Both Bloomberg and The Verge have been questioning the wisdom of the $12.5b Google paid for Motorola Mobility last year, though it did get almost $2.5b of that back by selling the Motorola Home cable business …


Google made the purchase in order to acquire the Motorola portfolio of some 17,000 patents. Motorola, as a very early player in mobile comms, patented a lot of technologies which are still in use today. These patents include core standards for technologies like wifi which are used in pretty much every wifi-enabled device on the market. Where a patent covers an essential technology, the law says the patent owner must licence the technology to anyone who wants it on terms known as FRAND: Fair, Reasonable And Non-Discriminatory. Crucially, this means that if a company thinks the patent owner is trying to charge too much for a licence, it can challenge the cost in court.

Google asked $3.9 billion a year from Microsoft, for patents used in the Xbox and Windows 7. Microsoft challenged this, and a court agreed, ruling that the appropriate royalty payment was just $1.7 million.

Google also acquired products in the company’s pipeline, such as the Droid RAZR Maxx HD, but nothing yet stands out as particularly noteworthy, and Motorola Mobility has also lost over $1b since Google bought it, laying off almost a third of its workforce.

None of which is to say Google shouldn’t have made the purchase at all. A large part of its motivation was defensive, fending off potential lawsuits from Microsoft, Apple and others. What is being questioned is the price Google paid.

“It wasn’t an irrational decision at the time but they’ve gotten nothing but heartbreak for that money,” said Rodney Sweetland, a patent lawyer with Duane Morris in Washington who has watched the legal disputes over smartphones. “Should they have bought? Not at that price.”

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