In Its Latest Crusade, Google Takes on Patents

Google has bid $900 million for Nortel’s patents, and in the process, appears to be starting its own war with the patent system. However, underneath its high-minded rhetoric about helping keep people free to innovate, Google (s goog) may be actually beefing up its patent war chest to ensure its control over Android remains intact — both from IP threats such as Oracle’s lawsuit (s orcl) and marketplace threats such as Amazon’s new Android app store (s amzn).
In a blog post Monday, Google said it won the stalking horse bid for Nortel’s patents. That means Google’s bid is the low bar now for other bidders on those patents. Nortel filed for bankruptcy in January 2009 and has since sold of many of its assets. However, it had a rich patent portfolio, especially as it relates to the Long Term Evolution networking technology that many mobile operators are deploying.
Nortel owns important intellectual property on two key methodologies: OFDMA (Orthogonal Frequency-Division Multiple Access) and MIMO (Multiple Input, Multiple Output). The owner of these licenses could become a major player in the LTE markets. By Nortel’s estimates, they were worth $1 per LTE device sold in license fees, though some analysts disagree. The sale of those patents had brought interest from Research In Motion (s rimm), Apple (s aapl) and others. Holding several essential patents for an underlying technology standard can help in two primary ways: It can offer royalty licences to the patent owner, or it can offer a certain level of freedom to move in a market thanks to cross-licensing deals. Google writes:

But as things stand today, one of a company’s best defenses against this kind of litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services. Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories.

Google sounds like it’s waking up kind of late to this patent race, which really started in earnest during the first part of the 2000s. It most likely started paying attention as it entered the highly contested and patent-cluttered mobile market. Nortel’s LTE patents would have the most influence within the carrier equipment and semiconductor world, but could also give Google cachet among mobile operators deploying the technology.