Apple's major $1.05b patent court victory over Google-Android partner Samsung has four under-appreciated implications for Google going forward.
- The purported Google-Apple settlement talks are going nowhere.
- Google-Apple patent talks compound antitrust risk.
- Google's actions, defense strategy, and IP track record drip of guilt and legal vulnerability.
- Google's acquisition of Motorola has backfired badly.
1. The purported Google-Apple settlement talks are going nowhere.
Think about it. Whose interest is it to spotlight a phone conversation between Google's CEO Larry Page and Apple CEO Tim Cook and characterize the conversation as an indicator of a coming "truce" or "détente" in the thermonuclear war" between Apple and Google? Google's alone.
Apple won against Samsung. It has additional patent infringement cases and ITC actions pending against HTC and Google's Motorola. After a stunning and sweeping victory, precedent, and award, why should Apple settle now, especially before it learns whether it can get courts, the ITC, or other nations to block imports of the infringing products, a result much more important and valuable to Apple than compensatory damages?
Apple is a strong property rights proponent and believes deeply that its signature iPhone invention has been stolen by Android. Google responded to the Apple-Samsung verdict by downplaying that most of the patents in question did not affect Google-Android. Google also argues that most of Apple's patents are not valid patents because they are not novel, in effect dissing Apple's innovation chops. Google is even arguing publicly that software shouldn't be patentable, and that the entire patent system is broken.
Apple must look at the one property-infringement settlement Google has negotiated since it has become a public company, the Google Book Settlement, and see a settlement that was very meager in compensation and limitations, rejected by a court, and opposed by the DOJ Antitrust Division and the Copyright Office as rewarding infringement and anti-competitive.
Google of course wants a settlement badly. It is in "Settlements R Us" mode, globally 24-7. Google is in negotiations with the EU to settle antitrust charges of being a search monopoly and abusing its monopoly position. Google would like to settle the other antitrust investigations around the world with the U.S. FTC, South Korea, Argentina, and India. Google just paid $22.5m to settle the Safari-gate scandal where Google hacked into Apple's Safari browser to bypass Apple users' privacy settings. Google settled with the FCC for $25k for impeding their Street View wiretapping investigation. Google is negotiation with about a dozen countries around the world for misleading them about what and when Google knew in the Street View WiSpy scandal. And Google is negotiating a potential settlement with the EU over whether Google's consolidated privacy policy conforms to EU law.
Expect more self-serving and deceptive Google PR leaks that it is in talks with Apple to settle its global patent infringement problems. However, be highly skeptical that any "talks" are real or substantive for the reasons above.
2. Google-Apple patent talks compound antitrust risk.
Reported analysis that Apple's patent win against Samsung somehow could lessen Google's antitrust liability long-term is a convenient distraction from the main short-term antitrust risks to Google that have gotten worse as a result of the Apple-Samsung verdict and Google's impetuous reactions to it.
In the throes of multiple very serious antitrust investigations of Google, Google's Larry Page was rash and unwise to call Apple's Mr. Cook to try and initiate settlement talks concerning Android's patent liabilities, and Apple was unwise to take the call.
Why so unwise?
First, these two players are front and center on antitrust authorities' radar. Google is under antitrust investigation on four different continents. The DOJ is currently suing Apple for anti-competitive collusion and price fixing in the ebook market. In 2010, Google and Apple (and four other companies) settled a collusion complaint with the DOJ for anti-competitively agreeing to not poach each other's employees. In 2009, the FTC forced Google's CEO off Apple's board as anti-competitive and stopped them from sharing board members going forward.
Second, the optics of this "phone conversation" are horrible. Google is dominant in search advertising and Google Android is rapidly growing dominant in mobile operating system share, rocketing from no share a few short years ago to almost two-thirds share today. By most any measure the wireless operating system market is dominated by Google Android and Apple iOS.
Google effectively has publicly bragged it is in settlement talks with its only significant wireless competitor, with the naked purpose being to "protect" Android from competitive harm from Apple. How could any antitrust official think that these Google-Apple discussions would likely yield a pro-competitive result? To antitrust officials, these talks must appear to be a recipe for market collusion to entrench their leading market shares.
Third, it gets worse. Remember that both the DOJ/FTC and the EU have warned Google that it is concerned that Google's plan to "defend Android" with Motorola's Standards-Essential patents -- is anti-competitive. The clear issue here is that Google-Motorola and its Android allies effectively are trying to unilaterally break pro-competitive market contracts -- that license competitively-essential patents on fair and reasonable terms (FRAND) -- for anti-competitive gain. (Please see Googleopoly IX for why this behavior is such a serious antitrust liability for Google.)
Simply, Google's fearful and rash market behavior in reaction to its growing and substantial patent liability risk is compounding its antitrust liability risk further.
3. Google's actions, defense strategy, and IP track record drip of guilt and legal vulnerability.
Impetuously buying Motorola for $12.5b -- in order to gain its 17,000 patent-large patent-portfolio to better defend Android against multiple patent infringement lawsuits -- is not the behavior of a company that is confident that the facts in court will prove that Android has not infringed on competitors' patents.
Google's defense strategy of not rebutting the facts and patents in question in detail, but politically attacking: that the entire patent system is broken; claiming that the constitutionally-based notion of patenting software is completely wrong; effectively charging that the U.S. Patent Office was grossly incompetent in granting multiple patents to Apple and Microsoft; and effectively claiming protection of software inventors is anti-innovation and not in the public interest -- all combine to expose a highly-cynical company that apparently has concluded that it can't win on the legal merits in court so it must manipulate the political court of public opinion to effectively secure "jury nullification."
Combined with Google's world's worst IP infringement record for any Global 1000 company, their overall behavior drips of guilt and legal vulnerability. (Please see: "Google's Systematic Theft is Anti-Competitive and Google's Rap Sheet for copious evidence and links to support that Google has the world's worst corporate IP record.)
4. Google's acquisition of Motorola has backfired badly.
As I predicted a year ago, Google's impetuous acquisition of Motorola to defend Android has backfired.
First, Google's plan to abuse Motorola's many FRAND standards essential patents is viewed by both the DOJ/FTC and the EU to be anti-competitive. If Google persists, Google will likely become embroiled in another separate, serious, global antitrust investigation.
Second, we have our first major precedent in court, and de facto Google admission, that Google's grand scheme to withdraw standards-essential patents from competitors for negotiating leverage in patent lawsuits has failed. Notably in a much-watched Apple-Motorola patent case in Germany, Google folded on this issue and agreed to license Motorola's 3G standards essential patent to Apple without any extra payment from Apple. Metaphorically, this means Google's quickly-built dam defense from patent lawsuits has sprung a big leak that eventually will wash away the purported dam.
Third, Google has had to put up for sale Motorola's strategic cable set-top box business, ostensibly because both the content and cable industries would not buy set-top boxes from Google given that set-top boxes are essentially the security system to prevent theft of content or signal, and given that Google has the world's worst record of IP infringement. (When Google bought Motorola it spotlighted that Motorola was a market leader in set-top boxes and that Google wanted to "accelerate innovation in this space." Oops!) Simply, Google's acquisition of this set-top box business created a predictable "fox guarding the chicken coop" problem.
Conclusion:
The overall takeaway from these four implications is that Google is obviously spooked at how much patent risk Google-Android faces and Google is reacting to that risk in impetuous ways that are making its situation worse not better.
First, Google's rash behavior is exacerbating its already critical antitrust problems, which is the last thing Google should be doing right now.
Second, Google now owns Motorola and the big problems that come along with it -- severe conflicts of interest vis a vis Google's partnerships with Samsung and HTC, and the huge financial drag on Google's growth and profitability -- without the purported upside and benefit of patents that can actually defend Android. Motorola has become an extremely expensive oops for Google.
Simply, Google again has violated the first rule of holes: when in a hole, stop digging.
*****
Google's Disrespect for Property Series
Part 1: Google TV: Dumb Content vs. Content is King
Part 2: Why Google's Motorola Patent Play Backfires
Part 3: Google 21st Century Robber Baron
Part 4: Google's "Infringenovation" Secrets
Part 5: Google's Piracy Liabilities
Part 6: Grand Theft Automated! Online Ad Economics Fuel Piracy & SOPA Opposition
Part 7: The Evidence Google's Systematic Theft is Anti-Competitive
Part 8: The Real Reasons Google Killed SOPA/PIPA
Part 9: Google's Rap Sheet
Part 10: Googleopoly IX: Google-Motorola's Patents of Mass Destruction -- Reneging on Competitively-Essential Contract Arrangements is Patently Anti-Competitive
