got a bounce of nearly 2% in Friday morning trades with only muted gains for Apple AAPL, Research In Motion RIMM, Microsoft MSFT and the other firms who joined the consortium who won the auction.
The reason stems mostly from the fact that the value of any patent is largely theoretical – at least until it's been tested in court. Google was prepared to spend about $900 million to secure a portfolio of patents that would likely be used to defend itself against future lawsuits related to its Android mobile operating system – or possibly assert claims against rival platforms.
It is therefore telling that the winning consortium in the Nortel NRTLQ case represented the bulk of Android's competition in the smartphone OS market. The owners of iOS, BlackBerry and Windows Phone 7 platforms joined with others to pay about $4.5 billion in cash for a pile of patents that will not likely lead to any one of them achieving a major technical break-through or differentiating feature for their respective products.
Rather, the move is a defensive play – meant to keep the patents out of the hands of Google or possibly a group of smaller firms that may have been more keen to use those patents in court. The $600 million-plus that RIM had to fork out in 2006 to settle a nasty patent dispute still haunts to this day.
For Google investors, the closing of the auction means money not going out the door for a group of patents that may have mostly offered only defensive value.
- Dan Gallagher
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