Motorola Mobility pushes patent absurdity to extremes

Would-be European dictators learned the hard way that fighting wars on two fronts at the same time is a recipe for disaster. Now Motorola Mobility, soon to be part of Google, is doing those aggressors one better. It’s fighting wars with regulators on three fronts: Europe, the United States, and Australia. Like those dictators, Motorola isn’t satisfied with just a bit of territory; rather, it wants to swallow whole countries or, in this case, whole industries.

On Tuesday, the European Commission opened two antitrust cases against Motorola Mobility for possible patent abuses, following complaints by Apple and Microsoft. The action by the European Uniion’s executive arm would be a lot less interesting if it weren’t for the astonishing attempt by Motorola to extract billions of dollars from Microsoft — and ultimately consumers and businesses — with wildly inflated patent claims.

[ Also on InfoWorld: Find out how Apple and Microsoft have become unlikely allies in the fight against Android patent claims. | Get the latest insight on the tech news that matters from InfoWorld’s Tech Watch blog. | Keep up with the key tech news and analysis with the InfoWorld Daily newsletter. ]

Motorola wants to charge a royalty of 2.25 percent for every Windows computer that uses a common video codec standard known as H.264. According to legal papers filed by Microsoft, that would amount to $4 billion a year. If Motorola were to get away with that extortion, it would, as patent expert Florian Mueller points out, take a bit more than three years to equal the $12.5 billion Google will pay for Motorola Mobility when the deal wins final approval.

Even crazier is the demand that Microsoft pay a royalty of $4.88 on every Xbox 360 it sells. That’s because the patent Motorola seeks to exercise covers a $3 or $4 chip that implements the 802.11 Wi-Fi standard, says Mueller. The royalty would, in fact, be higher than the value of the component.

Apple too, is the target of this patent extortion. Motorola wants a 2.25 percent cut of the selling price of iPhones and iPads that use 3G connectivity because of Motorola’s patents.

No doubt Motorola would be willing to scale back its demands, after every party involved has wasted huge amounts of time and money on legal expenses. Before long, though, the damage could spread beyond the companies and consumers who are directly affected. We got a glimpse of that earlier this week, when Microsoft announced it was moving a logistics center from Germany to the Netherlands because of the barrage of legal claims against it in Germany, where the legal system favors aggressive patent enforcement. Only 50 jobs are affected, according to reports, but the move is yet another indication of the kind of damage the patents wars could inflict on the world economy.

The patents asserted by Motorola are, in the E.U.’s view, essential for an industry to function and must therefore be made available to other players under reasonable terms or FRAND (fair, reasonable, and nondiscriminatory) licenses. Those standards are necessary to be sure that devices made by different companies can interact with each other and with networks. The European Commission said it “will assess whether Motorola has abusively, and in contravention of commitments it gave to standard setting organizations, used certain of its standard essential patents to distort competition.”

Regulators in Europe and the United States approved the purchase of Motorola last month, but both warned Google not to abuse Motorola’s huge (17,000 or so) patent portfolio once the deal closes. “This merger decision should not and will not mean that we are not concerned by the possibility that, once Google is the owner of this portfolio, Google can abuse these patents, linking some patents with its Android devices. This is our worry. … We might be obliged to open some cases in the future. This is not enough to block the merger but we will be vigilant,” said E.U. Competition Commissioner Joaquin Almunia.

Back in the states, meanwhile, Facebook on Tuesday filed a countersuit against Yahoo, defending its own patents and claiming that Yahoo infringes on nine Facebook patents. This follows Yahoo’s claim that Facebook had infringed on 10 patents, covering such details as where ads are placed on a page, how views are customized, instant messaging, and more. You don’t suppose that Yahoo’s own troubles (it just announced layoffs of 2,000 people) and Facebook’s imminent bonanza of IPO riches have anything to do with this, do you?

Don’t forget that Oracle’s suit against Google is set for trial in mid-April. Oracle claims that Google’s Android operating system violates a number of its Java-related patents. It looked like that case was about to settle when Google offered to pay Oracle roughly $2.8 million in damages, but the deal collapsed. I haven’t even touched on the complex web of suits surrounding the iPhone and Samsung, but you get the idea.

The tech industry continues to destroy value that should be going to innovation and job creation. As I noted last year, Google is spending more than $400,000 for each of the patents it will acquire along with Motorola, It’s doing so because each side of the patent arms race believes it needs an even bigger arsenal.

Now we learn that when the acquisition is complete, Google will also have purchased new and expensive fights with regulators on any number of fronts. Does that make any sense?

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