If you want to know what's really behind Google’s $12.5 billion buyout of Motorola Mobility, look no further than its patent holdings.
As a company with a relatively weak patent position looking to defend its Android operating system against a flood of lawsuits instigated by its competitors, Motorola's patent portfolio must have looked to Google like a lifeboat to a drowning man.
Motorola Mobility holds 17,000 approved patents worldwide and 7,500 pending patents. That's more than four times the number of patents held in Nortel's intellectual property portfolio, which recently sold for $4.5 billion to a group of tech companies including Microsoft and Apple.
"Our acquisition of Motorola will increase competition by strengthening Google's patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies," Google CEO Larry Page said in a post on the company's official blog today.
Google will be able to license the patents out to third-party device manufacturers and app developers, helping to shield companies using Android from lawsuits.
Android has been at the center of major patent battles between top players in the tech space. By some estimates, more than 50 lawsuits relating to the open source operating system have been filed in the United States alone.
Google's acquisition of Motorola Mobility could help guard the operating system – and the companies that make devices and applications running on it – from further litigation.
"If you're looking at the deal from a device perspective, it doesn't make sense at all. It's clearly a patent deal," says IDC analyst Scott Ellison.
In one sense, Google just shelled out $12.5 billion to erect a colossal legal shield around Android.
Of course, there's more to the deal. Google also will be able to control a top manufacturer of Android smartphones and get back into the consumer electronics space in a major way. But with Motorola's handset business struggling to make a profit, the company's patent stockpile is the core of the acquisition.
"You want to have enough clout on your side to say, 'Let's not take this to court,'" says patent attorney and blogger Dale Halling. "That's sort of the normal course where this would go."
Once antitrust officials clear the transaction, Google will have the legal clout it needs to bolster Android against its assailants.
While the buyout solves a lot of problems on the patent front, it opens problems in other areas. The acquisition could complicate Google's relationship with manufacturers of Android smartphones outside of Motorola, making it a potential competitor to the third-party smartphone makers that have helped make the platform a success.
Julie Samuels, a lawyer at the Electronic Frontier Foundation, sees another issue with the deal. Google could have spent that baker's dozen worth of billions on research and development for innovative new products. Instead, it spent it in large part as protection against aggressive litigation.
"It appears that Google feels it can't compete in the mobile phone market, the wireless marketplace, without having these patents. Without them, it doesn't have the confidence it won't be sued," Samuels says. "In other words, it's costing Google upwards of $10 billion to compete in the business it's already competing in. Those aren't research and development fees, or other costs that are attendant to innovation. Those are just fees for patents."
But with the highly litigious state of the patent system, Google apparently decided it was worth the investment.