In War with Google, Microsoft Wins a Decisive Victory

Say what you will about Google, but the online giant's strategy with Android has paid off: By giving away the software that powers its mobile platform, Google has quickly risen to dominance in the smartphone market, easily pushing aside industry darling Apple. But there's a dark side to Google's smartphone rise. And it appears that the company that doesn't charge for its mobile OS is likewise unwilling to pay for those patent technologies that Android infringes.

Cross-licensing and patent litigation is so common in the smartphone industry that attempts to graphically demonstrate the relationships between the various competitors resemble a complex spiderweb of interconnecting lines. But thus far, Google has remained largely above the fray, because it doesn't typically sell Android-based devices to customers. So companies like Microsoft—which do own mobile-related patents and must therefore protect them in court—have pursued Android device makers such as HTC and Motorola instead.

Too, these patents are lucrative corporate assets. So, after Nortel filed for bankruptcy protection in mid-2009, its creditors sought to sell off various assets, including a technology patent portfolio that contains many mobile industry-related patents. Various tech companies, including Google, bid for those patents throughout early 2011. And when a consortium of companies including Apple, Microsoft, Research in Motion (RIM), and others won the bid—for a staggering $4.5 billion—it was pretty obvious that the intent was for those companies to protect themselves against patent litigation while providing a counter-lever against others.

Obvious, that is, to everyone but Google.

In a bizarre blog post last week, Google Chief Legal Officer David Drummond claimed that the patents these companies bought were "bogus"—a charge he reiterated several times without any proof at all—and that using them to attack patent infringers was anti-competitive. He also noted that unless the US government stepped in and thwarted the sale, Google might be forced to pursue similar (bogus?) patents of its own so that it could in turn leverage them against others.

As I explained in a blog post of my own, Google's charges are largely nonsensical and hypocritical. But I have a deeper issue with the notion that the dominant power in the mobile industry—in the very same blog post, Drummond claims that Google activates a staggering 550,000 Android devices every single day, almost twice as many as does Apple, its closest competitor—could somehow be harmed by having to compete legally and fairly. After all, patents are in fact corporate assets, and the companies that own them are obligated to protect them in court when infringers won't pay licensing fees. This is why so many tech companies are cross-licensing mobile patents now.

I further alleged that Google's "dumping" of a free Android OS into the mobile market was as illegal as anything that landed Microsoft in antitrust hot water a decade ago. After all, how is Google's leveraging of its search and advertising monopoly to enter a new market (mobile devices) any different from Microsoft's leveraging of its Windows monopoly to enter a (then-) new market (web browsers)? Answer: It isn't. And in a climate in which Google didn't just rocket to first place in three years, but did so in a market in which Apple is still innovating steadily and exciting consumers with new hardware each year, Android has still managed to not just beat back that threat but defeat it utterly and decisively.

But wait, there's more.

In the hours after my blog post, Microsoft began replying to Google's charges via Twitter. And in a very damning series of tweets, Microsoft's head of corporate communications Frank Shaw proceeded to let the world in on the damning secret that Google didn't want you to know about. And that's that Apple, Microsoft, and the other companies in the Nortel "cabal" had asked Google to join the group, because the point of buying the patents was to ensure that those patents didn't enter the pool of enforceable mobile patents, further mucking up an already confused market.

I mean, even Apple agreed to do this. And Apple isn't exactly known for its partnership abilities.

But Google refused to join. "We asked them to bid jointly with us," Mr. Shaw tweeted. "They said no."

He went on: "Partnering with others and reducing patent liability across [the] industry is not something they wanted to help do." He also produced a letter from another Google general counsel, Kent Walker, written to Microsoft, explaining why Google wasn't interested in collaborating. "After talking with people here, it sounds as though for various reasons a joint bid wouldn't be advisable for us on this one," he wrote. "But I appreciate your flagging it, and we're open to discussing other similar opportunities in the future."

"Free advice for David Drummond," Shaw tweeted. "Next time check with Kent Walker before you blog."

What'chu talkin' 'bout, Mr. Drummond, indeed.

Now, the pedants who dominate the online discussion forums will point out that the online argument between Mr. Drummond and Mr. Shaw moves back and forth between two discrete groups of patents, one from Novell and one from Nortel. Don't get bogged down in a side show. What's happening is very simple: Google was asked to join the group of companies that purchased the Nortel patents, but it decided to make its own bid and compete with that group instead.

Put simply, Google isn't interested in licensing any patented technologies that are owned by other companies and are used in Android, because Google is intent on dumping that product into the market as quickly as possible and obtaining an unassailable and dominant position. Whether it is doing so illegally is of course open to debate, though I'd point out that the company is not coincidentally involved in other related mobile patent battles, including one with Oracle.

But Mr. Drummond was right about one issue. This is a matter that the US government needs to examine.

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