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11 July 2011, 15:41

To defend Android...

...Google must attack software patents

by Glyn Moody

Android is under serious threat. Not so much commercially, where it continues to trounce its rivals and take an ever-larger market share around the world, but through legal threats. Of course, that's not just a problem for Google: as Techdirt's handy diagram illustrates, practically everyone in the smartphone space is suing everyone else. But the big difference is how the others are addressing this.

Some are cutting deals among themselves, such as the recent, if still rather mysterious, one between Nokia and Apple. Others, with less in the way to offer in exchange, are simply coughing up licensing fees. Worryingly, that includes an increasing number of Android manufacturers.

Of course, that doesn't necessarily mean that Android infringes on anyone's patents. It simply indicates that the companies in question have done the sums and decided that it is probably cheaper in the long run to pay licensing fees now rather than risk losing a long and expensive patent infringement suit and end up paying much more later. In other words, these deals are mostly about the skewed incentives of the US patent system. But given the existence of that system, that leaves Google with a problem, in that it must still deal with the alleged infringements being laid at Android's door.

Against that background, I really thought that the Nortel patent auction could be the solution that Google was looking for. Had it acquired the portfolio, it would probably have been able to pay back in kind those who were alleging patent infringement. Not that I approve of this kind of bullying, but I am a big believer in game theory, and often the optimum approach in these situations is tit-for-tat.

I was therefore somewhat taken aback by the apparent flippancy of Google's approach to that auction:

At the auction for Nortel Networks' wireless patents this week, Google's bids were mystifying, such as $1,902,160,540 ... and $2,614,972,128.

Math whizzes might recognise these numbers as Brun's constant and Meissel-Mertens constant, but it puzzled many of the people involved in the auction, according to three people with direct knowledge of the situation on Friday.

That's particularly surprising given the following:

Google had been expected to emerge victorious after it set a $900 million stalking horse bid in April. But the auction that started on Monday and saw 20 rounds of bids over four long days ultimately hit a price that became too much even for Google, the sources said.

The Internet company might have had $36.7 billion in cash as of March 31, but it was only willing to go up to $4 billion for these patents, one person said.

That is, Google could easily have gone higher with its bid: why didn't it?

Since Google has stated on more than one occasion that it thinks the patent system is broken, perhaps it felt that bidding even more would have been feeding the beast it wishes to starve. And it's certainly true that the eventual “winners” of this auction ended up paying a great deal of money for a bunch of intellectual monopolies.

However, that does still leave the slightly awkward question: what does Google do now?

At least the Oracle lawsuit against Google is gradually being whittled down, so there is some hope that things won't turn out too bad there. But there are lots of other legal actions or threats of legal action around Android – not least all those involving Microsoft, which is trying to make good on Steve Ballmer's provocative claim last year: “It’s not like Android’s free. Android has a patent fee. You do have to license patents.” Google needs to come up with a broader strategy for countering that view, or we'll be seeing many more stories like this:

Microsoft Corp has demanded that Samsung Electronics Co Ltd pay $15 for each smartphone handset it makes based on Google Inc's Android operating system as the software giant has a wide range of patents used in the mobile platform, local media reported on Wednesday.

Samsung would likely seek to lower the payment to about $10 in exchange for a deeper alliance with Microsoft for the U.S. company's Windows platform, the Maeil Business Newspaper quoted unnamed industry officials as saying.

That's bad in two ways. First, these threats might encourage manufacturers simply to throw up their hands and use Microsoft's smartphone operating system instead of Android. Secondly, even if that doesn't happen, they will, if successful, at least make the relevant models more expensive. There are rumours that Oracle may also be asking for $15 or $20 a handset, however optimistically. And there's no reason why other companies might not come along and try to demand something similar, pushing the cumulative licensing fee per unit ever higher.

Android therefore risks turning into a perfect demonstration of all that is wrong with the patent system. These threats of patent litigation – and remember these are mostly just legal sabre-rattling – could make a hugely popular and affordable smartphone that brings powerful computing capabilities to a very wide audience progressively more expensive, to the point where it is priced out of the reach of those in developing countries, for example.

Next: The best defence is...

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